Investec Asset Management has hired George Varino, most recently managing director and client portfolio manager at Lazard Asset Management in New York, to grow its North American institutional client base for the firm's emerging markets investments, particularly in China. As head of emerging markets solutions, a new role, Varino will target investors, such as public pensions, that have very low allocations to developing markets, the firm said. Investec manages $145 billion in assets, 60 percent of which is in emerging markets.
Philip Anker, managing director of Investec's North America business and Varino's boss, said investors are severely underweight emerging markets, even though many have high return targets and are at risk from an aging bull market in the U.S. In addition, Investec, founded in Cape Town, South Africa 26 years ago, aims to provide something different from its U.S. and European competitors. "There is a lot of group-think among global asset managers, which share a lot of the same DNA from growing up in similar markets," Anker told Institutional Investor. "Given our heritage in South Africa, we bring a different perspective and provide a complement to others."
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North American investors have a home market bias, in part because they've been burned by emerging markets, said Anker. Many investors piled into these markets through index funds or were too early or pulled out during some volatile periods. Still, Investec believes they need to rethink these biases. "People have had mixed experiences venturing out of their comfort zones. But a lot of these markets offer the opportunity for better performance as well as uncorrelated assets," Anker said.
According to Varino, who is also a senior member of the global EM investment team, "investors haven't fully embraced the characteristics of markets such as China and other emerging markets and what they can for a portfolio in terms of returns and correlations."
He added that Investec, with a long history of investing in China, is bullish on the recent opening of the country's onshore market. He said he will encourage investors to put money into China before global index providers inevitably increase their benchmarks' exposure to the country. Changes to popular benchmarks would set off a flood of capital into China.
"This is not the emerging markets from a decade ago. It's not the tail that is being wagged anymore," said Varino. At Lazard, Varino co-founded the emerging markets debt business. Before Lazard, Varino was a product specialist in HSBC's fixed income team, where he was responsible for developing the firm's emerging markets and alternative fixed income platform. Earlier in his career he worked at Franklin Templeton Investments and Callan Associates.
Escalating tensions between the U.S. and China after President Trump imposed tariffs on the country's exports is not deterring Investec. "That makes it even more interesting for us to have this conversation with investors. There is a lot of misinterpretation of what these things mean. Investors can actually take advantage of all the noise," said Anker.