Investing in Emerging and Frontier Markets

Investing in Emerging and Frontier Markets

Investing in Emerging and Frontier Markets

Edited by

Kamar Jaffer

E U R O M O N E Y

B O O K S

Published  by Euromoney Institutional Investor  PLC Nestor House, Playhouse  Yard London EC4V  5EX United  Kingdom Tel: +44 (0)20 7779 8999 or USA 11 800 437  9997 Fax: +44 (0)20 7779  8300  www.euromoneybooks.com E-mail:  [email protected] Copyright © 2013 Euromoney Institutional Investor PLC and the individual  contributors ISBN 978 1 78137 103  9 This publication is not included in the CLA Licence and must not be copied without the permission of the  publisher. All rights reserved. No part of this publication may be reproduced or used in any form (graphic, electronic or mechanical, including photocopying, recording, taping or information storage and retrieval systems) without permission by the publisher. This publication is designed to provide accurate and authoritative information with regard to the subject matter covered. In the preparation of this book, every effort has been made to offer the most current, correct and clearly expressed information possible. The materials presented in this publication are for informational purposes only. They reflect the subjective views of authors and contributors and do not necessarily represent current or past practices or beliefs of any organisation. In this publication, none of the contributors, their past or present employers, the editor or the publisher is engaged in rendering accounting, business, financial, investment, legal, tax or other professional advice or services whatsoever and is not liable for any losses, financial or otherwise, associated with adopting any ideas, approaches or frameworks contained in this book. If investment advice or other expert assistance is required, the individual services of a competent professional should be sought. The views expressed in this book are the views of the authors and contributors alone and do not reflect the views of Euromoney Institutional Investor PLC. The authors and contributors alone are responsible for accuracy of content. Note: Electronic books are not to be copied, forwarded or resold. No alterations, additions or other modifications are to be made to the digital content. Use is for purchaser’s sole use. Permission must be sought from the publisher with regard to any content from this publication that the purchaser wishes to reproduce ([email protected]). Libraries and booksellers and ebook distributors must obtain a licence from the publishers ([email protected]). If there is found to be misuse or activity in contravention of this clause action will be brought by the publisher and damages will be pursued. Typeset by Phoenix Photosetting, Chatham,  Kent

Contents Forewordxv Prefacexvii Emerging and frontier markets xvii Harnessing the potential of the middle class xvii Rising capitalisation and increased diversification xviii Emerging market debt xix A broader investor base xix Compelling valuations xx Risks in emerging and frontier markets xx Conclusionxxi Acknowledgementsxxiii About the editor xxv About the contributors xxvii 1

The growing weight and influence of frontier markets 1 Dr Mark Mobius, Templeton Emerging Markets Group Tomorrow’s emerging markets 1 A way to diversify 2 Long-term growth potential 2 Africa – a continent of opportunity 3 Risks investors should consider 5 Liquidity and low market capitalisation 6 On-the-ground research 6 Accessing frontier markets 6 Conclusion7

2

The outlook for emerging and frontier markets Charles Robertson, Renaissance Capital

3

The role of emerging markets’ sovereign wealth funds 17 Dr Eliot Kalter, E M Strategies Inc. and Dr Patrick Schena, The Fletcher School Introduction17 Minding the institutional void 18 Surging SWFs in emerging economies and the paradox of outbound investment 22 The development agenda and the tensions of inward investment 32 Filling the void: reflections on a way forward 34

4

The importance of micro, small and medium enterprises in emerging markets Khaleel Ahmed, IFC The importance of small and medium enterprises

8

38 38

v

Contents

Definitions38 Composition of the industry 40 The missing middle 41 Issues and challenges facing the SME sector in emerging markets 41 The SME finance gap 42 Non-financial barriers 45 Weaknesses in credit delivery and support by financial institutions 45 Policy interventions designed to expand SME finance 46 The World Bank Group/IFC 47 IFI engagement with SMEs 48 Annex 4.1 50 First mover advantage: Bank Muscat targeted Oman’s unbanked SME market 50 Serving the female-headed SME segment: Access Bank Plc Nigeria 50 ICICI Bank 51 5

The regionalisation of emerging debt and equity capital markets 53 Julian Perlmutter and Piers Summerfield, Simmons & Simmons LLP Recent developments and emerging trends in the dim sum bond market 53 Steady growth of the young dim sum bond market 53 Overview of the current dim sum bond market – certain distinctive features 54 The maturity profile of dim sum bond issuances 54 The geographical diversification of dim sum bond issuers and investors 55 More ‘rated’ dim sum bond issuances 56 Dim sum bond market trends in 2013 and beyond 56 Recent developments and emerging trends in Middle Eastern debt capital markets 57 Recent developments and emerging trends in Kenyan debt capital markets 61 Recent developments and emerging trends in the Nigerian debt and equity markets 63 Conclusion65

6

Risks and return expectations for emerging and frontier markets 66 Allan Conway, Schroders Historic performance 66 Near-term prospects 67 Long-term outlook 72 Risks76

7

Portfolio allocation, diversification and risks across emerging and frontier markets 78 Matthew Annenberg and Robin Anderson, Principal Global Investors Motivation78 Diversification benefits and risks to frontier market investing 79 Benchmarks83 Portfolio89 Conclusion92

vi

Contents

8

9

Looking beyond external emerging market debt Michael Gomez, PIMCO Local debt will continue to stand out Investment implications Exchange-traded funds and the opening up of emerging markets Manooj Mistry, Deutsche Bank The general benefits of accessing emerging markets via ETFs The challenges of creating ETFs on emerging markets indices ETF product structures Size, scope and turnover of the market Frontier market ETFs Active asset allocation to emerging markets using ETFs

95 98 100 101 101 102 102 103 106 106

10

Market regulation and supervision in emerging and frontier markets 107 Kai-Niklas Schneider, Clifford Chance LLP and Leen Qablawi, Latham & Watkins LLP Introduction107 Emerging and frontier markets 107 Regulatory approaches 108 Basic principles 109 Regulation in emerging and frontier markets 109 Which approach works best? 111 Principles versus rules-based approach 111 One-size-fits-all approach 111 Conclusion112

11

Growing power of emerging market titans Sohail Jaffer, FWU Group Role reversal in emerging market foreign direct investment flows The growing importance of emerging market-based transnational corporations Go out Private equity and sovereign wealth fund drivers of FDI Outlook for increased ‘south-south’ investment flows Commodity security as a driver of FDI Risks impacting FDI flows The risk of resource nationalisation Security concerns: real or imagined?

12

Private equity in growth markets: changing patterns, emerging trends Sarah Alexander, The Abraaj Group Lessons from the first generation A fundamental and lasting shift Global growth markets opportunity Private equity – access to the growth economy

114 114 114 117 117 118 119 120 121 121 124 125 125 125 126

vii

Contents

Institutional investor goals Industry maturation – delivering returns Local support and participation A long runway Looking ahead – market and fund-size diversification

126 127 128 129 129

13

Doing valuations in emerging markets 130 Pär-Ola Hansson, Ernst & Young The preferred approach to emerging-market valuation 130 Why the DCF model is preferable for emerging markets 131 Consistency and building in advantages 133 Limits of the guideline companies/multiples approach 133 The bridge: justifying paying a premium 135 Summary135

14

Family businesses in emerging markets 136 Antonios Koutsoukis, Credit Suisse Advantages of family businesses 136 Growing the family business 137 Governance risks in family businesses 138 Adapting to change 141 Bibliography142

15

Growth of Islamic finance in emerging and frontier markets 143 Baljeet Kaur Grewel, Kuwait Finance House Introduction143 Global Islamic finance industry 146 Islamic finance industry: products and services 147 Islamic finance: key development in emerging markets 148 GCC148 Saudi Arabia 149 Oman149 Kuwait149 Qatar149 Turkey150 Asia150 Indonesia150 Malaysia151 Africa151 Nigeria151 South Africa 152 Sudan152 Islamic Development Bank’s role in promoting Islamic finance and SMEs 152 Outlook and potential for Islamic finance 153

viii

Contents

16

Verging on emerging: the reasons for surging investor interest in global frontier markets asset management 155 David Wickham, HSBC Global Asset Management Commencement155 Classifications: what are frontier markets? 156 Characteristics of global frontier markets: the 7Cs 158 Comprehensive universe 158 Change161 Consumers163 Commodity wealth 165 Correlations166 Cash returns 168 Cheap valuations 169 Considerations: navigating the risks of global frontier markets 170 Political risks 170 Commodity risks 171 Liquidity risks 171 Sector risks 171 Currency risks 172 Capital allocations to frontier markets 173 Conclusion174

17

Alternative investment landscape in emerging and frontier markets 177 Ian Morley, Wentworth Hall Consultancy Introduction177 Substantial growth in emerging and frontier markets 178 Emerging market’s hedge fund performance by geographical area 179 Type of strategies 181 Challenges facing emerging and frontier markets 182

18

Wealth management in emerging and frontier markets Justin Ong and Darja Habarova, PricewaterhouseCoopers LLP Asia – the new diamond in the wealth frontier Asia’s growing financial centres for wealth management Emergence of the Asian regional players Investment preferences in wealth management in Asia Preserving wealth long-term in Asia The talent conundrum A bright future, or a sunset industry?

