YouSaid · the spoken record

Daniel Graña

lines on the record: 65
first: 2021-09-30
most recent: 2021-09-30
sittings or episodes: 1
sources: podcast

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“Compassion is a big word. We were the family that lost everything in the revolution. We were the family that suffered most in the US economic downturns because we weren't well established. Good fortune isn't always a function of hard work. And so over time, I've came to appreciate that compassion is a big word and there are many different ways of applying that with your family, with your friends, with colleagues and so forth. And so over time, it was a lesson that I've always felt that if you worked hard and studied hard and made a difference, that life would reward you. And many times that's true, but many times that's not always true.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“My Hispanic upbringing taught me not to offend, not to be maladucado. That was very important in most Hispanic households. And what I've learned, however, that there are times to be bold, brave, blunt, and sometimes offensive. And so I completely agree. You have to respect, you have to understand that everyone's on a different path. But there are also times when you have to speak up and there are times to be brave and bold. And so that's what I would say would be the life lesson I learned. It's important not to be disrespectful, but it's also important sometimes to challenge.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Pursue love, pursue justice, pursue success, but don't necessarily follow the same footsteps that the older generations have taken. With that knowledge, you do have to ask that everyone's path will be different than yours. Certainly the younger generations will be. And so therefore, you need to see how some of these new innovative business models are approaching problems differently. You have to be open-minded.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“In emerging markets where we have very creative governments and companies, and so creative and not in a good way. And so I have the scars to show from my investment mistakes. I've heard every lie, both from government and from companies. There is a benefit to experience. And the experience comes in not only being cynical, not believing everything you're told, but also being mature enough where you are to understand that you don't see the whole picture. You may not see the whole picture. And so therefore read about it, challenge your preconceptions, talk to those who are in the target audience. Maybe talk to the younger generation 20, 30 years younger than you to see how they're experiencing life simply because you went a certain path doesn't mean necessarily that they need to follow the path. I'm trying to remember the exact saying something along the lines of something along the lines of that follow what your elders follow but take your own path, something along the lines of that. And that's exactly right.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“I underappreciated that when social media first showed up on the scene, I had to join Facebook to understand what is it that people are talking? What are they doing? I've gained an amount of appreciation that for many it's about making connections with similar-minded people, even if they're not your friends. Maybe you're online friends, but they're not your personal friends. It's about finding communities and the different ways of monetizing that. And so just because I didn't see the potential doesn't mean that there isn't potential. And so again, who is the target audience? And you have to be humble enough to appreciate it, maybe you will change and you will become the target audience.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“You might find this a curious answer. When social media was first beginning to make an impact, I frankly didn't understand. I did not appreciate the business potential. I thought it was going to be limited because I couldn't imagine sharing personal details and my own opinions for others to see. If you really are a true friend of mine, shouldn't you just pick up the phone and shouldn't we just catch up over a dinner? I did not understand it. The lesson here is that sometimes you are not the target audience, number one. And number two, sometimes you become the target audience as you change.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“I would say it's a tale of two investors who shall remain unnamed, one who experienced great success but then wouldn't or couldn't evolve. And so the lesson I took from there is you have to stay humble and you have to continue adapting and changing. And then another one who didn't have the right pedigree but used her very different background to approach investing in a very different way. And that's okay. Being different allows you to approach problems in an unexpected way. So this led me to think about, oh, there is strength in diversity of experience. And that's what I look for in my team.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Willful ignorance. I certainly can forgive ignorance. No one can know everything, but the active choice to remain ignorant bothers me.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Quiet time. I purposely try really hard to create some quiet time in my day to deconstruct, to synthesize, and make connections. Maybe it's about a book on Ulysses S. Grant making a connection to a situation I'm finding in emerging markets. Maybe it's a book on the Boxer Rebellion in the 19th century in China and what that means for investing in China today. You need to have some quiet time to let your brain make those connections.