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Daniel Graña

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65
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2021-09-30
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2021-09-30
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1
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  1. “The thought is to have a view that's relatively stable over a two or three year time frame, acknowledging that there will be some reasons to change the view, whether it's a political election or whether it's particular vulnerability to U.S. interest rates. And now we've changed our view on U.S. interest rates. But certainly the view is to have a semi-firm two to three-year view so that it could help us guide where the most attractive picking pools are.”

    2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “And these are countries that are less attractive. They're better picking pool over here, and a radioactive picking pool over there.”

    2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “Country head of the IMF and the World Bank. We meet with politicians, we meet with opposition politicians, we meet with journalists. We meet with regulators. We meet with everyone and anyone that can give us insights into that process, the political process, economic process, and the resulting outcome. We also spent a fair amount of time with our own resources at Janice Anderson, with the emerging market debt team, who of course have a different perspective on these countries. And so an understanding of the macroeconomic direction, which is an accumulation of all the past choices they've made, as well as the future direction. And sometimes those align nicely that the country has made very good choices in the past and continues making good choices in the future. But sometimes it's more about the change in trajectory. Maybe they've made bad choices in the past, but now they're making good choices. And that creates an opportunity. And so by having these discussions, we make an assessment of where these countries are headed. And that creates an environment of where I can push my analysts to say, these are countries that look attractive.”

    2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “Am I looking for? I have to understand the political process. I have to understand the macroeconomic management. I have to look at the comparative advantages of each of the countries. I have to look at things like industry diversification. Taiwan, two-thirds of the index is tech. Russia, 80% of the index are oil and gas and natural resources broadly. These are all factors that matter because I'm not predicting GDP growth or inflation. I'm making an assessment of the choices that these countries have made. In some cases, the people have made them via choosing politicians. In other cases, they're in dictatorships. But the choices that are made influence the environment that these countries operate in. The implication of all these choices, the economic trajectory of these countries, macroeconomic and geopolitical risks that these countries take. And then, of course, because of that industry issue that I raised as the cyclical considerations. And so this is what we do. And how do we do that? Well, we meet with me.”

    2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “Extreme diversity in COVID experiences across emerging markets, that's partially driven, many cases mostly driven by the quality of the political governance. 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. That's a choice. That is a choice. And so paying attention to the politics because the politics will drive economic policymaking and the economic policymaking will drive the kind of environment these companies are swimming in and the kind of risks. There are some countries that like to skate on thin ice. And that is something that as an investor we should know. And so it's that combination of finding good companies with good governance and good countries that I think make for a more sustainable, better outcome situation 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

  6. “Certainly investing in emerging markets is different. Countries and companies are at different stages of their development, which means the institutional guardrails are not as well developed. This creates a lot of opportunities, but also a lot of risk. Means the standard deviation of outcomes are much greater in emerging markets. And so as I developed as an investor, I came to believe that the best hunting ground is found at the intersection of good companies with good governance in good countries. So well before ESG became important, again, I've highlighted a few examples on the corporate and political governance, it was clear that putting governance as part of the DNA of your process had to be there. Emerging markets are different. And then you might ask, well, what about good countries? Why is that important? Top-down factors like macroeconomics, politics, geopolitics, political governance play an enormous role in emerging markets. You just look right now, compare the...”

    2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “Certainly, as an earnest banker, we were very transaction oriented. Certainly we were a financial advisors to companies and governments. But I wanted to eat my own cooking. I'm always suspicious of chefs who won't eat their own cooking. And as an investor, that's exactly what you're doing. When you make recommendations, when you place them in your portfolios and you as a shareholder of the fund, you are eating your own cooking. You have to believe. As a SM 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, then that was the market cave emptor, that was their decision. But I want to be more in the situation where I was investing in things that I bought into, that I really fundamentally believed in. That's what led me to move away from invest in banking and toward the buy side.”

    2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “I would point you to the first Mexican REET that came out of Mexico. It was a very complex transaction. The company actually didn't exist. We had to piece it together and explain to potential shareholders in the prospectus that this company was a recreation, a pro forma, piecing together many different companies. But nevertheless, investors were beginning to look for alternatives in emerging markets, not just staples, not just growth companies. They wanted to see something different. How about a high dividend yielding REIT? And so after a significant amount of work to deliver this IPO, which we moved the entire team to New York to be able to do it in time, surely after the IPO, the controlling shareholder disappeared. You went on a horseback ride on his beach resort and never came back. And lo and behold, the company was also short of funds. So again, you need to ask yourself who these controlling shareholders are.”

