Sep 30, 2021 · 52m · capital-allocators
Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Manager Meetings, host Ted Seides interviews Daniel Graña, portfolio manager at Janus Henderson Investors, exploring his framework for emerging market investing centered on good companies, governance, and countries. Graña shares insights on navigating political and governance risks, identifying homegrown technological innovation, and leveraging institutional scale to capture out-of-benchmark growth opportunities.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 10.9% of the talking time here. How this is scored →
Ted as informed peer 3.5 Guest teaching 5.4 Guest disagreement 1.1 Ted pushing back 0.1
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 16:21 Dismantling the MSCI EM benchmark
Daniel forcefully critiques the benchmark for having a poor starting point weighed down by governance-challenged state-owned enterprises.
Hardest push from Ted ▶ 37:19 Why bother investing in EM?Ted directly challenges the value proposition of emerging markets given over a decade of sustained US equity outperformance.
Biggest teaching moment ▶ 37:35 The S&P 460 parity data pointDaniel educates Ted by demonstrating that stripping out the top 40 US mega-cap tech stocks leaves the rest of the S&P 500 performing right in line with emerging markets.
Ted holds their own ▶ 15:58 Ted framing index construction limitsTed demonstrates his institutional knowledge by articulating the inherent size biases and governance blind spots of market-cap weighted EM indices.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Personal Roots and the Mexican Glass Bottle Wars | 2 | 5 | 1 | 0 | Ted opens with friendly biographical prompts about Daniel's entry into emerging markets. Daniel narrates colorful anecdotes about his Cuban background and the Mexican glass bottle wars to demonstrate why corporate governance matters in EM. | |
| Political Governance: The Russian Titanium Oligarch | 3 | 6 | 1 | 0 | Ted prompts Daniel on political governance, allowing Daniel to share a detailed cautionary story regarding a Russian titanium oligarch and state expropriation. | |
| Sell-Side Lessons: The Disappearing REIT Founder | 3 | 5 | 1 | 0 | Ted asks about sell-side to buy-side transitions. Daniel explains his investment philosophy centered on finding good companies with good governance in good countries. | |
| The Top-Down Country Assessment Framework | 4 | 5 | 0 | 0 | Ted asks precise procedural questions about macroeconomic variables and assessment stability. Daniel systematically lays out his top-down analytical framework. | |
| Bridging Country Macro to Bottom-Up Stock Selection | 3 | 5 | 0 | 0 | Ted inquires about connecting macro trends to micro stock picking. Daniel outlines his team's focus on differentiated views regarding earnings magnitude, duration, and capital allocation. | |
| Benchmark Flaws and Expanding the Investable Universe | 5 | 6 | 3 | 1 | Ted raises the structural limitations of standard benchmark indices like MSCI EM. Daniel aggressively critiques MSCI for heavy state-owned enterprise weighting and omitting major tech innovators. | |
| Portfolio Construction, Valuation Skews, and Style Agnosticism | 4 | 5 | 1 | 0 | Ted asks about portfolio construction mechanics. Daniel explains his probability distribution approach to valuation and why he rejects rigid style theological boxes like pure growth or value. | |
| Investing in China: Policy Alignment, Decarbonization, and Innovation | 3 | 6 | 2 | 0 | Ted asks about China positioning. Daniel explains the necessity of policy alignment, highlighting decarbonization, technological self-reliance, and avoiding state-owned enterprises. | |
| Valuation Nuance, Management Quality, and Generational Governance Shifts | 4 | 6 | 2 | 0 | Ted probes management quality assessment. Daniel highlights generational governance transitions in family conglomerates and criticizes imposing Western governance standards wholesale on developing markets. | |
| Leveraging Janus Henderson’s Multi-Asset Platform | 3 | 5 | 0 | 0 | Ted asks how Daniel's team manages research breadth across 30 countries. Daniel details cross-asset collaboration with Janus Henderson's debt and central research platforms. | |
| Scale Advantage: Why EM Cannot Be Managed as a Boutique | 4 | 6 | 2 | 1 | Ted asks if Daniel ever considered launching a boutique fund. Daniel firmly rejects the premise, asserting that EM requires institutional scale, before reframing US market outperformance as concentrated in mega-cap tech. | |
| Country Perspectives: Bullish on Vietnam, Bearish on Brazil | 4 | 6 | 1 | 0 | Ted invites country-specific views. Daniel provides a detailed bull case for Vietnam's manufacturing ecosystem and a sharp structural bear case for Brazil's fiscal and supply-side issues. | |
| Portfolio Allocations and Managing EM Currency Exposure | 4 | 4 | 0 | 0 | Ted asks how these country views map to portfolio sizing and currency hedging. Daniel succinctly outlines his portfolio tools and the prohibitively high cost of EM currency hedging. |
Statements from this episode (30)
Graña: Vast Majority of Emerging Market Companies Have Controlling Shareholders
“And what I learned from that experience is really crucial to understand the controlling shareholders' motivations, because in emerging markets, the vast majority of companies have a controlling shareholder, whether it's the state or a family.”
Graña: Purely Bottom-Up Analysis Fails for Emerging Market Stocks
“I strongly believe that you can't have a purely bottom-up discussion on emerging market stock because you miss a key part of their story, which is the nature of the system these companies operate in.”
Graña: Russia Holds the Vast Majority of Global Titanium Reserves
“The vast majority of the world's
Known reserves of titanium are in Russia.”
Graña: Controlling Shareholder of First Mexican REIT Disappeared Post-IPO
“Shortly after the IPO, the controlling shareholder disappeared. He went on a horseback ride on his beach resort and never came back. And lo and behold, the company was also short of funds.”
