Hunting growth on the frontiers as the West sinks deep into solipsism

PLAMEN Monovski doesn’t immediately come across as an aggressive investor in some of the world’s least explored markets. He sits almost demurely at a table overlooking a sunny, 12th-floor view of the City, sipping a cappuccino and speaking in genteel, accented tones, often punctuated by a mild smile.

But don’t be fooled. Monovski has been working as chief investment officer (CIO) at Renaissance Asset Managers – the wealth management arm of the Moscow-based Renaissance Group – only since February and has already overseen a bold raft of fund launches. October’s lineup includes two African equity funds and at least two more to come in Eastern European stocks and Russian debt.

“I was saying in 2004 that emerging markets will be a better place to invest – that they will be less risky,” he says. But with the housing boom in full swing, few wanted to hear about risks in the west. At the time, this soft-spoken Bulgarian was managing BlackRock’s emerging Europe fund and I ask why he would have understood the relative risks of different regional investments before others.

“I saw that in emerging markets, people wanted to live better and were prepared to do anything to get there,” he says, a note of intensity entering his voice. “Here, there is a sense of entitlement, that simply because you’re born here, you’re better – you’re more educated, you’re better dressed, you deserve a living. But people always underestimate the human factor: you should invest in a place where people will work hard.”

As we speak, it becomes clear that this is part of a damning critique of western economic vitality. Monovski laments that the financial crisis has shown how poor regulation is eroding the competitiveness of advanced economies: “After the crisis, the developed world went into widespread Keynesian behaviour of dubious effectiveness, flooding the markets with liquidity. The emerging market world responded with supply-side economics, measures that are long-term and capital-friendly. It understood that you need to earn more money, not redistribute what you do not have.”

And then there’s “the human factor”: “Such a large part of the population here is
dependent on the state. They have no aspiration and think they are entitled to be given a living.”

To his mind, it makes no sense to put money in countries where the population is
determined to tax and regulate large-scale wealth creation into the ground. Instead, he is convinced that the developing world is the place to be – specifically, areas like African “frontier” equities. But why is now the time to buy into these markets, given ill-fated previous attempts like New Star’s “Heart of Africa” fund?

“Then, prices were too high. But since the crisis in 2008, asset prices have stayed low in Africa – they didn’t recover in 2009. There has been growth in the mean time, but not in equity.” Instead, he says, African earners are putting their money into bank accounts and bonds, creating a fledgling credit market that will contribute to growth. And with infrastructure projects already underway in dozens of countries, including a huge modernisation drive in Russia, Monovski is optimistic.

Most investors would raise an eyebrow at the idea of putting money into Nigerian power generation or quasi-state operations in Russia, but Monovski dismisses the mainstream as overly obsessed with political risk in the developing world: “There is risk in every investment; emerging markets are where it’s priced in,” he says. “And when people talk about political risk, they never talk about what Obama did to BP. They never talk about a 50 per cent tax rate driving business offshore.”

He believes that there are some risks worth taking, in other words, and others that speak to a long-term degeneration in economic fundamentals. As advanced economies struggle to jumpstart growth by firing up the printing presses, Monovski is not hopeful: “An economy is like a household: right now, the mum and dad have lost their job and the kids are wondering what to buy on the credit card,” he says, shaking his head. “I fear that the ability of the West to adapt and reinvent itself is being lost for a long time.”

CV | PLAMEN MONOVSKI

Age: 40
Lives: London
Education: Masters in finance from the London School of Economics
Career:
1997 – Mercury Asset Management, Eastern European team
1998 – continued at Merrill Lynch Investment Managers, which bought Mercury Asset Management in December 1997
2006 – BlackRock and Merrill Lynch Investment Managers merge. At BlackRock, Monovski co-managed the BlackRock’s flagship Emerging Europe Fund, which peaked at $9bn in assets under management.
2009 – left BlackRock
2010 – joined Renaissance Asset Managers as CIO