184

Insurance in emerging markets Richard Holloway and Sanket Kawatkar, Milliman The importance of life insurance in emerging markets Review of some of the emerging markets in Asia

193

19

184 185 186 188 190 191 192

193 193

ix

Contents

Insurance markets in India and Indonesia 196 India198 Indonesia199 Future outlook and conclusions 200 20

Project finance in Asian emerging and frontier markets Michael Barrow, Asian Development Bank Good, bad and it depends Filling the gaps Broadening the funding sources Creating bankable projects In short

202 202 203 205 206 206

21

Infrastructure funds in emerging and frontier markets 207 Frank Kwok, Steve Gross and Melanie Gilmore, Macquarie Infrastructure and Real Assets Introduction – the emerging market opportunity 207 Challenges and characteristics of investing in emerging markets infrastructure 208 Long-term planning 209 Regulatory risks 209 Track record 209 Environmental and social concerns 210 Lack of resources and experience 210 Investing in emerging markets infrastructure 210 Role of development banks and other multilateral institutions 210 Investing through an infrastructure fund 211 Characteristics and returns of unlisted emerging markets infrastructure funds 213 Conclusions214 Case study: Philippines Investment Alliance for Infrastructure 215

22

Oil and gas in emerging and frontier markets Meb Somani, Lakhbir Sandhu, and Andrew Grant, Barclays Natural Resource Investments Opportunities in emerging markets for oil and gas investors What is an emerging market, from an oil and gas perspective? The challenges of oil and gas investment in emerging markets Managing oil and gas investment in emerging markets

216

Renewable energy in emerging markets Ye¸sim Bezen and Onur Ok¸san, Bezen & Partners and Claire Wilby Introduction: renewable energy and sustainable solutions on the global agenda Building sustainable energy strategies Political support Investment and financial incentives

221

23

x

216 217 218 219

221 221 222 222

Contents

Regulatory and legislative framework 223 Potential of the ‘green’ industry 223 Use of natural resources 223 Case study: Turkey 224 First steps: the legislative framework 224 Second steps: adapting the legislative framework 224 Next steps: recognition of market reaction 225 Adding a new element to get the right energy mix for Turkey: solar energy 227 Conclusion227 24

Telecom tower transactions in emerging markets 229 Federico Membrillera, Victor Sunyer and Kamal Daswani, Delta Partners Recent trends impacting operator’s appetite for tower transactions 229 Recent trends in tower investment in emerging markets 230 Opportunities for tower management companies 233 Opportunities for financial investors 234 Innovative tower sharing models in emerging markets 235 Key challenges in tower transactions in emerging markets 236 Conclusions238

25

Spotlight on China 239 BOCI-Prudential Asset Management Ltd Introduction239 The rise of the onshore equity market in China 239 Move towards a multi-tier stock market 241 Into stock futures and derivatives 243 The IPO market and fund industry 244 Opening domestic equity market to foreign investors: QFII and RQFII 246 Complementary development of fixed income market 247 The development of offshore equity market 248 Conclusion251

26

Spotlight on Indonesia Douglas Clark Johnson, Codexa Capital Indonesia: high-fashion for a reason Story distinguished by domestic demand Macro analysis: the good news – and the bad Islamic finance: fresh perspective on reform Investment outlook: across the board potential

27

252 252 253 254 255 256

Spotlight on India 260 Karuna Luthar, Elara Capital Introduction260 Young and able workforce 261

xi

Contents

Huge potential for consumption 261 Women: an opportunity in waiting 262 Savings: help or hindrance 262 Poverty262 Literacy rates 263 Resources264 Infrastructure264 Transparency and governance 265 Policies: reduction in subsidy bill 265 External factors 266 Comparative yields and growth data 266 Conclusion267 28

Spotlight on Latin America: opportunities and challenges in Brazil and Mexico 268 Gray Newman, Morgan Stanley Brazil: infrastructure prospects 268 Mexico’s moment 271 Conclusion274

29

Spotlight on Turkey: searching for the correct growth model on the road to 2023 275 Ertunc Tumen, Ak Asset Management Turkey gave a striking economic performance between 2002 and 2012 275 High hopes for 2023 275 But which model to follow? 275 Following the BRIC model? 276 Is the South Korean model a more realistic one to follow? 276 An economic growth model in Europe? 277 Could Turkey create an economic growth model of its own? 277 A stable economic background and the financing of innovative investments 278 Global science and technology leadership to be required in certain areas 278 Techno parks: a right step, but more progress required 278 Rise of the Anatolian tigers – the dawn of a new entrepreneurial spirit 278 Other challenges 279 Conclusion279

30

Spotlight on Iraq: the world’s fastest growing major economy Bartle Bull and Zaab Sethna, Northern Gulf Partners LLC Exceptional political and macro-economic environment Foreign investment The Iraq Stock Exchange Private equity opportunities in Iraq Case study

xii

280 281 282 284 285 285

Contents

31

Spotlight on Africa: which growth for sub‑Saharan Africa? Tapping its huge agricultural potential is key Claire Schaffnit-Chatterjee and Maria Laura Lanzeni, Deutsche Bank A growing and increasingly diversified market Social development remains low Agriculture growth lags behind Agriculture is key to growth, poverty and hunger reduction Boosting agricultural yields inclusively Broader, more sustainable input use Closing the infrastructure gap Technology development and technology transfer Improving access to credit and insurance markets Many wins associated with agricultural growth

287 287 288 288 289 289 290 291 291 291 292

xiii

Foreword The concept of emerging markets originated in the late 1980s when multilateral institutions interested in promoting the economic development of the world’s poorer countries realised that the best path to development was through private enterprise investment. They had to find a way to encourage investment in those countries by the enormous pools of pension funds and other institutional money in the developed parts of the world. Until then, the idea of investing in the ‘third world’, the ‘south’ or the ‘underdeveloped countries’ was unpopular and considered very  risky. In 1987, we started the very first listed emerging markets fund, raising US$100  million. It seemed like an awful lot of money at that time since there were only five emerging market countries in which we could invest. I recently received a letter from one of our company directors at that time. He reminded me that during the road show for the fund, the underwriters wanted to increase the amount to US$150  million but I refused since I thought it would be too difficult to invest such a large sum of money. How times have  changed! This book explores the many aspects of emerging markets investment that have developed over the years and is a reflection of the tremendous opportunities that have appeared. The authors are experts in emerging markets, and provide wide-ranging insights into these opportunities. In my contribution (Chapter 1) I discuss the growing weight and influence of frontier markets which are a subset of emerging markets and display many of the characteristics that emerging markets did when we were starting out in 1987. Fund flows into emerging and now frontier markets have risen exponentially since the 1980s and the mechanisms of those flows and how they have affected the market is explored  here. Another section of the book deals with the outlook for emerging and frontier markets and relates the growth of markets around the world to the levels of debt, currency values as well as other variables. The role of sovereign wealth funds is covered in an interesting chapter on the nature of such funds, their asset allocation practices and how those practices impact emerging markets. Small and medium enterprises and their importance in emerging markets is a topic which is particularly timely, since more and more small and mediumsized companies are being listed in emerging market stock markets around the world. The performance of these companies has often been quite  outstanding. Further topics covered in the ensuing sections include the regionalisation of both bond and equity markets in the emerging market world; risk and return expectations for emerging and frontier markets both near-term and long-term; portfolio allocation and diversification requirements; the dramatic rise of emerging market debt issuance; and market regulation and supervision in emerging and frontier  markets. Although portfolio investment in emerging and frontier markets is most visible, equally important, if not more so given its impact, is the growth of private equity in emerging markets and one section explores the changing patterns in that area. Related to that is a chapter on the important role of family businesses in emerging markets, and their advantages and disadvantages. Also discussed are the patterns of project finance including infrastructure, energy (including sustainable energy), and oil and gas  projects.

