Andrew Foster, the founder and CIO of Seafarer Capital Partners (Seafarer), was a recent guest on the Money Life podcast. Seafarer is an investment adviser focused on emerging markets. The firm was founded in 2011 and currently offers two funds: Overseas Growth and Income and Overseas Value. Foster was previously at Matthews International Capital Management.
You can listen to the interview here. Some highlights below (paraphrased):
- Political headlines tend to grab a lot of attention, but it’s always difficult to tell what impact they will have on the markets. For example, in emerging markets, we haven’t seen the pronounced move downwards many analysts predicted based on the US administration’s new set of policies (partly because they haven’t been enacted). They prefer to wait and see what happens with policy implementation vs. trying to trade on the noise.
- He doesn’t think the dollar has been as strong as people imagine. When the Fed first started raising interest rates back in Dec 2015, people thought the US dollar would strengthen significantly. In reality, some emerging market currencies have weakened against the dollar but, as a basket, they have been strengthening very slowly (+6% stronger through March 2017).
- On emerging markets, a few things they are seeing / doing:
- China: not all is wrong, but some of the conditions there are very stretched, particularly in terms of solvency (how much debt and credit there is in the economy versus the scale of output). They think it could be problematic for growth and stability going forward.
- Turkey: have been investing there since 2012, but their view has changed. They don’t usually make blanket, macro, top-down decisions to pull out of a country but have done so because of the political instability there.
- Corporate earnings: they are paying a lot of attention to fundamentals. Overall, they see quite benign conditions for growth but feel that many analysts are too optimistic following on from 2016 growth rates. There is room to be let down.
- Finally, he is increasingly worried about the situation in North Korea and thinks it could be a global issue. Said the underlying politics are incredibly complicated. When he started his career in the late 1990s, people used to focus a lot on both the China-Taiwan relationship and North Korea. Today, he feels more comfortable about the former than the latter.