“Emerging Markets – What Now?” by Cynthia Fryer Steer

by Morgan Yi (MBA ’14)


Head of manager research and investment solutions at BNY Mellon Investment Management Cynthia Fryer Steer identified trends in emerging market investing

“Emerging Markets – What Now?” by Cynthia Fryer Steer

On January 24th 2013, Cynthia Fryer Steer, Head of Manager Research and Investment Solutions for BNY Mellon Investment Management, returned to Johnson at Cornell to host a discussion on investing in emerging markets. In her talk entitled “Emerging Markets – What Now?”, she shared her observations, wisdom and lessons learned from investing in emerging markets to Johnson MBA students, including many candidates of the Emerging Markets Institutes Fellows program. 

Cynthia started her career at American Express as Head of Credit Lending for Latin America, and since then, has been quite bullish about investment opportunities in emerging markets.  She believes progress has been made in some asset management firms, such as endowment, pension fund, foundation, etc, and the capital allocated to emerging markets related asset classes has correspondingly increased from 5% to 30%. However, other firms still need to figure out their mission and investment goals, so that they can have better strategies. She emphasized that when investing in emerging markets, you also need a strategy to pull your investments out.  She acknowledged that a big challenge is that there is not enough theory about emerging markets investing. Although IMF and World Bank suggest investing in Treasury bonds, she thinks being bullish about asset classes from emerging markets will yield a better risk-adjusted return. For example, real estate is a real asset, with a real return which has been better than a Treasury bond. 

In terms of the criteria to ensure sound investment decisions, Cynthia cannot emphasize enough the importance of good governance. Major blowups can happen to endowments or pension funds, because there can be a flaw in governance or decision making processes. Case in point, she is indeed worried about the pension system in United States. She additionally maintains that the quality of governance in a country is crucial to the success and superior return of investments. Regarding the outlook for the United States, she thinks that the tax code will be ironed out, and politics will resume stability, which will bring some certainty to the next five to seven years.

A few select Q&As from the discussion: 

Question:  Regarding the Eastern Europe market, it seems most of the channels are managed by a few wealthy families. How do you invest in this type of environment?

Cynthia: This phenomenon is common in some developing countries, such as India, Argentina and Mexico. Mexico is known for about 200 families. Ultimately, firms will transform from family management to a better form of governance.  In this manner, the family members will become even richer. For example, a lot of senior CEOs in India realized that if better governance was implemented, they could enter into other industries and go global. East Europe is a fascinating place. Culture plays an important role there. After the Arab Spring and the fall of Egypt, the influence of Turkey increased.

Question: It seems that governance is Africa is going backwards. What is your view?

Cynthia: You are right. And thus I think the public market is relatively safe compared to the private market. But over time this is not enough. However, East Africa is an amazing place to consider. Historically, there was a strong sense of regionalism. A general impression has been that Africa is underdeveloped, but if you go there now to visit, you see that people shop by using cell phone - a huge transformation. Transformation is all about belief.

Question: Can you comment on Nigeria Sovereign Wealth fund? An argument has been that should they undertake well-rounded investments or only invest in infrastructure?

Cynthia:   This fund comes from foreign reserves. What I see is they have been trying to get the mechanism in place to have a sound asset allocation policy. That said, their agenda is different from the central bank, and reflects the country-specific needs.  Thus, they will continue to put a big portion on infrastructure.

Question: Whom do you think is the greatest investor?

Cynthia:   I will give you three.  Mohamed A. El-Erian, the CEO and co-CIO of PIMCO; Jeffrey Gundlach, the Founder of Doubleline Capital, and Jim O’Neill, Chairman of Goldman Sachs Asset Management.

Cynthia closed her talk with investment advice for MBA students who want to become successful investors: “Master something, read a lot and learn to take risk. More importantly, remember that a career is marathon, not a sprint.” 

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