Graña: Bankers Will Execute Deals They Disbelieve In For Willing Buyers
“As a investment banker, we would sometimes put together a transaction That we didn't necessarily, at least I didn't necessarily believe in, but if the shareholders, if the market wanted to buy it, and that was the market caveat emptor, that was their decision.”
Graña: Countries suffering debt and currency crises rely on external savings
“You could look at the number of countries that have debt crises, bank crises, currency collapses. They have a lot of things in common. They required meaningful amount of external savings to balance the books.”
Graña: Oil, gas, and resources make up 80% of Russia's index
“Russia, 80% of the index are oil and gas and natural resources broadly.”
Graña: EM Investors Must Align Capital With National Policy Priorities
“What does it mean to be politically correct is to invest alongside national policy goals. And certainly while China is an extreme example that you always, you generally want to be investing in companies and industries that are being politically correct, that y…”
Graña: Up to 98% of EM Capital Is Benchmarked to MSCI
“In emerging markets, between 95 and 98%
Of the money managed in this asset class is benchmark against MSCI emerging markets.”
Graña: Up To a Third of the MSCI EM Index Is State-Owned
“Between a quarter and a third of the benchmark are state-owned enterprises. Think Gazprom, Rosneft, PetroChina, ICBC, Petrobras. Most of these companies that I hope you can appreciate are governance challenged.”
Graña: Janus Henderson holds 35% to 45% in out-of-benchmark EM ideas
“We typically are between 35 and 45% of the portfolio in out of benchmark ideas.”
Graña: Point Estimates Create False Security in Emerging Market Forecasting
“I don't like point estimates. I think that gives you a false sense of security that you know what's going to happen in Russia in year eight or China in year 12.”
Graña: EM Value Outperformed Pre-2008, but Growth Led Post-2008
“You have to consider that before Value outperformed growth on average six out of seven years in emerging markets, but post 2008 growth, I think has outperformed nine out of 11 years.”
Graña: China Solar and Wind Power Are at Grid Parity Without Subsidies
“Did you know that producing, in China, the producing electricity from solar and from onshore wind is almost at parity with producing electricity from thermal. No subsidies needed.”
Graña: China's 2060 Decarbonization Pledge Will Be the Biggest Post-COVID Story
“Decarbonization by 20 60. That will be the biggest story after COVID. I think the market is commentators will look back on 2020 and we'll miss this, but we'll say many years later that was a big announcement.”
Graña: Generational Successions in EM Firms Drive Better Governance and ROIC
“We've noticed that as the patriarch, the family patriarch of the family hands the reins over to the next generation, a lot of that next generation Are Western educated, are conversant in this language that we've just talked about. And so they will make changes…”
Graña: Emerging market governance should be judged on progress, not Western standards
“I find that kind of silly and frustrating when people want to apply Scandinavian levels, types of corporate governance standards on emerging markets. We are emerging. I applaud companies when they make change. It's about so many times about the trajectory of c…”
Graña: Emerging Market Success Stories Often Start as U.S. Business Model Copies
“Many of our emerging market Success stories started off as carbon copies of successful business models in the U.S., and then we evolved and changed depending on local conditions.”
Graña: EM due diligence requires grassroots fieldwork, not conference meetings
“Due diligence isn't just about asking a treasurer or CFO or IR at a conference in New York. That's not sufficient due diligence. You need to travel to these countries, kick the tires, meet with competitors, meet with the supply chain, meet with former employee…”
Graña: Running emerging markets equity as a boutique shop is very hard
“I think it would be rather hard to recreate this as a sort of one man shop or a small man shop, a small woman shop. It would be very hard to recreate.”
Graña: The S&P 460's Returns Match Emerging Markets Exactly
“If you were to strip out the 40 most successful US stocks out of the S&P 500 and compare that to the, so the remaining S&P 460, I guess. The S&P 400 sixty's performance is actually bang in line with emerging markets. Bang in line with European markets. There's…”
Graña: Fintech Expands Emerging Market Bankability to Practically 100%
“You know, the bankable population, if you have to build branches, Is small in some countries, but if you're able to use technology in new and creative ways, then the bankable population is a hundred percent of the population practically.”
Graña: Asia Generates More Innovative Companies Than Other Emerging Regions
“Clearly Asia generates a fair amount of innovative companies relative to Latin America and Eastern Europe, Middle East Africa.”
Graña: Vietnam is currently where China was 30 to 40 years ago
“If I were to turn the clock back on China, 3040 years ago, that's exactly where Vietnam is today.”
Graña: Samsung Left China to Become Vietnam's Largest Exporter
“For example, the largest exporter of Vietnam today is not shoes and t-shirts and it's actually Samsung. Samsung doesn't produce smartphones in China anymore. They do produce them in Korea, but the low and medium end phones are now produced out of Vietnam. The …”
Graña: Peak Globalization Makes Export-Driven Growth Harder for Developing Nations
“We have seen peak globalization. The export driven economic model that was used by very successfully by Japan, then Korea, Taiwan, and now China, that is not going to be as easy to replicate going forward.”
Graña: Brazil's incumbent president will likely lose to Lula next year
“And next year, it looks like the incumbent president, based on all the latest polls, would likely lose to Lula, former president of Brazil.”
Graña: State Enterprises Make Up Roughly 75% of Vietnam's Stock Market
“About three quarters of the Vietnamese stock market, maybe a little less now, are state-owned enterprises, which again, we struggle with from a governance perspective. And then of the remaining balance in Vietnam, many of those have hit their foreign ownership…”