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“I believe that life is about experience and that asset accumulation should either facilitate an experience or remind you of an experience. So I have a mask collection from Indonesia, Thailand, the Pacific Northwest, and Africa. I love to stare into as I'm pondering investments. Another is travel, culture, food, art, and other ways to sort of challenge who you are and what you like, because that's effectively what travel does. It gets you out of your comfort zone. You're going to have to try new food. Maybe it's a little spicier than you like. Maybe it's a different protein than you like. But nevertheless, it's gently challenging you, causing you to evolve and change. And so to me, that is what life is about. Accumulating masks, I suppose, is one of them and travels another.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“In Brazil, we are asking ourselves a lot of questions about our positioning. We certainly weren't very overweight Brazil. We actually were neutralist Brazil. As we started to feel uncomfortable with the trajectory, we need to ask ourselves Could change what you own. So obviously an exporter would benefit from a weaker currency, a domestics would be hurt. Or third, you could hedge the currency. And sadly, the cost of hedging in emerging markets is rather expensive generally. So basically, we only have two tools in our toolbox. And those two tools would argue that we need to think long and hard about changing what we own in Brazil and potentially changing how much we own.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“So Vietnam, as I said, is not yet in the benchmark, and so any exposure there which we have, about 3% of the portfolio is totally out of benchmark. We would love to have more in Vietnam. But as it stands today, 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 limits. So it's rather hard by those shares. But as more companies list and as those foreignership limits change, and we would expect that to happen in the coming years, that we would be buyers of that situation.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is home to a lot of great management teams, but at the same time, I'm very concerned about the trajectory that Brazil's heading. And they have not, by the way, addressed the supply side reforms. A lot of product which is produced in the interior of Brazil rots before it gets to the ports because there's an insufficient amount of infrastructure. And so it's not just about stabilizing the fiscal accounts, which is, I think, a necessary but insufficient condition. It has to also be about supply-side reform. It has to be about reducing the cost of doing business in Brazil. Brazil's tax regime is a labyrinth, and the infrastructure is poor and education levels need to rise. Those are the things that should have been tackled in addition to stabilizing the fiscal, and that haven't been.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Government debt to GDP with emerging market interest rates. Italy gets away with it because they import German interest rates. Brazil doesn't have that benefit. And so because they responded very poorly to COVID, there's a lot of populist pressures to loosen the purse strings further and continue to loosen the purse strings. So that fiscal anchor is now in doubt. And next year, 2022 looks like the incumbent president, based on all the latest polls, would likely lose to Lula, former president of Brazil. He came at a similar time as Chavez and Putin. They came into power making lots of promises, but they benefited from a once-in-a-hundred year commodity boom, 2000 to 2008 environment. I don't think anyone's expecting that kind of once-in-a-hundred year commodity boom again. And so spending without that commodity boom will lead to an even worse situation. So for many, many reasons, I think they've governed themselves into a quadmire. And even though, again, Brazil,”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Succeeding where a lot of emerging markets are not. We have seen peak globalization. The export driven economic model that was used very successfully by Japan and Korea, Taiwan, and now China, that is not going to be as easy to replicate going forward. Rising protectionism pressures everywhere. We've probably seen the limit of deindustrialization, we've seen populist pressures in developed markets. But Vietnam is one that's actually succeeding. And so I'm most excited about Vietnam. In terms of countries that I'm concerned about, I do worry very much about Brazil. I think Brazil is losing its way. Obviously, they responded very poorly to COVID, echoes of how we responded in the US. But the difference is we could be irresponsible with our government balance sheet. We have the global reserve currency. We could run massive budget deficits for the foreseeable future without a significant change in the market's perception of that risk. Emerging markets, you can't for the most part. You can have Italy style”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“And with good macroeconomic management, Vietnam has gone through periods where they didn't have good macroeconomic management, but they learned, and again, I am a proponent of crises. I know that they hurt a lot of people, but they clean up bad practices and they better position the country for many times for a better future. And that's exactly what's happened in Vietnam. Many people invest in Vietnam by buying staples and certainly earlier stage economic development countries, you focus on staples because people will move from buying milk from neighbor market and buying