A Deep Dive into Emerging Markets Value Investing with Christine Phillpotts

From Concert Pianist to Emerging Markets Guru

Christine Phillpotts' path to becoming a leading emerging markets value investor at Ariel Investments wasn't a straight line. Initially dreaming of a career as a concert pianist, a scholarship program at Chase Bank sparked an unexpected interest in finance. This led her to Columbia University for economics and psychology, where an independent study on cognitive psychology ignited a fascination with behavioral economics.

“If everyone's going in route one, I want to go in route two, three, and four,” says Phillpotts, explaining her draw to less efficient markets.

Navigating the Financial Crisis and the Rise of Impact Investing

Phillpotts' time at Morgan Stanley during the 2008 financial crisis provided a front-row seat to market mayhem. Working on the convertible debt desk, she witnessed the market's volatility firsthand. Later, at the Grassroots Business Fund, she focused on impact investing in emerging markets, traveling extensively through Sub-Saharan Africa, Latin America, India, and Southeast Asia.

Emerging Markets vs. Frontier Markets: Untapped Potential

Phillpotts specializes in identifying opportunities in emerging and frontier markets, leveraging market inefficiencies to generate alpha. She clarifies the distinction between these markets, emphasizing the importance of factors like liquidity, market mechanisms, and overall depth.

“The benefits of the inefficiencies in emerging markets are that much more magnified for frontier markets,” Phillpotts explains.

China: A Compelling Opportunity Amidst Complexity

Despite the complexities of investing in China, Phillpotts views it as a significant opportunity. Focusing on bottoms-up analysis and aligning with the government's long-term goals are crucial for mitigating risk.

India and Southeast Asia: A Tale of Two Growth Stories

While acknowledging India's strong economic growth, Phillpotts believes the market is currently priced to perfection. She sees greater value in Southeast Asian markets like Vietnam and the Philippines, which offer similar growth prospects at more compelling valuations.

The Ariel Investments Philosophy: Slow and Steady Wins the Race

Phillpotts' move to Ariel Investments aligns with her long-term, value-oriented approach. She appreciates the firm's patience and focus on building businesses for the long haul.

“We were strategy number four at Ariel... You could say that Ariel is adding a new strategy once a decade,” says Phillpotts.

Advice for Aspiring Investors: Embrace the Obstacles

Phillpotts encourages aspiring investors to embrace obstacles and learn from mistakes. She also emphasizes the importance of saying "yes" to new opportunities and developing a creative approach to gathering information.

“You need to let go of [perfectionism] and just kind of understand you will be wrong,” she advises.