xv

Foreword

Selecting the right investment is the big challenge in emerging markets. The need for doing comprehensive research and valuations is thus always present and Chapter 13 looks at the methodology of that complex  task. The impact of religion is now being felt in emerging markets in terms of a growing demand by investors for socially and morally acceptable investments. This is manifested in the rise of Islamic finance in emerging markets and development of Shariah-compliant equity and bond  funds. While equity and fixed income instruments are stars in the emerging and frontier market firmament, the important role of insurance must not be overlooked, particularly since more and more insurance products are based on equity and bond  funds. Finally, this book contains a number of case and country studies which enable the reader to obtain a good insight into some of the more interesting aspects of emerging market investing. Included are studies of Turkey, China, India, Mexico, Brazil and the frontier markets of Iraq and the countries of sub-Saharan  Africa. This is a comprehensive volume covering a wide range of emerging and frontier market topics that should be of interest to any inquiring  investor. Dr Mark Mobius Executive Chairman, Templeton Emerging Markets Group May 2013

xvi

Preface Emerging and frontier markets At a time of faltering recovery throughout the developed world, emerging markets continue to provide investors with exposure to rapid economic growth. In its most recent World Economic Outlook, the International Monetary Fund (IMF) forecasts that while growth in the developed world will be a sluggish 1.2% in 2013, in emerging markets it will expand by 5.3%. Among the largest emerging economies, the IMF expects China to lead the way, growing by a forecast 8% in 2013, followed by India (5.7%), Russia (3.4%), Mexico (3.4%) and Brazil  (3%). Africa, for so long dismissed by portfolio and direct investors due to poverty, poor corporate governance and political risk, is also emerging as one of the most dynamic economic regions in the world. In 2012, a quarter of African economies grew by 7% or more, while between 2013 and 2015 the region as a whole is expected to grow by an annual average of more than 5%.1 In fact, the IMF has projected that from 2011 to 2015, seven of the top 10 fastest growing economies will be in sub-Saharan Africa (Ethiopia, Mozambique, Tanzania, Democratic Republic of the Congo, Ghana, Zambia and  Nigeria).2 According to the IMF, the share of global GDP coming from the emerging markets will surpass that of the developed markets by 2015 and frontier markets are not far  behind.

Harnessing the potential of the middle class Economic growth data in isolation, however, only tells part of the compelling emerging market story. Emerging and frontier markets are fragmented: they consist of diverse economies, people and languages. Certain countries are commodity producers (for example, oil, gas, minerals and precious stones), whilst others are major consumers. An OECD paper published in January 2010,3 notes that in the 40 year period between 1965 and 2004, the G7 accounted for 65% of global GDP. Underpinning this performance, and indeed driving the world’s economy over this period, says the paper, was a large middle  class. At the time of writing, with economies in the developed world deleveraging, and with unemployment levels persistently high, the consumerism that has led global economic expansion for at least four decades may be passing from developed to emerging and frontier regions. In some of these regions, the process of so-called consumerisation, spurred on in many cases by a parallel process of urbanisation, is coming from an exceptionally low base. Asia is poised to take up the baton from the US and Europe as the driving force of global consumerism. An analysis published by the Asian Development Bank (ADB) in 20104 forecast that ‘assuming consumption expenditures continue to grow at roughly the same rate as in the past 20 years, they are likely to reach US$32 trillion [compared with US$4.3 trillion in 2008] and comprise about 43% of worldwide consumption by 2030’. This, says the same study, will mean that Asia’s middle class replaces its counterpart in the US and Europe as the world’s leading  consumers. Africa, in the long term, is expected to be one of the most populated and youngest and fastest urbanising markets in the world. Its population is estimated at one  billion today,

xvii

Preface

and by 2050, it is expected to reach two  billion and overtake India (1.4  billion) and China (1.6  billion).5 Because this population is relatively young, the continent has an estimated working-age population of more than 500  million people that is predicted to more than double by 2040.6 The fast-growing population has a growing middle class with combined consumer spending power approaching US$1  trillion. This growth of the middle class is of critical importance for equity investors, because the process of consumer-driven private sector growth will accelerate in many emerging and frontier countries at a much faster rate than GDP growth. In other words, headline figures on emerging and frontier markets’ growth often understate the opportunities these countries offer to  investors.

Rising capitalisation and increased diversification For equity investors in emerging and frontier markets, however, another essential piece of the jigsaw that has only recently dropped into place is the existence of a broad, well-diversified range of markets that are appropriately regulated and sufficiently liquid to absorb robust inflows of international  funds. According to Ernst & Young,7 total market capitalisation of the world’s emerging equity markets rose from under US$2 trillion in 1995 to US$5 trillion in 2005 and about US$13 trillion by the end of 2011. Over the same period, the total market capitalisation of developed markets has only doubled. This process of convergence between the size of developed and emerging markets is expected to continue over the next two decades. According to Ernst & Young’s calculations, even if emerging market capitalisation only grows in line with GDP, it could account for half of the global total by as early as  2020. This growth will dovetail with diversification. Although the capitalisation of the emerging market universe continues to be dominated by the so-called BRICS (the grouping of Brazil, Russia, India and China, to which South Africa has recently been added), investors are increasingly casting their nets further afield in search of opportunities  elsewhere. It has now become fashionable to look at the potential of the emerging market universe through the lens of the so-called Next-118 set of Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, Pakistan, the Philippines, Turkey and Vietnam. Although the 11 countries within this group are very different, culturally as well as economically, they share a number of characteristics underpinning their appeal to emerging market markets. These include a higher long-term growth rate than their G7 counterparties, a large, growing, young and aspirant population, and an evolving middle class enjoying greater purchasing  power. More broadly, the universe of investable emerging markets has expanded at a breathtaking rate over the last years. When the Morgan Stanley Capital International (MSCI) global emerging market index was launched in 1988, it included just 10 markets. At the time of writing, there are 23 countries in the MSCI Emerging Market  Index. In contrast, the concept of frontier markets was coined in the 1990s. There is no single definition of frontier markets, although these are described as ‘pre-emerging markets’ being less developed than emerging markets9 in which equity markets are investable but do not have the market capitalisation, liquidity and other characteristics of emerging markets. The

xviii

Preface

MSCI Frontier Markets Index comprises 35 countries located in Central and Eastern Europe, Africa, Middle East, Asia and South America in the Frontier Markets  benchmark. Emerging and frontier markets are fluid concepts as, given the rapid economic growth, certain emerging markets are likely to be reclassified as developed markets and certain frontier markets will likely transition into the next generation of emerging markets. For example, the MSCI is reclassifying Qatar and the UAE as emerging  market effective November 2014. Although the liquidity of many of these markets remains limited, many of the smaller frontier markets are registering rapid expansion, underpinned by market reforms as well as vibrant economic fundamentals. Tiny Mongolia, for example, which has a market capitalisation of just US$1.3  billion, could reportedly see the value of its stock market explode a staggering 30-fold, to US$40  billion, within five years, if a revision to the securities law permits dual listings on its stock exchange.10 This would allow overseas firms such as those that are investing in Mongolia’s plentiful mineral resources to list their shares in Ulan Bator.

Emerging market debt Emerging market debt has also undergone a metamorphosis since the late 1980s, when Brady bonds were designed as a way of repackaging bank loans into tradable debt. Today, external emerging market debt is a US$700  billion asset class, more than three times larger than in 1995, according to figures published by Ashmore.11 Based on the average growth of the asset class over the last decade of 6%, Ashmore estimates that external debt will grow to US$1.1 trillion by  2020. Similarly to its equity counterpart, the market for emerging market debt is now highly diverse. In 2012, the number of index-eligible emerging market sovereigns rose to 55, compared with just 14 in 1993.12 Voracious investor demand for new emerging market sovereigns will underpin a continued expansion of this universe. One of the most striking recent indications of the strength of fixed income investor demand for new credits in the emerging market space came in April 2013, when Rwanda launched its debut bond in the international capital market. The order book for this 10-year US$400  million bond reached US$3.5  billion, which is more than half of Rwanda’s GDP of US$6.9  billion. With governments in African countries ranging from Nigeria to Zambia having also taken their bow recently in the international bond market, an increasingly diverse and liquid sub-sector of the global fixed income universe is taking shape in a continent long regarded as the last frontier for debt  investors. Until recently, liquidity considerations meant that most international investors in emerging market bonds confined themselves to sovereign debt. Emerging market corporate debt, however, is now one of the fastest growing asset classes. At US$1.3 trillion, it is now larger than the emerging market sovereign and the European high yield bond markets combined, and is growing by between US$200  billion and US$300  billion a  year.13

