Plamen Monovski joined Renaissance in February 2010 to revive its emerging markets asset management business. He has led the team on a journey that included launching its own frontier markets fund and acquiring three emerging Europe funds. Monovski’s expertise in niche markets stems from his 13-year career at BlackRock, including predecessor firms Merrill Lynch Investment Managers and Mercury Asset Management, running its global emerging markets products.
Renaissance’s new frontier markets fund invests partly in Asia. Which Asian market are you most excited about?
Indonesia as it provides the blueprint for frontiers to mature and generate substantial returns for early investors. It transformed incredibly well – it was one of the most corrupt places in the world, very commodity-dependent and had a lot of ethnic tensions, which culminated in the Bali suicide bombings in 2005.
Today, Indonesia is the hot spot for private equity investing in Asia and it’s one of the largest recipients globally of foreign direct investment relative to GDP. Indonesia has now become one of the most vibrant manufacturing hubs and its population of 240 million is one of the largest consumer pools in the world.
Indonesia is a case study of an ugly duckling becoming a swan within a very short period of time, purely through governance and economic management. This market shows what can be achieved and I think Indonesia has done it far more intelligently than China. There is a lot of potential for other countries to follow Indonesia’s path.
In our judgment, Sub-Saharan African stands a real chance to ‘do an Indonesia’ during this decade. We think the potential is the greatest in Africa.
What about other Asian frontier markets in the fund?
We’re big fans of Vietnam. We feel there is a lot of potential there, but its walk down the governance path is not yet complete. Over time, we think that Pakistan and Bangladesh would also collect the governance dividend but the reform process must accelerate.
Sven Richter, who runs the fund and has invested in frontiers – previously for Templeton – for 16 years, has followed a simple yet largely unique philosophy in the construction of the frontier fund.
Sven is looking to pick cheap, cash generating and dividend paying companies in countries with sustained governance processes and large populations that are prepared to work hard to have a better life.
I don’t grasp some of the other frontier funds out there, half of which cover regions such as the Gulf just because it happens to be in a benchmark. Those frontier funds seem to have been constructed with prevailing benchmarks in mind rather than the investment opportunity. In that sense, it is hard to see how they are serving investor interest.
How does Renaissance’s frontier markets fund differ from others?
Our fund is not constructed around a mechanical and meaningless benchmark but with the investment opportunity in mind. Secondly, we have a quality angle in bottom-up stock picking, which many would associate with developed markets. This is based on Sven’s strong historic track record and we are confident that this is the right approach, rather than the prevailing growth bias of other fund managers.