shelf-stable milk in a supermarket. But increasingly, we're also beginning to get excited about opportunities that we see in the financial sector, in the real estate sector. And then as the market develops, as valuations move higher, we would expect to see a lot more IPOs. And so now is the time to do due diligence. Now is the time to figure out which the right management teams, which horses are the right ones to back, because they are”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“I would say that Vietnam is one that I'm most excited about. It's not a very well researched market. It's a success story. If I were to turn the clock back on China 30, 40 years ago, that's exactly where Vietnam is today. So think a government that is very much attracting foreign investment or an export-led model. They have a young demographic labor force willing to work, a great infrastructure. And so they've created the right ecosystem. For example, the largest exporter out Vietnam today is not shoes and t-shirts. And it's actually Samsa. 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 largest export of Vietnam is now Samsung. And so as a result, you have this positive feedback loop that wages can rise. And as wages rise in Vietnam, you get a domestic consumption story that's sustainable.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Technology in new and creative ways, then the banco population is 100% of the population practically. And so this is what gets us so excited that it isn't just about buying the best outsourcing stories or the best convergence stories. It's increasing about buying the best innovators. And there is a lot of homegrown EM innovation. I will fully acknowledge that innovation in emerging markets is not evenly spread throughout all the countries. Clearly, Asia generates a fair amount of innovative companies relative to Latin America and Eastern Europe, Middle East Africa. But nevertheless, this emerging theme gets me very excited about the future of the asset class.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Then there was convergence. So as income levels rose in emerging markets, you'd expect households to want to buy cars, homes. So HDFC in India and Walmex and Mexico are good examples of those. But we're now beginning to see an emerging third reason to invest in emerging markets, which is innovation. And a lot of these are technology-enabled companies that are solving EM frictions in very new and interesting ways. We have to keep in mind that emerging markets are home to great economic inequities, very uneven access to healthcare, financial services and so forth. Some of the most exciting innovations that we're seeing address those obstacles. Why do you need to build branch network in rural India when you could reach those people through fintech and through smartphones? That's an example of an innovation that will change the lives. The bankable population, if you have to build branches, is small in some countries. But if you're able to use”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Why are you bothering? Why bother? Well, number one, I would say if you were to strip out the 40 most successful U.S. stocks out of the S&P 500 and compare that to the remaining S&P 460, I guess, the S&P 460's performance is actually bang in line with emerging markets. Bang in line with European markets. There's an outsized outperformance by the likes of Google and Apple.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“I would say absolutely not. As I said, emerging markets is not an island unto themselves. We would need to build an organization that would touch upon different asset classes, the emerging market fixed income, emerging market currencies. We would need to have an understanding of the global fixed income markets, sovereign research. We would need to have plenty of capabilities to cover things as varied as China ASHAR, as Vietnamese stocks, South African stocks, resilient stocks, to recreate that on your own would be given my process and my thought that this is a labor intensive process, right? You can't just screen for the best ideas in emerging markets. You actually have to go see them, meet with competitors. The short answer is no. I think it would be rather hard to recreate this in a sort of one-man shop or a small man shop or a small woman shop. It would be very hard to recreate”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Soft and tangibles. The relationship with the government, the corporate governance, culture of the companies. Do they value their employees? These are all legitimate questions that I think perhaps play an outsized role in emerging markets.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“It prompts questions that you hadn't thought of. Maybe you get a better sense of how deep in the organization some of these changes the CEO is talking about are really penetrating. 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 employees, expert networks, meet with government officials, regulators. Many times they came from these companies to get a much more holistic view of what's happening on the ground and what's happening with these companies. So I would say that it is a very labor-intensive process. I struggle to see how a purely quantitative approach would work in emerging markets. I would struggle to see how a purely bottom-up, just by the companies that have the highest or best improving returns on invested capital, how that would work because it ignores all these other factors.