A broader investor base Critically, emerging market equity and debt are also no longer the preserve of specialist fund managers, mutual funds and ETFs. Both asset classes are also increasingly drawing

xix

Preface

the attention of many of the world’s largest and historically most conservative investors, such as sovereign wealth funds, which now have some US$2.2 trillion of assets. Take, for example, the shifting asset allocation policy of Norway’s colossal sovereign wealth fund, which is the world’s largest, with assets of close to US$750  billion. The Norwegian fund was reported in April 2013 to have continued to move assets away from mature markets in Europe and into equities in countries such as Kuwait and Oman, and debt in Latin American economies including Colombia and Mexico. ‘We see an increase in emerging markets and their currencies to a significant degree over the next 10 years,’ the Fund’s CEO, Yngve Slyngstad, told  reporters.14

Compelling valuations Even though many of the world’s emerging and frontier equity markets have underperformed the US equity market since the end of 2009, it is easy to see why these markets remain attractive to investors on a fundamental basis. Schroders15 advised at the end of 2012 that ‘GEMs [global emerging markets] look extremely attractive in terms of valuations, both absolute and relative to history, as well as on a market capitalisation to GDP basis’. According to Schroders, as of December 2012 emerging market equities sold on a very undemanding forward price/earnings ratio of 10×, compared with a historic multiple of  12×.

Risks in emerging and frontier markets The under-development of markets and financial services, together with the lack of an equity culture in many emerging and frontier economies, generates opportunities for international investors – but it can also create pitfalls. For example, while under-researched companies clearly provide opportunities for international investors with extensive research capabilities, governance standards can also fall well below those expected by fund managers in developed  markets. Another potential pitfall is that it is a fallacy to assume that there is always a correlation between economic growth and asset price performance. For example, over the 19 years between 1992 and 2011, the Chinese economy grew by an annual average of more than 10%. An investor in an equity fund tracking the MSCI China index over the same period, however, would have achieved a negative  return.16 There are several reasons why emerging market indices can often perform poorly relative to economic growth rates. Foremost among these are that indices seldom mirror a country’s economic structure. In Russia, for example, consumer and banking stocks still account for less than 30% of the index. The balance is dominated by energy and commodity-related stocks, many of which remain at least partially in state ownership, and are not accurate proxies for the Russian  economy. Shortcomings such as these will progressively be eliminated as an equity culture crystallises in a wide range of emerging markets, encouraging more family-owned and other privately held companies to open their share capital to the investing public. This is turn will support the continued growth and diversification of this vibrant asset  class.

xx

Preface

Conclusion Although setbacks and bouts of intense volatility along the way are inevitable, the long term prospects for emerging market and frontier market activity remain bright. As Ashmore noted in April 2013,17 ‘valuations are low, earnings growth is strong and, relative to history and to the rest of the world, the economic backdrop is stable if not getting stronger – the time for allocating is  now’. This preface has no regard to the specific investment objectives, financial situation or particular needs of any specific reader. The preface is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any emerging and frontier markets, specific sectors, strategies, securities or related financial instruments. The type of transactions described herein for illustrative purposes may not be eligible for sale in all jurisdictions or to certain categories of investors. The contents of this preface is based on information obtained from sources believed to be reliable but is not guaranteed as being accurate, nor is it a complete statement or summary of the sectors, strategies, securities, markets or developments referred in the preface. The contents of this preface should not be regarded by readers as a substitute for the exercise of their own judgement. The author accepts no liability whatsoever for any loss or damage of any kind arising out of the use of all or any part of this preface. World Bank, ‘Africa’s pulse’, press release, 15 April 2013. www.economist.com/blogs/dailychart/2011/01/daily_chart. 3 OECD Development Centre, ‘The emerging middle class in developing countries’, Working Paper No 285, January  2010. 4 ADB, ‘Key indicators in Asia and the Pacific’, 2010, www.adb.org. 5 MEED, ‘Can Africa become the next China’, 2013. 6 Fidelity. 7 Ernst & Young, ‘Moving towards the mainstream: stock market developments and performance in the rapidgrowth markets’, 2012, www.ey.com. 8 For more details, see www.next11.se. 9 JPMorgan. 10 See, for example, www.reuters.com, 18 April 2013. 11 Ashmore, ‘The emerging view: price and prejudice’, March 2013. 12 Ashmore, ‘The emerging view’, March 2013. 13 Insight Investment, ‘The outlook for liquidity in emerging market corporate debt,’ Outlook 2013. 14 Bloomberg, 26 April 2013. 15 Schroders, ‘Outlook’, December 2012. 16 Schroders, ‘Investing in emerging markets: a primer for UK pension funds’, October 2012. 17 Ashmore, ‘The emerging view’, April 2013. 1 2

xxi

Acknowledgements I wish to thank each of the authors for their valuable contribution, time, support and dedication. Their wealth of knowledge and expertise is truly impressive and I am very grateful to them for sharing it with  us. Our special thanks to Dr Mark Mobius, Executive Chairman of Templeton Emerging Markets Group, for providing us with the foreword to the  book. I wish to express my appreciation to Melissa Oshungbure, Sarah Abel and Lanh Te at Euromoney for their excellent co-operation, review and assistance and Tushar Garg (Goldman Sachs Asset Management, Bangalore) and Shahzad Waraich (HSBC Global Asset Management, Dubai) for their introductions and unwavering support in realising this unique and important  publication. I wish to thank Sohail Jaffer, Partner, FWU Group, for his valuable inspiration and unfailing support in enhancing the overall quality of this  publication. I am also grateful to my husband, Thomas Kristensen, for his understanding and patience in supporting my efforts to realise this  project.

xxiii



About the editor Kamar Jaffer is a VP, Legal & Compliance at PineBridge Investments Middle East in Manama, Bahrain. She will be involved in advising on the distribution of financial products and services and privately negotiated principal investment transactions in the Middle East and North Africa (including Turkey). Before joining PineBridge Investments Middle East, Kamar Jaffer was a senior associate at Vinson & Elkins in Dubai and, prior to that, an associate at Allen & Overy in Dubai and Clifford Chance in London. Kamar Jaffer has a degree in English law from King’s College, London and a degree in French law from the Sorbonne, Paris. Kamar Jaffer has contributed a number of articles and co-edited publications including Investing in the Middle East and North Africa (MENA) Region: Fast Track Opportunities for Growth also published by Euromoney.

xxv



About the contributors Khaleel Ahmed Khaleel Ahmed is Chief Investment Officer in IFC’s Global Financial Markets Department. He has worked with IFC since 1990 and has led IFC’s investment transactions in banks and financial intermediaries in emerging markets. He has significant transaction and advisory experience spanning all different geographic regions and financial sector sub-segments, including establishing new private financial institutions, and restructurings. His work experience with IFC has also involved advising governments and regulatory authorities on financial market development and  regulation. Prior to joining IFC, Khaleel started and headed the merchant banking operations of National Development Finance Corporation of Pakistan (then the leading long-term financing institution in Pakistan). Prior to that, he worked with Price Waterhouse in London to qualify as a Chartered Accountant and later worked with their financial services consulting side. Khaleel read Economics at the London School of Economics. He is a Pakistani citizen and lives in Washington  DC. Sarah Alexander Sarah Alexander is a Managing Director with The Abraaj Group, a global private equity company investing in the growth markets of Asia, Africa, Latin America, the Middle East/ North Africa and Turkey. Prior to joining The Abraaj Group, Ms. Alexander was instrumental in creating the Emerging Markets Private Equity Association (EMPEA), the leading provider of authoritative information and insight into the opportunities in the private equity industry in emerging and growth economies. As Founding President and CEO, she grew the organisation to more than 300  member firms representing 60 countries and more than US$1 trillion in assets under management, while developing the industry’s leading research products and programs. An industry expert, she is a frequent contributor and commentator for broadcast and other  media. Previously, she was a private equity investor in Asia, and worked with the World Bank Group, the US Department of State and the US House of Representatives. She received an MBA from Harvard Business School, a Masters of Public Administration from Princeton University, and a BA, summa cum laude, from Emory University. Robin Anderson Robin Anderson is an Economist at Principal Global Investors. She works with the Economic Committee and the Chief Global Economist, Bob Baur, on weekly commentaries and macroeconomic strategy. Robin also works with Multi-Asset Advisors, an investment boutique within Principal Global Investors. Robin joined the firm in 2011. Prior to her current role, Robin served as an Economist at the US Census Bureau. She received her PhD in Economics from the University of Washington and a bachelor’s degree in Economics from the University of North Carolina at Chapel  Hill.