    2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “But it's also about political governance in emerging markets. The nature of the systems, as I said, rule of law, the predictability, the regulatory regime, the predictability of the tax regime, these are all important questions to ask in emerging markets that we all take for granted in developed markets.”

    2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “Too far away from the Kremlin. He starts very loudly complaining about the corrupt Putin regime. Made me feel very uncomfortable. It's one thing to do it in his office, another to do it in a very public forum. And even then though it was many, many years ago, I knew of the nature of the regime. So I changed the subject. I asked him about his family, get him off of that rant. He mentioned that he had sent his wife and his only child to Switzerland with a billion dollars. And that tells me everything I needed to know. Clearly, he felt uncomfortable, that clearly he was feeling pressure. And so I decided to pass on the opportunity a few months later, he gets that proverbial knock on the door, an offer he cannot refuse. He had to sell his company at significant discount to these friends of the Kremlin. And the deal was off. Airbus and Boeing walked away. Share price collapsed significantly. And so the moral of the story is that political governance, so it's not just about corporate governance, which we just talked about.”

    2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “That certainly comes to mind when I had just switched over to the buy side. This, of course, is the political governance. I strongly believe that you can't have a purely bottom-up discussion on emerging market stock because you miss a key part of the story, which is the nature of the system these companies operate in. So the story I like to tell is Russia. There was a time when Airbus and Boeing were thinking of the next generation aircraft, what should be the materials used. And there was a debate whether they should use composite or titanium. The vast majority of the world's known reserves of titanium are in Russia. And so I went to see the oligarch who, and of course they're always oligarchs in Russia, who owned VSMPO, which is the company that had the titanium reserves in Russia, to see if they could get surety of supply. Obviously, once you design an airplane using titanium, your expectation is you're going to lock that in for 30 years. You can't design around that once you start using titanium. And so when I had dinner with him at a restaurant,”

    2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “And so my years as an investment banker highlighted to me the importance of corporate governance. You really need to understand who the controlling shareholder is. You really need to understand that what is acceptable in some countries is not going to be acceptable in others. And that was important life lesson for me.”

    2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “And we're using glass, not plastic. And so he would go around and collect these glass bottles and smash them. Coke, of course, expecting these glass bottles to come back to be able to sort of wash them and refill them and send them out again, didn't know what was happening. And he managed to put his Pepsi bottles on the shelves and gain market share. Of course, when Coke found out what they were doing, they painted their Coke trucks with Pepsi logos and collected the Pepsi bottles from the convenience stores and smashed them. And that started a glass bottle war. But they ended with a truce where Pepsi ended up about 40% market share in the Mexico City area earning himself the Pepsi bottle of the year. But I don't think New York really fully appreciated how he did it.”

    2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “Sure. So I worked and invest in banking, which is working for the dark side, bringing a lot of these Latin American companies public, helping governments to raise sovereign debt. 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, acceptable business practices in emerging markets are very different. And I could give you an example. The Mexican glass bottle wars 25, 30 years ago, a Pepsi bottler new shareholder to the company managed to gain majority share of the carbonated soft drink market in Mexico City area over Coke. That, of course, is unheard of, unbelievable. But the way he did it was very emerging markets. He painted his Pepsi trucks with the Coke insignia, circled around all the mom and pop shops at the time in Mexico. A lot of these drinks were sold in mom and pop shops and convenience.”

    2021-09-30 · Capital Allocators · Daniel Graña – Janus Henderson Investors Emerging Markets Equity (Manager Meetings, EP.13) · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “My grandfathers chain of neighborhood hardware stores in Cuba were nationalized after the Cuban Revolution. My father's two brothers became communists and denounced the family as counter revolutionaries, which made life very uncomfortable for the rest of the family. My mother left failing Peru and I married a Soviet refugee whose family suffered from religious persecution. So as you can appreciate, I've always been fascinated by some countries fail their people, whereas others did not. And that led me to spend my entire professional career 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