Investing in Frontier Markets – Looking Beyond the BRICs – Scott McCormack

SuperInvestor U.S. - Scott McCormack (Partner, Granite Capital Management) interviewed by Kelly DePonte (Partner (Probitas Partners) at SuperInvestor U.S. 2013 in San Francisco. Investing in frontier markets - looking beyond the BRICs. What tells you that a frontier market is ready for private equity? There are a combination of factors: 1. You want to see the right macroeconomic factors within that country - GDP growth, the right demographics, the right level of political stability and the emerging middle class consumer story. 2. Dealflow - you need deep markets for this. There should be a portfolio of somewhat diversified businesses and there need to be viable exit opportunities. Which frontier markets are beginning to be right for private equity? 1. Sub-Saharan Africa 2. West Africa has really seen the market develop. Particularly in Nigeria and Ghana, the combination of the natural resource play, the emerging consumer story and infrastructure. 3. Within Asia: Indonesia is an attractive market where funds are emerging. The Philippines is looking very interesting. Vietnam - still a strong believer that private equity has a big role to play there. It slowed down a bit as people are waiting for exits but it has dynamism, the right demographics, the consumer story, GDP growth, a strong youth culture. It's all there and it's waiting to re-blossom but it needs help from the government to get theri economics straight.