Emerging markets are traditionally more vulnerable to corruption than developed markets because of their unstable economic situations and political turmoil.
GQG Partners CIO Rajiv Jain has told Citywire Switzerland how he tackles the problem.
Jain said: ‘We believe that corruption is a huge issue across emerging markets and companies unsurprisingly will go to great lengths to cover up corrupt practices, so to gauge corruption you need to develop a viewpoint that is not solely reliant on statements and materials provided by management.’
Jain has included in his team analysts with non-traditional backgrounds in fields like investigative journalism and forensic accounting.
He said: ‘The layering of these additional perspectives contributes to deeper, more differentiated research and help us develop our own thesis around whether or not corruption is present.’
The emerging market veteran does not rule any country out of his list. ‘Maybe a bigger risk than avoiding any particular country would be having the wrong type of emerging markets exposure.
‘During market dislocations, which we believe we are currently in, the separation between winners and losers becomes more apparent. Thus, it is in periods like this where adaptive, active management is vital, as we believe only active management will allow investors to take advantage of these dislocations.’
Jain nonetheless believes emerging market still offer several opportunities.
‘My team and I are finding what we regard as ample growth opportunities in emerging Asia. We expect the continued maturing of the middle class consumer will be a driver in financial services and health care.’
The emerging markets equity veteran and his team believe that in times of increased market volatility anchoring the portfolio to companies that have clear earning profiles helps protect investors from market downturns.
Prior to joining GQG Partners in 2016, Jain was co-CEO and CIO and head of equities at Vontobel asset management.