xxvii

About the contributors

Matthew Annenberg Matthew Annenberg is the Head of Multi-Asset Advisors at Principal Global Investors. Matthew joined the firm in 2012. Prior to his current role, Matthew served as a Managing Director at K2 Advisors, where he analysed Macro and Currency managers in a Fund-ofFunds setting. Prior to K2, Matthew ran Financial Markets Advisory for the Americas at ABN AMRO Bank, assisting corporate and institutional clients with a range of issues around funding, hedging and investment strategies. He received a bachelor’s degree in Economics from Harvard College. Matthew holds the Chartered Financial Analyst designation and is a member of  NYSSA. Michael Barrow Michael Barrow is Director for Asian Development Bank’s (ADB) private sector infrastructure operations including public-private partnerships in South Asia, the Central Asian Republics and the Caucuses. He joined ADB in July 2003, prior to which he worked for the Deutsche Bank group over the course of 15 years in London, Tokyo and Singapore, lastly as both Director of Project Finance and of Transportation. He was also Senior Vice President in the Structured Finance Department of Sumitomo Mitsui Banking Corp. in Singapore handling project financing. Mr Barrow has had extensive experience in project financing, PPPs, privatisation advisory, and corporate restructuring in Asia, Eastern Europe and the Middle East, and has covered most sectors including water, power, oil and gas, transportation, telecommunications and  manufacturing. Ye˛sim Bezen Ye¸sim Bezen is a finance and projects partner at Bezen & Partners. She is a qualified solicitor (England & Wales). She was employed by the London office of a magic circle law firm from 2001 to 2007 where she advised clients on banking, asset finance and project finance transactions until co-founding Bezen & Partners. She has extensive experience of finance and projects work both in Turkey and abroad. She advises banks, finance institutions, international organisations and sponsors in banking, energy and infrastructure  deals. BOCI-Prudential Asset Management BOCI-Prudential Asset Management was jointly established by BOCI Asset Management Limited (which is a subsidiary company wholly owned by BOC International Holdings Limited) and Prudential Corporation Holdings Limited in 1999. The company offers a comprehensive spectrum of investment products, which includes Hong Kong mandatory provident fund scheme, pension funds, retail unit trusts, exchange traded funds, institutional mandates and other investment funds. The company also manages discretionary investment portfolio and provides charity fund management services to both private individuals and institutional clients. Being one of the major investment managers of MPF schemes, BOCIPrudential Asset Management manages assets for more than 670,000 clients in Hong Kong. In terms of asset under management on MPF, the company ranks among top three investment managers in the MPF market with approximately 8% market share. The managed Mandatory Provident Fund Scheme is one of the Master Trust Schemes engaged by the Government for the provision of MPF services to its eligible employees.  www.boci-pru.com.hk.

xxviii

About the contributors

Bartle Bull Bartle Bull, an emerging markets fund manager, is the Portfolio Manager of Iraq Investment Partners I, the world’s first Iraq-only public securities investment fund. Mr Bull began his emerging markets investment career at the UK’s Jupiter Asset Management, where he established and ran the group’s Latin American investment management operation. Mr Bull then managed Asian regional equities hedge funds for Jupiter in Hong Kong. He subsequently worked in Baku, Azerbaijan to establish the first portfolio investment fund for the Caucasus and Central Asia, until the Russian debt crisis of 1998. In 2000, Mr Bull joined the emerging markets debt division of Van Eck Global in New York, leaving to focus on Iraq in 2004. Prior to co-founding Northern Gulf Partners LLC (NGP) with Zaab Sethna in October 2007, he spent three years providing Iraq political analysis to a variety of publications and broadcast media outlets, including the New York Times, the Wall Street Journal, the Washington Post, the Financial Times, Fox News, the BBC, NPR and many others. Mr Bull was presented with a personal Commander’s Award by General David Petraeus in 2008 for the excellence of his Iraq political analysis for various news media and is a member of the Council on Foreign Relations. He received a BA from Harvard University and an MBA from Columbia Business  School. Allan Conway Allan Conway has been the Head of Emerging Markets Equities at Schroders in London since October 2004. Previously, Allan was the Head of Global Emerging Markets for West LB Asset Management from 1998 and then Chief Executive Office of WestAM (UK) Ltd from 2002. From 1997, he was Head of Global Emerging Markets at LGT Asset Management. From 1992 to 1997, Allan joined Hermes Investment Management as Head of Overseas Equities. From 1983 to 1992, Allan moved to Provident Mutual Life Assurance initially as an Investment Manager and later as Head of Overseas Equities. Allan commenced his investment career in 1980 when he joined the Occidental International Oil Company as an  accountant. Allan is a Fellow of the Securities Institute (FSI) and a Member of the Institute of Chartered Accountants. Allan has a BA (Hons) in Economics, York  University. Kamal Daswani Kamal Daswani is Vice President, Corporate Finance at Delta Partners Group. With over nine years of experience, Kamal has worked in Investment Banking (M&A) in the TMT industry. He holds an MSc from ESADE in Spain, a CEMS MSc (LSE/ESADE) and an Executive MBA with distinction from the London Business School. Kamal previously worked for Fairfax and Millennium Finance Corp. in Dubai and London, and Citigroup Corporate and Investment Bank in London and  Madrid. Kamal has been involved in M&A, IPOs and private placements in Europe and the Middle East, and currently focuses on emerging markets, where in the last few years he has worked on several tower infrastructure transactions in Africa and  Asia. Melanie Gilmore Melanie Gilmore is Vice President of Macquarie Infrastructure & Real Assets and has over seven years’ experience in the finance sector and at Macquarie. Melanie has worked across

xxix

About the contributors

Europe and Asia and her current role involves fundraising, product establishment and asset acquisitions across Asia. Prior to this Melanie worked on asset acquisitions for the Macquarie European Infrastructure Funds 2–4 which committed the equivalent of €6  billion of capital to European infrastructure investments. Prior to working at Macquarie, Melanie worked in the venture capital  sector. Melanie holds a Master of Mathematics and Physics (Hons) from the University of  London. Michael Gomez Michael Gomez is a managing director in the Newport Beach office of PIMCO, a portfolio manager and co-head of the emerging markets portfolio management team. Prior to joining PIMCO in 2003, he was responsible for market making and proprietary trading of emerging market bonds at Goldman Sachs. Prior to that, he spent a year in Colombia serving as a financial consultant to the Ministry of Finance and Public Credit. Mr Gomez was named one of the rising stars of mutual funds by Institutional Investor News (2009). He is chairman of the oversight committee for the Markit GEMX emerging markets indices and also serves on other committees pertaining to emerging markets. He has 18 years of investment experience and holds an MBA from the Wharton School of the University of Pennsylvania, where he also received his undergraduate  degree. Andrew Grant Andrew Grant is an Assistant Vice President at BNRI, having transferred to the BNRI team in 2012, after joining Barclays in 2009. Prior to joining, he worked as a consultant at Hewitt New Bridge Street, specialising in executive remuneration and corporate governance. Andrew holds a BSc in Law & Chemistry from the University of  Bristol. Baljeet Kaur Grewal Baljeet Kaur Grewal is the Managing Director & Vice Chairman at KFH Research Limited (KFHR), the Investment Research subsidiary of Kuwait Finance House. In her capacity, Baljeet heads the Global Economic & Investment Research and Advisory teams at KFHR, the first Islamic bank worldwide to have a notable research presence in Islamic  finance. Prior to this, Baljeet was the Head, Investment Banking Research at Maybank Group, Malaysia. Prior to that, she was attached with ABN AMRO Bank and Deutsche Bank, London, with experiences ranging from Credit Structuring, Loan Syndication and Economic & Capital Market Research. She has broad experience in investment banking, having participated in notable Islamic fund raising transactions in Asia & the Middle East; as well as in strategic planning and execution of investment banking organisational change. To date, she has undertaken research in Islamic finance with a principle focus on debt capital markets and Sukuks in emerging markets. She has written and published numerous articles and papers on Developing Economies & Debt Markets, Islamic Debt Structures and South East Asian Economies; and has addressed numerous international Islamic conferences & forums. Since inception, KFH Research Limited has been awarded nine international awards of research excellence, and is widely regarded as the Best Islamic Finance research house  globally.

