The Ledger
Every statement that passed quotation and attribution checks. Mix any filter with any other: certainty 1/5, debate potential 5/5, or both at once.
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U.S. hegemony as the primary global capital magnet is over
“A target-rich environment promoted by the fact that U.S. Hegemony in terms of being a magnet for capital is over.”
Global leadership in emerging market asset management is an unoccupied space
“Global leadership in EM asset management is an empty space. There is nobody out there who can answer the question for allocators, big or small. How much should I invest in emerging markets? In what asset class? In what region? In what style? With whom? And whe…”
Emerging market deal flow cannot support single-country mono-asset funds
“The deal flow in emerging markets Will not support mono asset class, single country, sub-regional funds, and therefore the people who raise that money end up deploying it badly.”
Monoline mid-sized emerging market managers will inevitably go out of business
“If you are a monoline
Mid-sized emerging market manager, public or private.
It is not a question of, are you going out of business?
It's a question of, when are you going out of business?
Because of the question you asked, the cycles. Unpredictable and violent…”
China is currently a trade, not a long-term investment
“Since then, China went from the darling to uninvestable to today. It's a trade. It's not an investment.”
Emerging markets investing must be run as a standalone horizontal activity
“One of the things I had known about emerging markets is emerging markets is a horizontal activity. I had built it at JPEEP as a horizontal standalone activity. It was not a fixed income subsidiary, not a subsidiary of equities or of anything else. It was its o…”
Enduring asset managers must build solution-oriented supermarket platforms
“The other way is to say, look, I have these investment capabilities. How can I create a solution for you out of those investment capabilities? In a way, that's what the large asset managers do. It's a supermarket. You want a diet version, you want a full calor…”
Monoline and benchmark-based investing fail to consistently profit in emerging markets
“It will be those investors who are smart enough and flexible enough to see that the combination of number of countries, number of underlying markets, number of cycles does not match up well with certainly monoline investing. And that that also does not match u…”
Passive smart beta beats benchmark Sharpe ratios across EM asset classes
“You can absolutely build something passive that will get you a higher sharp ratio than the underlying index. I have no doubt about that. And I have very little doubt about it, although we haven't done it specifically for the other asset classes. It may have a …”
Emerging markets will always remain an afterthought for mega asset managers
“The fact that EM is a niche and remains a niche for all the mega investors, investment firms that are out there, emerging markets is an afterthought. I promise you it is an afterthought. I don't care what they say, and it always will be because it's small.”
EM hedge funds have huge long biases, lower liquidity, and high fees
“Emerging market hedge funds typically have a huge long bias. They're less liquid and they have higher fees. That is not logical as an investor. Why am I paying all this extra in terms of liquidity and fee for something that is essentially a long-only strategy?”
60% multi-asset hit rate in EM lost money once in 15 years
“If you had done that over the last 15 years, over roughly 20 countries, and you were right 60% of the time, in a fifteen-year bear market for emerging markets, you would have lost money in one year.”
Every investment fund requires a single decision-maker, not a committee
“Every fund needs a manager. It's not a committee. You can have a committee, but there has to be one person who decides.”
Currency capability is the most critical risk management tool in emerging markets
“Number two, on public markets, the most important thing from a risk management point of view is to have a currency capability, because currency liquidity almost never goes away in emerging markets.”
Monoline EM private equity investors without currency expertise face major problems
“This is why you put a monoline private equity guy out there in Mexico who just knows how to do private equity that has no clue about currency forwards, currency options, currency swaps. You're gonna have a big problem.”
Post-2008, 95% of hedge fund inflows went to managers over $5 billion
“If you looked at the amount of money allocated to hedge funds post the crisis, for the next three, four years, 95% of the dollars allocated to hedge funds globally went to hedge funds with more than five billion dollars.”
Building respectful, collegial LP relationships is harder than investing
“Building respectful collegial partnerships with LPs is really hard, harder than investing.”
