While emerging market private markets remain arguably the least efficient asset class in the world and therefore highly attractive to value investors, they have also gradually evolved and matured, allowing for more sophisticated approaches.
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 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 find value and efficiently execute across markets, with the flexibility to build vs. buy and a mandate that allows optimal deal structuring.
- 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, ACM's global networks and proven ability to support global expansion make us a partner of choice for many of 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.
- We believe there remain continuous opportunities to take advantage of investor misconceptions of political risk in certain jurisdictions. Good companies operating in out-of-favor jurisdictions or circumstances can be attractive.
Distressed Credit Opportunity
- Albright Capital believes that increasing corporate leverage 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 pause, creating an opportunity to support a select group of orphaned portfolio companies with much-needed follow-on capital, including structured capital on advantageous terms.
- Given recent difficulties in conventional emerging market private equity, many firms have delayed or may not be able to raise subsequent funds; furthermore, traditional sources of capital to buy secondary LP interests may not be available, given their heavy reliance on continuity of the GP. Deal-level skills will be essential to process this growing, secondary opportunity.