xxx

About the contributors

Baljeet has a 1st Class Honours in International Economics from the University of Hertfordshire and has undertaken extensive research in Development Studies with the London School of  Economics. She is also the award recipient of the prestigious Sheikh Rashid al-Makhtoum award for Regional Contribution to Islamic Finance in Asia 2006, as well as accolades honouring women in Islamic  finance. Steve Gross Steve Gross is Senior Managing Director, Head of Asia-Pacific Business Development, Macquarie Infrastructure & Real Assets and has over 20 years of experience in the finance sector and eight years within  Macquarie. Steve’s current role involves overseeing a team based across Asia-Pacific raising private equity from Asia-Pacific investors for all global Macquarie Infrastructure and Real Assets funds, co-investment and direct opportunities as well as structuring new Asia-Pacific based funds and separate managed accounts (SMAs). This team led the successful fundraising of MIRA’s third Korean infrastructure fund, raised US$770  million for the Macquarie Everbright Greater China Infrastructure Fund. In addition in Q3 2012, the team closed the first Philippines infrastructure fund, with commitments of US$625  million – the Fund reaching its hard cap at first  close. Prior to this, Steve led the set up and capital-raising of the Macquarie European Infrastructure Fund (MEIF) 3 following two years as the Chief Operating Officer (COO) of the MEIFs with €7.3  billion under management. During his time as COO, the team grew from 25 to more than 60 staff and capital invested increased to €6.3 billion including investment in the largest water and wastewater business in the UK – Thames  Water. Steve completed a Bachelor of Commerce with honours at the University of Melbourne, where his thesis was on the impact of infrastructure spending on private sector expenditure and holds an executive MBA from London Business School with distinction.  Darja Habarova Darja Habarova is a manager with PricewaterhouseCoopers LLP Singapore. Darja has more than eight years of experience working with various financial institutions. She played a lead role in many of the projects with key wealth management clients in Asia. Areas covered include strategy, operations, regulatory compliance and business risk management. Prior to joining PwC, Darja was working in various front office roles with leading wealth management players in Switzerland. Darja is a regular contributor of PwC’s thought leadership on Wealth Management, including the 2011 PwC Wealth Management Survey. She also drives the firm’s Regional Private Banking Chief Operating Officer Roundtable Series, where players discuss current industry trends, challenges and opportunities for leaders in the operational function. Darja holds an MBA from the University of St. Gallen, Switzerland and is a Certified International Wealth manager  (AZEK). Pär-Ola Hansson Pär-Ola Hansson is the Markets Leader for the Transaction Advisory Services (TAS) practice at Ernst & Young (EY) in the EMEIA region (Europe, Middle East, India and Africa). He was

xxxi

About the contributors

previously the Managing Partner for EY TAS in the Nordics region and sits on the Executive Management Board for the TAS practice globally. Pär-Ola has over 15 years’ experience as a transactions adviser and has primarily advised large corporate buyers on complex crossborder transactions. His past clients include Volvo, SKF, Stena, SAAB and EQT. Pär-Ola holds an MSc in Business Administration from the Stockholm School of Economics and has a background as an authorised public accountant. Richard Holloway Richard Holloway is Managing Director of Milliman’s life consulting businesses in SE Asia and India. He has worked on most of the mergers and acquisitions in SE Asia over the past 16 years and has undertaken several Appointed Actuary roles for direct insurers and reinsurers in Singapore and Sri Lanka. Richard is well known for his role in pioneering the insurance consulting market in India and his clients have included many multi-national insurance groups, domestic insurance companies, private equity funds and  regulators. Sohail Jaffer Sohail Jaffer is a Partner and the Head of International Business Development within the FWU Group based in Dubai. His main achievements are his success in extending the group’s insurance footprint into several emerging markets, understanding the evolving demand for individual life insurance, savings and pensions in such high growth markets especially for Islamic insurance, developing a sustainable value added proposition for the group’s international business, providing his business creativity and industry thought leadership. Mr Jaffer’s expertise has been sought by regulators, international service providers and banks in the Middle East North Africa (MENA) and South-East Asia regions and he has secured several major bank distribution partners for the group in five emerging  markets. Before joining the FWU Group in July 1999, he was Senior VP within the International Mutual Funds Group of Scudder based in London, responsible for international product development from June 1998 until June 1999. From January 1989 until 1995, he was VP with Citibank London with the Financial Institutions Group responsible for structured products including alternative investments; then in 1996 joined Citibank’s Alternative Investment Strategies (AIS) Group as Director and was also a member of Citibank’s Hedge Funds Policy and Strategy  Committee. Mr Jaffer was an Audit Partner with the Price Waterhouse practice in Africa from July 1984 until September 1988. He is a UK qualified Certified Accountant (FCCA). He is currently Regional Advisory Council Member (EMEA) of the Alternative Investment Management Association (AIMA), was a Council member of AIMA for the period 2001 to September 2008 and past AIMA Chairman for the period 1997 to 2000. He was also a member of ALFI’s Asset Management Advisory Committee and of their Hedge Fund Committee. ALFI is the Association of the Luxembourg Funds  Industry. Mr Jaffer has edited several Euromoney publications on Alternative Investments, Hedge Funds, Funds of Hedge Funds, Multi-Manager Funds and six of their Islamic Finance series (Asset Management, Retail Banking, Insurance, Wealth Management, Investment Banking

xxxii

About the contributors

and Sukuk) and co-edited two editions of Investing in the GCC published by CPI Financial Books. In 2009, he received the ‘Best Business Leader in Europe’ accolade given by the World Finance  magazine. Douglas Clark Johnson Douglas Clark Johnson is CEO and Chief Investment Strategist of Codexa Capital. He formed Codexa Capital in the depths of the subprime crisis to pursue opportunities for issuers and investors in non-traditional markets. His career-long commitment to emerging markets in general, and the Muslim world in particular, has led to the firm’s focus on the Islamic Crescent.  Johnson is a well-known commentator on emerging-market issues; his work has appeared in leading financial trade publications as well as in periodic research commentary prepared for clients of his firm. He has lectured at Effat University in Jeddah and has spoken at professional conferences in locations as diverse as Chile, South Africa, and  Malaysia. Johnson holds dual master’s degrees in finance and international affairs from Columbia University, with an emphasis on Asia and its capital markets. He earned a bachelor’s degree in finance from Georgetown  University. Dr Eliot Kalter Dr Eliot Kalter established and is President of E M Strategies, Inc. Eliot also holds the position of Senior Fellow at the Fletcher School, Tufts University, where he is co-head of the Sovereign Wealth Fund Initiative. He retired from the International Monetary Fund in June 2007, as Assistant Director of the Capital Markets  Department. Eliot received his PhD in International Finance from the University of Pennsylvania; MSc from the London School of Economics; and BA from the University of Cincinnati. His publications are in the areas of international and local capital markets, public debt management, corporate restructuring, international competitiveness, financial crisis management and global asset allocation  (www.emstrategies.com). Sanket Kawatkar Sanket Kawatkar is the Head of Milliman’s life insurance consultancy practice in India, and has previously worked at Watson Wyatt (now Towers Watson) where he grew their life insurance consulting practice in India, and with the AIG group. With experience of over 17 years, Sanket has consulted with almost all the life insurance companies in India in areas such as embedded/appraisal valuations, peer reviews of statutory valuations by Appointed Actuaries, product development and pricing support, strategy development, benchmarking support, capital efficiency reviews, market reports, market entry and business planning, and regulatory licensing support. He is a regular speaker at industry  forums. Antonios Koutsoukis Antonios Koutsoukis is an analyst at Credit Suisse in the Private Banking Division. His areas of responsibility include equity strategy and thematic research. Antonios holds an MSc in Finance from Cass Business School, a BSc in Economics and Economic History from the London School of Economics and is a CFA  charterholder.

