In our years of having met portfolio managers and analyst, we always viewed international fund managers in the U.S. with great skepticism. Not all, there are some very good ones, but most.
Why? We have heard every excuse in the book. We invest in Russia, Brazil etc, but these answers have horrified us:
1) We don't have foreign language speakers, as all necessary financial statements are translated into English.
2) We don't travel, as managements all come to New York!
3) We have no view on currencies. We are bottom-up stock pickers.
4) We don't have a macro economic view, we are bottom up stock pickers.
5) We don't have a view on commodity prices. We have no view on oil, we are picking the best stocks in Russia on a bottom-up basis.
It should be obvious to all investors that a PM must know about currencies, commodities, economics, and politics to successfully invest internationally.
Most emerging markets are commodity driven. They are also extremely sensitive to interest rates, and current account, budge deficits. We would never hand over a dime to a manager that didn't understand commodities and currencies, yet claimed they could make us rich in their international fund.
If the stock market collapse and the currency experiences a run, even the best stock will do poorly.
If commodity prices collapse, Middle Eastern and Russian markets collapse.
Lesson Learned!
The Russian RTS index is in USD. Don't you wish the PM had an understanding of currency, political, and commodity risks before you handed over your money? Even being late, It was easy to avoid this swan dive. It would have been better to take a small loss than to give years of gains back...on hope!
http://bloomberg.com/apps/cbuilder?ticker1=RTSI%24%3AIND
Kuwait and the ME are petro economies. One best understand oil and politics before committing ones capital!
http://bloomberg.com/apps/cbuilder?ticker1=SECTMIND%3AIND
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