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James Donald

lines on the record: 82
first: 2018-03-19
most recent: 2018-03-19
sittings or episodes: 1
sources: podcast

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“In fixed income, currency hedging happens a significant amount, I would say. Inequities, we can hedge currencies in practice. We don't tend to do it that much. It's quite expensive. And it's quite easy to get the time periods wrong. We tend to embed it in our target prices by analyzing what risks we think the currency or macroeconomic factors in general might mean for the actual profitability of the company.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“It is very different from the US. You really have a number of different fixed income areas in emerging markets. You have hard currency, debt, which has been a very, very strong area. You have local currency that until recently has been relatively weak. And then you tend to get strategies that mix the two. And you also have quite a significant corporate debt universe as well.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“By design, they're quite different portfolios. The overlap is relatively limited and they will produce different types of results for investors over time.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, the way we're organized at Lazard is that we actually have 12 different emerging market teams, anywhere from fixed income. To currencies, to fund of funds, to equities. We're almost like a collection of boutiques. And all the strategies are different. So inequities, for example, We have four different equity strategies. We have a quantitative one. We have a relative value one, which is where I spend most of my time. We have a growth at a reasonable price one, and we have a core one. So a whole lot of different things. It's almost like a menu with four different food plates. And people can decide based upon their objectives what type of journey they would like to go on.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think indexing is a perfectly viable tactical and often short-term solution. But one of the interesting things is that in emerging markets over longer periods of time, the median manager tends to beat the index. And so I think informational efficiency is less good in the emerging markets. There aren't necessarily a huge amount of analysts in emerging markets overall. It's nothing like the US And so actually going and understanding these companies and utilizing certain strategies for investing, I think can produce good results in comparison with the index over longer term periods of time. So it's a bit more work. I think one has to be creative, but I think one can construct portfolios using perhaps different Investing methodologies in emerging markets that can provide a very strong performance in the long term.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Not a million, but a good portion of that and pretty much all of our analysts are traveling heavily around the emerging market world to see opportunities on an ongoing basis.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it's vital to go and see activities in all of these countries. I don't think it's necessary to actually be there all the time, but I think it's very, very critical to travel, to get updates, to see what's changing in these markets on a very, very regular basis. Because if you're not seeing it fairly regularly, you're perhaps not understanding opportunities or risks that are coming up in these markets.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, of course, I mean, every country has its own issues. I mean, India, for instance, is actually, I wouldn't say a terrible. The areas that we think are relatively underappreciated include Russia. Some stalks in Brazil, Turkey, Indonesia, for instance, and to some degree South Africa right now. But again, we find opportunities in many, many markets across the emerging markets.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think India is very exciting right now. You've got a Prime Minister, Mr. Modi, who doesn't really have to answer to anyone, even the leaders of his own party were not in favor of him being Prime Minister. He appears to be very, very courageous. He's willing to do things like removing the largest denominations of currencies and making big, big changes in the civil service. So what is exciting is he's tackling the bureaucracy of that country, knowing that there's a huge young population with, I think, about a million people going into the workforce every month.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“We believe it is. It certainly is a place where you have to take into account political risk. Because it can have big, big effects on certain corporations. And there's some degree of judgment in how we look at that. It's also a place where we tend to see risks associated with governance in some companies. So those are big, big factors in Russia. But we do think that there's reasonable protection in most companies in Russia.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Very good question because I also was surprised last year in the US that the market did not seem to be affected by the noise, the political noise and the economic noise out there in the world as a whole and in the US. I think it varies on situations, but certainly there are political effects that we see in emerging markets, a very good example right now is in South Africa. Where a new leader of the African National Congress, so Ramifosa, has come into power, and where there seem to be sizable changes afoot politically that are causing some quite big changes with the currency and with the market in that country.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“We do a lot of accounting analysis because we have around 70 analysts at Lazard who are involved at looking at all types of different strategies. And we make adjustments for accounting distortions where relevant. And then we look forward towards the fundamentals for their businesses. And we then see, according to the valuations, if we think the stocks are inexpensively priced or not. And then at the end of our process, we'll discount for certain risks that include things like political risk and macroeconomic risk and even governance risk.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I would agree with you. I actually come at this from the perspective of thinking there are no cheap asset classes today relative to their own history, but emerging markets are relatively cheap to develop markets and to the US market from where I stand. And we approach our analysis by focusing on stocks, stocks that look inexpensively valued and relatively profitable.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“There is tremendous variety across emerging markets. In Asia, you have large technology sectors, for instance, whereas you have a lot more of a focus on commodities in parts of Latin America and in parts of Eastern Europe like Russia or South Africa. Very different countries, very different political systems, tremendous variety.