Argentina is a great investment opportunity well ahead of Venezuela
“Argentina is a great opportunity too, and they're well ahead of where Venezuela is.”
Allocating solely to China and India by GDP size is a mistake
“So if you say, well, I'm just going to invest in China and India because these are the largest economies, It's a mistake because it's not your job to support large economies. It's your job to make money. Putting that many eggs in so few baskets doesn't make se…”
Western allocators unfairly denigrate the rule of law in emerging markets
“I think that people inaccurately in holding, let's say, the U.S. As the benchmark for rule of law, for sanctity of contract, for this, for that, unfairly denigrate a lot of these other places because there are rules in all of these places. There are laws in al…”
Global rates and the U.S. dollar overwhelmed country fundamentals, 2010 to 2024
“There was a long period of time, 2010 to 2024, when what was happening in the world in terms of interest rates and the US dollar was so important that it overwhelmed what was happening in a lot of countries.”
Korea, China, India, and Brazil make up over 70% of MSCI EM
“Now, if you look at equities, the MSCI global, Korea, China, India, Brazil, make up 70 plus percent of that index. So you are actually buying a very concentrated exposure, not a very diversified exposure.”
Non-government EM fixed income is multiples larger than government bonds
“The non-government bond part of the fixed income market in emerging markets is multiples in size of the bond market.”
Team members must share fund economics to enable cross-regional capital allocation
“Everybody shares in the result, to a certain extent, no matter their contribution to the result. You want somebody who is a Latin American equity expert to feel good about saying I think Asia looks like a much better bet than my region.”
Scenario analysis matters far more than standard deviation in emerging markets
“Scenario analysis is much more important than standard deviations. Because in many of those scenarios, it was a six standard deviation event.”
Integrating bank private equity spinouts requires an unbending management hierarchy
“We've done a bunch of arranged marriages, and in those, my conclusion is, You have to have the structure to oversee them, and you have to be very unbending about who's in charge.”
African private fundraising is tough and dominated by development finance institutions
“Africa is a tough market for raising money. It's dominated by the development finance institutions, IFC, EBRD, who are particular in the kind of managers and kind of funds they want to back.”
Rohatyn predicts a surge in strategic capital targeting Latin America
“And Latin America is obviously important to this administration, so I think there will be a lot of strategic capital looking at Latin America right now, for which I think we are well positioned.”
81% of emerging market private capital once flowed solely to China
“There was a period of time where of all the private money being invested in emerging markets around the world, 90% of that money went to Asia, of which 90% went to China. This concentration, 81% of all private investing money In emerging markets flowed to one …”
Integrating FX and equity teams drives return synergies in emerging markets
“Having everything under one roof is far superior if they are incented and cultured to work together. Because if you have A good FX person next to a good, even public market equity person. Both of those will generate better returns for sitting next to each othe…”
The largest emerging market public multi-asset fund is only $800 million
“I think the biggest multi-asset class fund in public markets is the hundred billion dollar fund. The biggest one in emerging markets is eight hundred million dollars. There are only five that I can find.”
Private multi-asset class vehicles do not yet exist in emerging markets
“In private markets, you're starting to see multi-asset class in developed markets. You have not seen it yet in emerging markets at all.”
Rohatyn executed J.P. Morgan's first-ever interest rate swap in 1983
“And in fact, I'm proud to say I executed the first interest rate swap ever at JP Morgan in 1983.”
J.P. Morgan executed the first voluntary emerging markets debt exchange
“Morgan did the first voluntary loan for debt exchange in emerging markets.”
Rohatyn created the first emerging market bond benchmark at J.P. Morgan
“I was responsible for building the first bond benchmark in emerging markets. It was called the Emerging Market Bond Index, MB. I did that at the time at JP in order to help grow the pie because I, of this exact point, people needed a benchmark.”
TRG's executive committee has never taken a vote in 23 years
“We've never had a vote on anything in 23 years.
We come to conclusions that we buy into.”