xxxiii

About the contributors

Karuna Luthar Karuna Luthar is a banking professional who has worked in the UAE for over 15 years. Karuna heads the Middle East office of Elara Capital Plc, where she is responsible for business development, growth and compliance, and is on the Board of Elara’s Singapore office. Elara Capital is a full service investment bank that offers global fund raise and trading capabilities to companies and institutional clients through its cross-border presence in London (headquarters), Mumbai, Singapore, Dubai, New York and Mauritius. Prior to her current role at Elara, Karuna was Head of Corporate Customer Services at HSBC in Dubai, where she successfully re-engineered bank practices to simultaneously improve profitability, customer experience and employee satisfaction. Karuna is a member of the Institute of Chartered Accountants of India and has a BA (hons) degree in Economics from Delhi University. In addition to her professional commitments, Karuna enjoys working within communities in India and Dubai. She is an Assessor with the Mohammed bin Rashid al Maktoum Award for Business Excellence, an Executive Committee Member for the Dubai Chapter of the Institute of Chartered Accountants of India, and a Director of the India office of Operation Eyesight Universal, an organisation that works to eradicate preventable blindness in different parts of the  world. Frank Kwok Frank Kwok joined Macquarie Group in 1997 and has over 15 years of experience in infrastructure and infrastructure funds management. Mr Kwok is a member of the investment committees or boards of a number of Macquarie-managed infrastructure funds in Asia, including Macquarie State Bank of India Infrastructure Fund, Macquarie International Infrastructure Fund, Philippine Alliance for Infrastructure and Macquarie Everbright Greater China Infrastructure Fund. From 2007 to 2010, Mr Kwok was Global Chief Operating Officer of Macquarie Infrastructure and Real Assets, the division of Macquarie which manages infrastructure and real assets funds and prior to that role, he was Chief Financial Officer of Macquarie Airports, a top 50 company listed on the Australian Securities Exchange. Mr Kwok holds a Bachelor of Economics (Hons) degree and a Bachelor of Laws (Hons) degree from the University of Sydney. Maria Laura Lanzeni Maria Laura Lanzeni is Head of Emerging Markets, Global Risk Analysis at Deutsche Bank Research. Her team analyse developments in Emerging Asia, Latin America, Eastern Europe, Middle East and Africa. Among other topics, the team focus on sovereign risk, banking sectors, and medium-term economic and political trends in emerging economies. Before joining Deutsche Bank in 1999, Ms Lanzeni held a senior position at the Inter-American Development Bank in Washington, DC, and previously worked at the Central Bank of Argentina as well as in macroeconomic consultancy. She holds graduate degrees in Economics from the Institute for World Economics at Kiel University, the Di Tella University and the University of Buenos  Aires. Federico Membrillera Federico Membrillera is Managing Partner and Head of Corporate Finance, Delta Partners Group. With 20 years of telecom advisory experience, Federico has spent the last seven

xxxiv

About the contributors

years focused exclusively on the emerging markets with deep focus in Middle East and Africa. Federico holds an Economics degree from Barcelona University, and has previously worked for VC fund Nauta Tech I, DiamondCluster (now Oliver Wyman) and Andersen Corporate  Finance. Federico has been involved in buy-side mandates for several opportunities in the Middle East and Africa, including, but not limited to: Iraq, KSA, Syria, Jordan, Lebanon, Kenya, Tanzania, Rwanda, Namibia, Nigeria, DRC and Mali. He has been advising leading MENA operators in their tower management strategy and has been lead adviser in tower transactions in Africa for operators, tower companies and financial  investors. Manooj Mistry Manooj Mistry is head of Exchange Traded Products and Institutional Passive, EMEA, for Deutsche Bank’s Asset & Wealth Management division. Manooj joined Deutsche Bank in May 2006 and was part of the team that launched the db X-trackers ETF business in 2007, which is now the second largest ETF provider in Europe by assets under management. Prior to Deutsche Bank, Manooj was with Merrill Lynch International in London, where he was responsible for the development of the LDRS ETFs, the first ETFs to be launched in Europe. Manooj graduated in Economics and Business Finance from Brunel  University. Mark Mobius Mark Mobius, PhD, Executive Chairman of Templeton Emerging Markets Group, currently directs analysts based in Templeton’s 18 emerging markets offices and manages the emerging markets portfolios. Dr Mobius has spent more than 40 years working in emerging markets all over the world. He joined Franklin Templeton Investments in 1987 as president of the Templeton Emerging Markets Fund, Inc. In 1999, he was appointed joint chairman of the Global Corporate Governance Forum Investor Responsibility Taskforce of the World Bank and Organization for Economic Cooperation and  Development. He has received many awards including: ‘50 Most Influential People’ by Bloomberg Markets Magazine in 2011 and ‘2010 Africa Investor Index Series Awards’ by African Investor. Dr Mobius was also named by Asiamoney Magazine in 2006 as one of their ‘Top 100 Most Powerful and Influential  People’. Dr Mobius earned bachelor’s and master’s degrees from Boston University, and a Doctor of Philosophy (PhD) in economics and political science from the Massachusetts Institute of Technology. He is the author of the books Trading with China, The Investor’s Guide to Emerging Markets, Mobius on Emerging Market, Passport to Profits, Equities – An Introduction to the Core Concepts, Mutual Funds – An Introduction to the Core Concept, Foreign Exchange – An Introduction to the Core Concepts and Mark Mobius – An Illustrated  Biography. Ian Morley Ian Morley is the Chairman of Wentworth Hall Consultancy. He was the founder Chairman of The Alternative Investment Management Association (AIMA) and was one of the European pioneers of the Hedge Fund industry. He was assisted in the chapter in this book by Charlene Jones a student from the London School of  Economics.

xxxv

About the contributors

Gray Newman Gray Newman is Managing Director for Morgan Stanley in New York, which he joined in 2000. As Chief Economist for Latin America he is in charge of all Latin American macro-economic research. The Latin American Economics team’s research is used by the fixed income, as well as the FX, equity and investment banking groups within Morgan  Stanley. Prior to joining Morgan Stanley, Mr Newman was Senior Latin America Economist at Merrill Lynch through June 2000. Prior to that, Mr Newman was Chief Economist for Latin America for the Hong Kong Shanghai Bank (HSBC) in New York. Before working at HSBC, Mr Newman was Senior Economist for Interacciones Casa de Bolsa, a Mexico City-based brokerage  house. Mr Newman is regularly cited by the financial press on Latin American economic trends. He was ranked number one as Latin American Economist in the 2012, 2011, 2009, 2008, 2006, 2005, 2004, 2003 and 2002 Institutional Investor  polls. Onur Ok˛san Onur Ok¸san joined Bezen & Partners after obtaining a law degree from Galatasaray University and is currently an associate of the firm. He is a qualified lawyer and a member of the Istanbul Bar Association. He advises local and international clients on regulatory and compliance issues with a focus on the energy and infrastructure sector and works closely with the projects and regulatory partners of the  firm. Justin Ong Justin Ong is a partner with PricewaterhouseCoopers LLP Singapore, and is the Singapore  Asset Management Industry Leader as well as the Asia Pacific Private Banking Leader. His focus is on serving firms in the asset management and private wealth space, covering business model and strategy reviews, human capital assessments, performance improvement reviews, risk assurance and training, among others. He has more than 21 years of experience working in Singapore, London and Luxembourg. Justin is a member of the Stakeholder Engagement Sub-Committee within the Private Banking Industry Group, a think-tank comprising senior level private banking executives and co-chaired by the Monetary Authority of Singapore. Justin has a Bachelor of Economics degree from Monash University in Australia, and is a full member of the Australian Society of Certified Practising Accountants as well as a practising member of the Institute of Certified Public Accountants of Singapore. He also holds the Investment Management Certificate (IMRO Full Version) issued by the Institute of Investment Management and Research in  UK. Julian Perlmutter Julian Perlmutter is a partner in the corporate group at Simmons & Simmons in London. He is a US securities law specialist, with extensive experience in equity securities and highyield and standard debt securities offerings, with a particular focus on Rule 144A offerings, leveraged buy-outs, debt restructuring and general SEC compliance. Julian joined Simmons & Simmons as a corporate partner in 2011. He was previously with another leading