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, this is where there's strength and diversity on a team. But the first point I would mention is that most emerging markets, you could get by with the international language of bad English. But you need to do more than that. Obviously, you will miss cultural nuances. Things get lost in translation. And so you do want to have members of your team that do speak different languages. I speak Spanish and understand Portuguese. They're members of the team that speak Chinese. And that does matter. That is important. Yes, meeting with a CEO and CFO that many cases speak English or bad English, as I said. We all speak bad English, I suppose, that certainly gives you 1%. But imagine if you could speak with the line manager or the head of the factory or the head of the union in the local language over drinks, over dinner, over lunch. And you get a much more unfiltered view of what's happening.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Organization to complement what we do. It's very hard to keep track of what's happening in 30 countries, plus what's happening in the US markets, plus what's happening with the ECB, plus what's happening on geopolitics. And so consequently, I think by being part of an organization that values partnership and values collaboration makes us all better investors. The emerging market debt team could disagree with me. Maybe they're bullish on Brazil and I'm bearish. But having that debate, friendly debate, makes us better investors. Maybe I'm bringing up points that they hadn't thought of. Maybe they're bringing up points I hadn't thought of. Having that different perspective, that cross-asset allocation discussion makes us better investors.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“I am a firm believer that emerging markets are not an island to themselves. Not all the world's crises originate for emerging markets. Not all the world's problems originate from emerging markets. We get hit from contagion from other asset classes. And so it's very important to have a more integrated approach. We spend a fair amount of time talking to the emerging market debt team to get their perspective, to hear about what the global fixed income team is thinking. We spend a fair amount of time integrating with centralized research at Janice Henderson. Many of our emerging market success stories started off as carbon copies of successful business models in the US. And then we evolved and changed depending on local conditions. But nevertheless, it's very helpful to hear the centralized research point of view in terms of what's happening in other parts of the world. We integrate with the ESG team to talk about what the latest standards are. We have a dedicated team of analysts, but we rely on the larger part of the team.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm curious to go from that individual assessment up to part of your process, which is the types of information that you're gathering in 30 countries around the world, lots of different companies, lot of different political regimes, requires a breadth that many have struggled with in emerging market equities. And I'm curious, what does your team look like?”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“The CFO of a Korean utility telling me I don't see why anyone invests in our shares. That tells me what I need to know. Why would you invest in those kind of companies when the controlling share doesn't care about the share price? How deep is the compensation in shares driven deeper and deep into the organization? This is kind of new grounds for emerging markets. We didn't require independent boards in the US until very recently. And by the way, at our similar stage of economic development, didn't we pollute the environment at the dawn of the Industrial Revolution? Didn't we employ child labor? And so, yes, emerging markets are behind. We're still developing. We should be supportive and encouraging of those companies that are taking baby steps in the right direction. And that's what we like to do when these companies.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“And that told me everything I needed to know. And sure enough, many, many months later, the controlling family bought a completely unrelated business for the third son to run. So you need to ask yourself different kinds of questions in emerging markets. And it isn't always about where you are. I find that kind of silly and frustrating when people want to apply Scandinavian level 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 change rather than where you are. And so most of my boards are not independent. If you start acting like a world-class company that cares about governance and it cares about minority shareholders, provide transparency, cares about return on invested capital, you will get larger pools of capital chasing your shares. If you care about your share price, this is what you should be thinking about. If you don't care about your share price, and I can give you another example,”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Very unrelated divisions. And I asked after many, many years of overinvestment in these two sectors now was the opportunity to generate a tremendous amount of free cash flow where you're going to start returning that cash to shareholders or thinking about maybe splitting the businesses because they're two very unrelated businesses. And the CFO gently reminded me that the control”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Cash to shareholders. Are you an empire builder? Many of these old school controlling shareholders, the old families, are empire builders. They find it hard to return cash to shareholders. You could point to a lot of Korean companies, for example, are that way. And so the ask of the management team are changing, but at the same time, there's also generational change. 