Aaron Visse, the San Francisco-based portfolio manager for the $14 billion Salient Partners investment firm thinks investors should look at something else instead: infrastructure. Whether its warehouses for e-commerce companies, toll roads, or port terminals, Visse tells RIA Channel CEO Julie Cooling that the story he tracks in the Salient EM Infrastructure Fund (KGIAX) are the companies that are building the systems needed to grow big business.
Ask a global fund manager what they like about emerging markets and they generally will say its growing middle class. People in the developing world are getting richer. They are buying more toothpaste and eating more chicken. That’s been the story for some time now, particularly since the commodity super cycle wound down around seven years ago.
“We’re investing in mission critical assets for mission critical industries, so governments are encouraged to promote private infrastructure in their markets. That’s a risk mitigating factor for us,” he says.
Visse gives viewers a sense of what sectors they are looking at, as well as their preferred market cap. The $27 million fund invests primarily in long-only physical structures and networks that provide necessary services and other logistics that benefit from “global megatrends” such as demographics, technological adaptation and urbanization.
One way to judge a money manager is to see how well they do when the market is tanking. In 2008, Visse’s fund fell around 42% while the MSCI Emerging Markets Index fell 53.18%. Visse and his team of five fund managers beats the market best in a down cycle. They beat the MSCI EM again in 2011, 2014 and 2015. Over the last five years, KGIAX is up around 20% while the iShares MSCI Emerging Markets (EEM) is up 12.3%.
“This strategy is a way for investors to get higher yield, lower volatility, and has holding in companies with a longer term track record of outperforming the index,” he says.