Have hedge fund, will travel. Anyone who’s ever had the pleasure of attending Everest Capital’s annual investing conference in Miami knows that the firm’s founder and CEO, Marko Dimitrijević, spends as much time globe-trotting as he does sitting behind his desk. He says that the best way to gauge potential investments in the emerging markets is to go there and get to know how the locals do business. Institutional Investor Senior Editor Jay Akasie spoke with Dimitrijević about his emerging-markets strategies after Everest Capital’s conference this past spring. The CEO says that most investors are underweighted when it comes to their exposure to emerging-markets investments and that they’ll increase their allocations when they realize the kind of earnings growth these markets are poised to deliver.
1. How have the emerging markets changed over the past decade?What’s changed is the interrelatedness of the emerging markets to each other and the exchange of capital and technology between them. Brazilians are selling beef to Iranians. You have people in Central America traveling on a Panamanian airline and bypassing American carriers. Russians go to resorts in Thailand. Kazakhs shop in Dubai. The Chinese traveler has come into his own. Emerging-markets companies are often better equipped to provide goods and services in other emerging markets because they went through a long growth phase. You see Turkish companies expanding in central Asia and even Africa. And Chinese goods are all over the world.
2. It’s been a year and a half since the onset of the so-called Arab Spring. How has it affected the Middle Eastern markets?The initial reaction from the outside was that the uprisings would delay construction projects and delay social programs. But I think that countries like Saudi Arabia and Qatar are poised to have accelerated economic growth. Saudi Arabia is a large market and one that’s quite liquid. Qatar is poised to have an infrastructure boom before it hosts the World Cup in 2020. We invested in Iraq last year, and it has the distinction of having the lowest market cap to GDP in the world.
3. What are some markets that are attractive?Brazil is an interesting situation. It’s loosened its ties with Europe — faster than most countries — after the economic crisis there. And the government seems to have moved from its superhawkish stance against inflation. Now it appears willing to trade off a more accommodative monetary policy for faster growth. Another market is Korea, home to many consumer products companies that are world-class, not to mention industrial companies and shipbuilders. Investors will eventually recognize that and reward higher valuations to the Korean market.
4. Container ships carry emerging-markets wares around the world. Do you like the shipping industry?Sure. As international trade continues to grow, shipping will be the beneficiary. Fleets are being renewed and ordering much larger vessels that are much more economic to run. There’s a strong push to upgrade across the board.
5. Why is it important to spend a lot of time on the ground?Our team comprises 22 nationalities, speaks 18 languages and conducts more than 1,000 meetings a year. Once you realize what’s happening on the ground, you get a very different perspective. In Borneo nobody cares about what is going on in Greece.