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 just talked about. And so they will make changes. That's an exciting part when you see a change in corporate governance driven by that generational change that suddenly maybe they're not empire builders, that suddenly they do care about returns on the invested capital. And that certainly makes for a much better investment than one where they continue adding new divisions. I'll give you an example. In Korea, a mid-size industrial company had two”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Enormously, enormously. Earlier in a lot of these emerging market histories, the kind of capabilities that was asked of the management teams was more on the political side, political connections, how you develop your moats was directly related to how you can influence the government to set up barriers. Or creative ways of using government regulatory pressures to make sure that you are the only license holder. But as the world has evolved and changed and as those barriers have come down, I wouldn't necessarily say they've all come down everywhere, the ask on the management team has changed. And then suddenly the kind of things that you ask for a management team are more like what you would expect to ask for a management team in the West. And so building a culture, rewarding employees with stock, what are your moats? How defensible are those moats? What are your thoughts about return?”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, as I said, no one really knows what's going to happen in the far off future in emerging markets. So we have to not be a theological and we have to approach valuation in many different ways. I don't like to see one way of approaching valuation. If you look at EV to sales, many of these early stage companies evaluate on EV to sales. Let's confirm that. Let's confirm the valuation coming from something very high up on the income statement with a DCF. Let's confirm that with comparing similar stage companies and other jurisdictions. One would argue that maybe the duration of growth is higher in China relative to say the US, but at the same time the risks are higher. And so we can have that debate that where was Google trading, where was SAP trading at similar stages of their development, give us a sense of what these stocks were trading at and compare. And so that will give us a framework of is this even in the realm of probable or possible?”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“When you have that type of alignment with the government interests in a sector, let's say in China, as you said, is politically correct, how does that influence how you think about just the valuation of the business itself?”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Obviously, we're much more sensitive to companies that have to do national service, and that's why we've generally largely stayed away from state-owned enterprises everywhere, but certainly in China, because those that do national service don't always have the interest of the minority shareholders in mind.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Say is it's not the end, it's not the beginning of the end of investing in China, it's the end of the beginning. And what do I mean by that is the kind of approach to invest in China must change and evolve. We're invested in a company that is very politically correct because they're utilizing technology to solve local problems. The largely state-owned enterprise banking system in China was not designed to finance the largely private sector SME sector. And so a lot of these smaller companies struggle to access capital. Now we have a company that uses blockchain, artificial intelligence, and a digital currency in order to digitalize the supply chain relationship so that banks have the confidence to lend SMEs. This is exactly what the government would like to see. They're not paying a patent to a Western company for this benefit. It's solving a less domestic problem, and it would certainly have the support of the government. So as a result, these are the kinds of ideas that we like.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Announcement that in my mind is credible. And so if you are helping to decarbonize, if you are battery manufacturer or battery components or you're building electric vehicles, you're going to have the support of the government. Another key theme, of course, is geopolitics with data security. These are the kinds of themes that so long as the companies that we invest in are supporter of these themes, the kinds of risks that we see are reduced. It's a different approach. You have to ask these political governance questions in China that perhaps you wouldn't have to ask in other places. And this is why as a key part of our process, if you choose to ignore the top-down, if you choose to ignore the political governance questions, in my view, you shouldn't be investing in China. You shouldn't be investing in emerging markets. These companies, as we could see from certain industries like the education sector, could suddenly be subject to surprises from the government.