Jonathan Auerbach of Auerbach Grayson.
So I asked him what he does with the cash. He said, "I put it in the stock market." And I asked if he was joking. So I asked the value of his portfolio, and he said it's the equivalent of about $150 million. The company only has a market cap of $125 million. He looked at me and said, "That's why we're a good buy!"
How are these markets faring as the American economy slows?
On a macro basis, we take a very positive view of the global economy right now. Given the [fund] flows we see and the amount of business we do in these markets, it's certainly where business is going. On a given day, I'll trade in 30 to 40 different countries and have turnover of $150 million to$200 million a day in order flow. Five years ago, 50 percent of our revenue came from G-20 markets and 50 from the rest of the world. Today, close to 65 percent is from the emerging and frontier world.
I also think global investing from people who are dollar-neutral, and that includes American managers, will continue to focus outside the United States, because the dollar will continue to be under more pressure than other currencies. Investing in most foreign markets is a natural hedge to short the dollar.
Is political leadership improving in Africa in a way that will help draw investment?
The postcolonial kleptocrats who assumed power when the British, French, and Portuguese took it on the lam in the '60s and early '70s are gone. You've got some really remarkable leaders in Africa like [President Yoweri] Museveni in Uganda, [Jakaya] Kikwete in Tanzania. In terms of privatizations, citizens becoming shareholders, publicizing investments, the improvements are there. They're politicians at the end of the day, but they're cognizant that there's something to improving people's lot.
But the political element is obviously still a concern in some of these spots. How do you invest in places where political risks are high and stability isn't a given?
The concerns people have, whether it's political corruption or governance, are generally overstated relative to the reality. Kenya had an electoral political crisis in January. I went there immediately afterwards because we have a lot of investments there for clients. Within two days—and I know what the headlines said—downtown Nairobi was busy.
We went around and picked up some fantastic, sizable, $10 million-range blocks of stock in some Kenyan companies. Our clients are up 10 to 15 percent on it on the recognition that what you could see on the evening news [was disruptive]—and I'm not minimizing what happened because there were people killed—but they resolved it. And things like tribalism are on the wane. I'm a great believer in Africa.
Any advice for average retail investors?
For the man on the street with a 401(k), realistic emerging market exposure is an absolute must. That means about 15 to 20 percent of a portfolio in emerging markets.
