Two ideas led me to join an emerging and frontier markets investment bank in 2010. First, having seen massive credit growth in developed markets (DM) drive up asset prices, it seemed likely that the DM story was over for years to come. Emerging markets, from Rwanda to Russia, with private sector debt at 10-50 per cent of GDP had room to boom.
Second, I believed we were re-running a 40-year cycle that meant the post-2008 period would look much like post-1973. Equities would do better than bonds. EM equities would only gently outperform DM but there would be a few (hard to predict) markets that would be responsible for all this outperformance. Getting exposure to as many as possible was sensible – so avoiding a single-country broker, or a bank primarily exposed to DM, was key.
Oddly it was the less obvious reason – the 1970s comparison – which has been the better call.