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Placing aircraft carrier group on one side of the Malacca Straits, and you could starve China of crude oil. But they're also good economic reasons. Did you know the vast majority of the solar supply chain is in China? Did you know that producing an elect in China that producing electricity from solar and from onshore wind is almost at parity with producing electricity from thermal? No subsidies needed. I'm not even talking about pollution. Of course, that's a rising concern among the people in China. I'm talking about good economic and geopolitical reasons for the Chinese government to announce this pledge that they announced last year, decarbonization by 2060. That will be the biggest story after COVID. I think the market has commentators will look back on 2020 and we'll miss this, but we'll say many years later that was the big announcement. The Chinese government making this splashy”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“It is very topical. And so we would spend more of our due diligence time with As we see it today, the government would like companies to help localize. So in other words, innovation, replace qualm, replace SAP with Chinese equivalents. One of the lessons that the Chinese government took from the US-China trade war was that they were very vulnerable. They had to import a lot of semiconductors, they had to import a lot of semi-cap equipment. They wanted to localize. And so one of the key themes for the Communist Party is innovation. If you're a Chinese company, if you're helping to replace a foreigner, then you will be supported. Another key theme for the Chinese government is decarbonization. Now, you might argue why? Why is that a key theme for the Chinese government? There's a yawning gap between domestic consumption of oil and domestic production of oil. And the vast majority of the imports must then come from volatile parts of the world, mostly the Middle East. And most of that comes through the Malacca Straits. You could imagine one major”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“We usually have between 50 and 80 names my style bias is agnostic, which is a very strange term. I allow the bottom-up stock picking to drive my portfolio tilt. If the bottom-up stock picking leads me to a tilt toward value, then so be it. If it tils me toward growth, so be it. There are times to be tilted one way or the other. We are not theological about having a growth portfolio or value portfolio. And I think that's important in emerging markets. You have to consider that before 2008, 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. And so if you always had a value bias or always had a growth bias, you would tend to outperform one regime and tend to underperform in another. Maybe the construct of value versus growth is artificial. Why not allow bottom-up stock picking to drive what you own in your portfolio?”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Becomes those portfolio candidates. It moves from these are the best ideas within that intersection to now let's compare how we build a portfolio from those best ideas. The next step would then be the most crucial step because I'm a very firm believer in risk adjusted returns. The next step is how do these stocks play with each other in the sandbox? What I mean by that is the risk characteristics. If we are already an overweight Korea, overweight technology, overweight growth, then adding another Korea technology growth name has certain risk implications. The focus is to deliver great risk adjusted returns through market cycles. And so it's very crucial to me to understand the risk implications of adding every stock in the portfolio as to earn its keep, but also has to play well with the rest of the portfolio.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Specifically, what we then look at at the stock level is we look at the valuation skew. 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 8 or China in year 12. Give me standard deviations. If the stock plays out as you expect, what do you think the market will pay for it? That's your base case outcome. If the stock plays out even better than you expect, that could be your reasonable bull case. And if the thesis is broken, what's a reasonable bear case? You could always come up with Uber bear cases in emerging markets, but give me a reasonable bull, reasonable bear, reasonable base case. And that is how we compare stocks across sectors and countries. Now that we've identified which are the good companies in the good countries with good governance, the way we compare those stocks is to look at a stock that might have 80% upside and 20% downside on that versus 20% upside and 50% downside. That gives us an ability to compare and sort of then”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of stocks. But here I think you need to talk about expanding the universe first. Another example is that MSAI only has about 400 China A share. So those are the stocks that trade in Shanghai and Shenzhen. Only 400 of those China A share stocks in the benchmark. They're 4,000. Surely there's a better way finding attractive names than narrowing 4,000 to 400. We certainly find some interesting ideas outside of what's in the benchmark. We typically are between 35 and 45 percent of the portfolio in out-of-benchmark ideas. Again, emerging market ideas, but a significant amount of what we invest in are out of benchmark ideas. And that leads our portfolio to act differently from others that focus more explicitly on the benchmark.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Or London, or Singapore. Maybe they don't have a home country listing. And keep in mind, though, I don't consider Apple or Unilever or an ASML to be an emerging market stock. Yes, emerging markets are 20, 30, 40 percent of the story, but it's not 80, 90, 100% of the story. The other thing I'd say is that the index also decides who goes in and who goes out. Surely, surely, Korea and Taiwan should not be considered emerging markets. Surely. And yet they are. Surely Vietnam should be upgraded to emerging markets in the foreseeable future, but it hasn't been. They were very slow to upgrade countries, and they're very slow to migrate them out. Israel was the last country to be migrated out of emerging markets. I think it was 12, 15 years ago. And so they keep adding new countries. The starting point is very poor. And so what we talk about when we start our process isn't narrowing the universe. Many investors talk about, well, I want to tell you which stocks are my kind of stocks and what kinds of stocks are not my kinds of stocks.