The vast majority of investors in EM private markets pursue growth in one country or region. In aggregate, this has the effect of creating opportunities for a small number of opportunistic value driven global investors with specialized EM skills.
Meanwhile advancement of emerging markets naturally expands the actionable opportunity set for value investors. Emerging markets gradually evolve and mature, allowing for more sophisticated deal structures and approaches, even as they beneficially remain arguably the least efficient asset class in the world.
Minority shareholders remain vulnerable but creditor rights are increasingly respected and enforceable. Bankruptcy codes, in various stages of development, exist in many jurisdictions. Progress is uneven, but, in general, efficient win/win restructurings are increasingly commonplace, allowing an appropriate variation of the special situations toolkit from developed markets to be effectively utilized in emerging markets.
Albright Capital's global orientation identifies opportunities missed by local investors
- Emerging market private markets have long been dominated by growth-oriented investors focused on one country or region, who are often limited by mandate to buying existing businesses utilizing traditional equity structures. This leaves significant opportunity for the relatively few value-oriented investors who have the global networks and orientation to agnostically execute across markets and offer customized capital solutions.
- Middle market companies operating globally (or with global aspirations) often find it hard to obtain capital given that most emerging market private equity investors have a limited geographical mandate. Moreover, Albright Capital's global networks and proven ability to support global expansion make us a partner of choice for these companies.
EM Corporate Credit
The emerging market corporate credit market is now as large as the US high yield market, after rapid, quantitative-easing-driven growth since the Global Financial Crisis. Idiosyncratic restructuring opportunities (delivering inherently low correlation) should persist for a long time.
- Opportunities to take advantage of investor misconceptions of political risk in certain jurisdictions & good companies operating in out-of-favor jurisdictions or circumstances should be continuously available.
Distressed Credit Opportunity
- Increasing corporate leverage within the emerging markets since the Global Financial Crisis and a heavy maturity calendar in the next few years should create a significant emerging market distressed credit opportunity.
Currency and other losses
- Recent currency and other losses in country and regional emerging market private equity funds have caused the usual investor base for those funds to retreat, creating an opportunity to support a select group of orphaned portfolio companies with much-needed follow-on capital, including structured capital on attractive terms.
- Given recent difficulties in conventional EMPE, many firms have been unable to raise subsequent funds and traditional sources of capital to buy secondary LP interests may not be available, given their heavy reliance on continuity of the GP.