xxxvi

About the contributors

international law firm, where he gained over 10 years of experience working in their New York, London and Hong Kong offices. Julian has also spent time with the US Securities and Exchange Commission in Washington, DC and on secondment to Morgan Stanley in  London. Leen Qablawi Leen Qablawi is an associate in the Dubai office of Latham & Watkins and is a member of the Corporate Department. Ms Qablawi has a broad range of experience including in mergers and acquisitions, private equity, investment funds, business restructuring, capital markets and all general corporate transactional  work. Charles Robertson Charles Robertson, a leading emerging markets specialist, is Renaissance Capital’s Global Chief Economist and Head of the Firm’s Macro-strategy Unit. Mr Robertson covers the global economic themes having the greatest impact on emerging  markets. Over the past decade, the scope of Mr Robertson’s work has covered, among other topics: quantifying political risk in emerging markets; how the retirement age rising to 67  reflects deep-rooted problems in the West and great opportunities in emerging markets; the revolutionary nature of growth in countries with non-democratic governments; the fact that Africa’s economies are now returning some of the highest growth rates on Earth, and how this trend is set to play out; the impact of terrorism and natural disasters on economies; the effects of falling agricultural stocks on food prices and inflation; and how emerging-markets banks may have the best growth potential over the coming  years. Mr Robertson is the lead author of The Fastest  billion: The Story Behind Africa’s Economic Revolution  (www.fastestbillion.com). Mr Robertson was ranked the number-one economics and macro analyst for emerging Europe, the Middle East and Africa in the Extel survey in 2007, 2008, 2009 and 2010. In addition, the team he led was ranked the best macro team in Extel’s 2010 survey of equity  investors. Mr Robertson graduated from the London School of Economics in 1993, and worked at a UK parliamentary defence think-tank and a research boutique until joining the financial services industry in  1998. Lakhbir Sandhu Lakhbir Sandhu is a Director at BNRI, having joined the team in 2008. Prior to joining Barclays, he was an Associate in the investment banking division at Goldman Sachs (2004– 2008), where he worked on M&A and financing transactions for large-cap UK clients including Diageo, Yell, HSBC, and Shire. Previously he was an investment research analyst at Goldman Sachs (2001–2003). Lakhbir is a CFA holder (since  2006). Lakhbir holds a BSc in Management Sciences from the London School of  Economics. Claire Schaffnit-Chatterjee Claire Schaffnit-Chatterjee is Senior Analyst at Deutsche Bank Research, responsible for sovereign ratings in sub-Saharan Africa and investigating trends in the areas of food/agriculture

xxxvii

About the contributors

(supply/demand, food prices, sustainability, climate change, risk management), gender and consumption. Her views are regularly sought after by private sector, industry associations, various governments (all levels), experts and NGOs. Prior to joining Deutsche Bank Research in 2006, Claire worked for consulting companies (latest as a manager at Accenture, StrategyFinancial Services) and in academic research. Claire has a PhD in engineering and applied mathematics from the University of Toronto and an engineering degree from the University of Technology of Compiègne,  France. Patrick Schena Patrick Schena is Adjunct Assistant Professor of International Business Relations at the Fletcher School, Tufts University, where he is also Senior Fellow of the Center for Emerging Market Enterprises and Co-Head of the Sovereign Wealth Fund Initiative. Dr Schena has 30 years’ experience in finance, operations, and technology management focused on investment management. He was formerly a Principal, leading delivery of the Investment Management Services at a Genpact-Headstrong Corp., a global provider of outsourcing services. He has participated in or cofounded two companies providing technology and operations services to investment managers. He holds a PhD from the Fletcher School, Tufts University and additional graduate degrees from The Fletcher School, and Boston  College. Kai-Niklas Schneider Kai-Niklas Schneider is head of Clifford Chance’s Funds and Investment Management Practice in Singapore and the Middle East. He focuses on investment funds, joint ventures and private equity. He regularly advises sponsors on accessing the US market as well as on regional licensing and securities laws. Mr Schneider is the Chair of the Regulatory Committee of the Gulf Bond and Sukuk  Association. He received a BA from American University, a JD from University of Baltimore and an LLM from Georgetown University. Zaab Sethna Zaab Sethna is Head of Baghdad Office, Northern Gulf Partners LLC and has been working closely with Iraq’s leading political parties, business families, and entrepreneurs since 2003. Based in Baghdad for the last 10 years, he worked for the Government of Iraq on financial, trade, and energy policies from 2003 to 2007. Since then, Mr Sethna has represented a number of international companies involved in Iraqi oil and gas, banking, insurance, aviation, and construction projects among others. His assignments in Iraq have included: acting as strategic business adviser to Iraq’s leading bank; public affairs and government relations consultancy for the world’s largest insurance group; business development and government relations for various international oil companies; market entry advice for a Fortune 500 telecoms equipment maker; an in-depth study of the Iraqi oil sector for a European market researcher; and strategic advisory and relationship management for one of the world’s leading alternative-investment managers. Mr Sethna began his career with the United Nations in Brazil and also worked at the Sawyer/Miller Group in New York and the Rendon Group in Washington, DC and London. He received a BA from Georgetown University and an MIA from Columbia  University.

xxxviii

About the contributors

Meb Somani Meb Somani is a Managing Director at BNRI whose deals with BNRI include CEOC, Nio Petroleum, Hydra Energy, Tulip Oil, Third Energy and  PetroGranada. Meb joined the BNRI team in early 2009. Previously he was Head of Oil and Gas Investments at Actis (2006–2008), a leading private equity investor in emerging markets. Prior to that, he was a Managing Director at Harrison Lovegrove (2001–2006), where he advised on acquisitions and divestments around the world valued at several  billion dollars. Before that he spent 20 years with Shell and Texaco in senior petroleum engineering, commercial and asset management roles based in Europe, Asia and the Middle  East. Meb is a Chartered Petroleum Engineer, a member of the Institute of Directors and several industry associations. He holds a First Class Honours degree in Engineering from the Royal School of Mines, Imperial College London and an MBA from Henley Management  College. Piers Summerfield Piers Summerfield is a partner in the capital markets group at Simmons & Simmons in London. Piers has significant experience in international capital markets work, both equity and debt, with a particular focus in recent years on equity-linked transactions. His experience has included advising issuers and underwriters on a wide range of debt and equity capital markets work including straight bonds, convertible and exchangeable bonds, Euro Medium Term Note Programmes and Euro Commercial Paper Programmes, GDRs and liability management transactions. He has covered a broad range of jurisdictions in his experience, including most parts of Europe, the Middle East, South Africa, Russia, Ukraine, Kazakhstan, Japan, Australia and Canada. Piers joined the Simmons & Simmons London office as a capital markets partner in 2012. He was previously with another leading international law firm, where he gained over 12 years of experience working in their London, Paris and São Paulo offices. He has also spent time on secondment to a major international bank in London. Victor Sunyer Victor Sunyer is Director, Corporate Finance at Delta Partners Group. With more than 11 years of professional services experience, Victor has worked in investment banking (M&A) and strategic management consulting, focused on the TMT industry. He holds an MSc from ESADE in Spain and an MBA from INSEAD, and previously worked for UBS Investment Bank in London, and DiamondCluster (now Oliver Wyman) in Europe and the Middle East. Victor has been involved in several M&A transactions and fundraisings in Europe and the Middle East, and currently focuses on large telecom groups in emerging  markets. Ertunc Tümen Ertunc Tümen, CFA, is the Executive VP of Marketing in Ak Asset Management. Previously he worked as Senior VP in charge of Affluent Banking & Liability Products in Akbank. He was the CIO of Equity and Balanced Funds of Ak Asset Management between 2006 to 2011, managing the Discretionary Portfolio Management, Structured Products Businesses and the Research Department. He worked in Garanti Asset Management in strategist, buy side analyst and fund manager roles between 2000 and 2006. He received his BS in Civil

xxxix

About the contributors

Engineering from Istanbul Technical University in 1994 and MBA from Bilkent University in 1997. David Wickham David Wickham is a Director of Global Emerging Markets & Frontier Markets with HSBC Global Asset Management where he is responsible for leading the promotion of the company’s global emerging and frontier markets equity capabilities. He is also a Fellow of the Brookings Institution and an Associate Fellow (Adjunct Professor) of the University of Oxford’s Saïd Business School. Prior to joining HSBC, David was employed as a Director and Acting Head of International Partnership Investments with Invesco Asset Management where he managed the company’s international private equity investment program and raised capital from institutional investors. Throughout his tenure at Invesco, David was an advisory board member of a number of leading private equity companies. He held a similar position prior to this at Insight Investment (now part of BNY Mellon Asset Management) where he was responsible for sourcing, analysing, approving, and actively monitoring investments in American and European venture capital and private equity partnerships. David holds a Master’s degree in International Relations from the University of Cambridge and an MBA with Distinction from the University of Oxford, in addition to postgraduate and undergraduate degrees gained in Sydney and Melbourne, and has held a fellowship with the Oxford University Foreign Service Programme at the Oxford Department of International Development. In addition, he is a Fellow of the Chartered Institute for Securities & Investment and the Royal Asiatic Society, an Associate of the International Institute for Strategic Studies, and a Member of the CFA Institute and CFA Society of the United Kingdom. Claire Wilby Claire Wilby is in-house legal counsel at a project company developing a Southern Corridor gas pipeline. She is a qualified solicitor (England & Wales). Claire trained at a magic circle firm in London with secondments to Milan and Frankfurt and has since also lived and worked in the Middle East and the US. She has significant experience in large cross-border transactions with a focus on energy and infrastructure across developed and emerging markets. Claire is currently based in  Austria.

xl