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Places a heavy emphasis on state owned enterprises, and they miss a lot of new economy stocks. So Mercao Liber, which is Latin America's Amazon, C, which is Southeast Asia's Tencent and Amazon, they're not in the benchmark, partially because they're not traded in their home markets. And I don't know why MSA has that bias, and partially because they want to see how an industry develops before perhaps putting them in the benchmark. What happens is the benchmark misses a lot of the future and captures a lot of the past. A lot of these old economy stocks, old cyclicals, oil and gas names, those feature very prominently in the index. The other thing that misses is we don't care where the stock is incorporated or where they're listed. We care where the exposure comes. If the vast majority of the assets or vast majority of the revenues, vast majority of the story, driven by emerging markets, we consider that to be an emerging market stock. Why should it matter that it trades in Toronto?”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“In emerging markets between 95 and 98% of the money managed in this asset class is benchmark against MSCI emerging markets. It's a reality. I know that other asset classes you have more diversity. We don't have it in emerging markets. So for better or for worse, and I think for worse, we have to live with MSCI. What do I say by for worse? I don't agree with the opportunity set that they've created. It's a poor starting point. I'll give you some examples between a quarter and a third of the benchmark are state-owned enterprises. Think Gazprom, Rossnev, Petrochina, ICBC, Petrobras. Most of these companies that I hope you can appreciate are governance challenged. They don't necessarily represent the future of emerging markets. 10Cent certainly is not an SOE. And certainly look at what that share price has done over time. Walmex, the Walmart de Mexico in Mexico, is a private sector company. Look at that share price, what that's done over many, many years. And so MSCI”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“It comes to constructing your portfolios, a lot of strategies like this are benchmarked against whatever it is Morgan Stanley, emerging market index, which is just a construct of size and can't possibly take into account all of the factors you're talking about, about investing with good countries and the right type of culture and sectors. How do you think about the benchmarks that you're investing against?”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, what we like to do is, I asked my analysts, I don't want research reports on Mexican cement. I want you to tell me how you're different. A research report says this is the Mexican cement industry. These are the major players. That's not as interesting as we should buy this stock in the Mexican cement industry. And this is the homework that I've done to have a differentiated view. And we would like to divide that differentiated view in four key areas. Either you have a differentiated view and the magnitude of the earnings or cash flows that you see. You have a difference in view in the duration, the quality, or the use of the cash flows that are going to be generated. So are they empire builders, for example, or are they going to actually return cash to shareholders? This allows us to focus our stock selection in one of those four key drivers. If you believe that the market is misunderstanding the duration of growth, then let's see the homework that you've done to have that view. And that gives us more”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“Concerned about the currency, for example, maybe exporters are better placed to be, for instance. And so these are the kinds of discussions that we have that we start marrying the top-down views with the bottom of views. Now let's be clear, the bottom-up is enormously important. You have to choose the right company's strategies, the right modes, the right valuation. But in emerging markets, that top-down does play a big role.”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source
“So the Chinese have this concept called politically correct. What is to mean to be politically correct is to invest alongside national policy goals. And certainly while China is an extreme example that you generally want to be investing in companies and industries that are being politically correct, that you generally need to appreciate that as countries develop that certain industries will have their day in the sun. And certainly some industries will have support from the government and some industries will be faced with regulatory thunderbolts from the blue. And so what we try to do is then go from the macro to the micro. And that's where the heavy work, the heavy lifting is done by our analysts to understand given the environment, the soup, the river that I've identified in terms of the operating environment these companies face, what are some industries that are going to be winners and what are some of the industries that are going to be losers in this?”
2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source