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Weak dollars, strong EM, strong dollar, weak EM. That is a strong correlation. And indeed, emerging markets tend to have quite a strong correlation with commodity prices.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that's fair. I think the clear enemies of emerging market equities are negative real economic growth and or crises.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“So it's a big change. It tends to fluctuate over periods of time. But what I would say is that emerging markets as a whole are just more dependent on economic growth than the developed world. And so when the world has difficulties with economic growth, emerging markets tend to be negatively affected by it.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, the commodity areas like energy materials are today relatively small parts of emerging markets, around 15% of our universe.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“It's hard to tell how long they last. I mean, they seem to be often seven to ten year periods. That we see this. You're absolutely right. Emerging markets has underperformed the US over the last ten years. I think the biggest reason for that is that we've been through a strong period where deflationary pressure has dominated markets and the emerging markets are just more economically sensitive than the US. You know, if you think about the technology sector, for instance, big, big area in the US, there is actually quite a big technology sector in emerging markets as well. But you have a lot of industries that are very economy sensitive. So in that last decade period, economic sensitivity has worked against the returns in emerging markets.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“While the correlations have increased. There's no question that when the US market has big movements, we have a lot of interlinked risks around the world that cause these markets to be much more correlated than they used to be. Over time, there are big differences between the performance of the emerging markets and the US market. But on a short-term basis, the correlations are pretty high.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, China has come a long way. China has industrialized very. As successfully. And China is no longer a low wage country. It's actually a medium wage country. So it's not nearly as wealthy as South Korea or Taiwan on a per capita basis, but it's moved up quickly.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, the most obvious are South Korea and Taiwan. Which are actually quite developed economies, relatively wealthy economies, there are some restrictions with changing money and with investor identification that has caused them to stay in emerging markets. But in terms of overall capital market development and economic development, they're probably the leading contenders.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, I understand that. I get asked that question a great deal. I would say there are other countries that would be probably contenders, at least based on economic development before China.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Those have even less accessibility. On the whole, they are much more rudimentary economies and rudimentary markets. And they have less liquidity in them. So there is an ongoing process by which countries have moved between frontier markets and emerging markets and even back into frontier markets.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“It's something that's changed over time. I think originally the index was based or the indices were based on economic development and political development. They've moved over time more towards what's easily accessible and MSCI is the biggest index provider in this area and they're very focused on accessibility.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Nope. None of that. Slowly these markets have opened up. And investors like ourselves have been able to directly invest in them.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, if you go back more than 20 years, a great deal of these markets were not markets you could directly invest in. You had to go through those country funds. So there were fixed pools of capital. And as a result of that, the country funds values could be very different from their net asset values. And so essentially, that could distort the picture very heavily.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“It was before Index funds, but it wasn't necessarily before country funds. A lot of country funds actually developed during this time because a lot of these markets were very, very small. And they didn't want to be overwhelmed by foreign capital flowing in and flowing out. So actually, country funds were a very, very big part of the development of those markets. In general, the markets were very small. A lot of the big, big countries today, for instance China, which is close to being 30% of the emerging market index today was around 1%. And back then, places like, I mean, Malaysia was a huge market. Mexico was a very big market. Whereas, say, Brazil was relatively small. Or, you know, for instance, India was relatively small as well.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“I had done a lot of work analyzing smaller stocks in the US and looking at stock markets in Asia. And back then, essentially the equivalent of emerging markets, places like Hong Kong and Singapore and Malaysia and areas like that. And so I thought these markets were ones that I had had experience, or not too different experiences with. And I also was very attracted by the cultures, the variety of cultures in emerging markets. And at the end of the day, I felt that People around the world want to see their economies develop and the capital markets are very, very critical part of that.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I then in 1985 got a position at SG Warburg in London. And I went into the investment management area there and was involved in global investments. This is really pre-emerging markets only really developed, I would say, in 1987, 1988. And so I was involved in managing global portfolios, a lot of U.S. holdings at that time, and really learnt about portfolio management at SU Warburg and the firm ultimately became Mercury Asset Management. And in the early 1990s, when Mercury was establishing its emerging market team, I was very interested in joining that team. And so I was one of the first members that joined that team and was involved in managing portfolios at Mercury.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“I participated in the training course and I was involved in a whole lot of different functions in the firm, anything from operations all the way to government finance.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I was born in Toronto and I actually began my first career in Toronto at a brokerage firm called Wood Gundy, where I did a training course around the firm.”
2018-03-19 · Masters in Business · James Donald Discusses the Sensitivity of Emerging Markets · IDENTIFIED FROM THE TRANSCRIPT · source