Active Management Still Matters in Emerging Markets | Jamie Carter
Dec 10, 2024
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Jamie Carter, Partner and Managing Director at Variis Partners, shares his extensive experience in emerging markets investment. He discusses the stark distinctions between long-only businesses and hedge funds. Carter highlights challenges in raising capital across the US, UK, and Europe, and why emerging markets are crucial for active management. He also addresses the impact of political policies on global markets and the importance of local knowledge in navigating these complex investment landscapes.
Jamie Carter emphasizes the unique challenges faced by long-only investment boutiques in raising capital, especially due to shrinking traditional funding sources in the UK.
The bottom-up investment approach at Variis Partners targets inefficiencies in emerging markets, showcasing potential for generating alpha through concentrated stock selections.
Active management remains crucial in emerging markets, where historical underappreciation of certain businesses presents compelling investment opportunities for informed investors.
Deep dives
Career Journey and Transition
Jamie Carter began his career at Mercury Asset Management and later transitioned to Oldfield Partners, where he focused on non-investment activities, including operations and business development. Over nearly 15 years at Oldfield, he played a crucial role in growing the firm from a business plan to managing assets reaching about $6 billion. Eventually, feeling a sense of stagnation after a successful journey and the firm’s maturation, Jamie sought a new challenge. His departure led to a chance encounter with Rufus at Longview Partners, which sparked discussions that ultimately resulted in the founding of Veris Partners.
Founding Veris Partners
The concept for Veris Partners emerged from conversations among Jamie, Rufus, and their colleagues, who recognized a gap in the resources available for starting a long-only investment boutique. Jamie emphasized the need for alignment among team members, which led them to settle on a single strategy focusing on long-only emerging markets with a tightly constrained number of positions. This approach fosters a shared commitment, as they are all heavily co-invested in their fund. By focusing solely on one strategy, Jamie believes they can generate superior performance and avoid several challenges faced by more diversified firms.
Investment Philosophy and Market Opportunities
Veris adopts a bottom-up investment philosophy, largely disregarding benchmark influences and focusing instead on finding the best investment opportunities within their concentrated list of emerging market stocks. Jamie highlighted the inefficiencies in emerging markets that necessitate active management, making it a fertile ground for generating alpha. He also pointed to the historical underappreciation of certain new economy businesses within emerging markets that mirror successful Western counterparts. Jamie's goal is to showcase these potential investments in communications to clients and prospects to underscore why emerging markets present compelling opportunities.
Challenges in Capital Raising
Raising capital for Veris in the UK poses unique challenges, especially as many traditional funding sources are shrinking and shifting towards passive investments. Jamie noted that in the UK, smaller boutiques face hurdles due to regulatory complexities and a competitive market for investor attention. In contrast, their strategy of targeting sophisticated North American investors appears advantageous, as these allocators are more receptive to unique value propositions from boutique firms. He believes the key to successful fundraising lies in establishing strong connections, garnering early support from committed investors, and efficiently communicating their investment thesis.
Navigating the Boutique Landscape
Jamie pointed out that the successful endurance of boutique firms often hinges on clearly defined client expectations and specialized roles within investment portfolios. While periods of underperformance may be inevitable for active managers, transparent communication about performance expectations from the outset can help mitigate investor dissatisfaction. He also acknowledged that boutiques can thrive by cultivating a client base with an appropriate time horizon and appetite for risk. Additionally, Jamie stressed the importance of succession planning and maintaining focus, as needing broader strategies or spreading resources too thin can jeopardize a firm's long-term sustainability.
Jamie Carter, Partner and Managing Director at Variis Partners has spent much of his career focused on the world of long-only emerging-market investment boutiques. In this interview with Max Wiethe, Carter discusses the huge differences between building a long only business and a hedge fund business, why launching fund vehicles out of the UK has become more difficult, the differences in raising capital in the US, UK, and Europe, and why he thinks emerging markets are the last hold outs for fundamental active managers. He also explains why EM investors and allocators are holding their collective breath waiting to see how the Trump administration’s policies will impact global markets.
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You can learn more about Variis Partners on their website: https://www.variispartners.co.uk
Follow Max Wiethe on Twitter: https://x.com/maxwiethe
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