Greg Saichin joined Allianz Global Investors on 23 September 2013 to build a new emerging market debt business. A 26-year veteran of the asset class, here is his personal reflection on the journey and his hopes for the future.
“I walked through the doors of Allianz Global Investors for the first time last September with a sense that big things were about to happen. The company had energy and momentum following its transformation to a single brand and I was excited and proud to be asked to create a new business in this challenging asset class that I know and love.
The so-called taper tantrum was still fresh in my mind, but I was confident in my plan to assemble a team of experienced portfolio managers, credit analysts and traders, who would be able to protect and build value for clients when US interest rates finally rise. Twelve months on, I can tell you that the team has exceeded my expectations and I am still more than a little surprised at how far we have come in so short a space of time. One year at AllianzGI has been like four or five years anywhere else!
Let me share with you some of the important milestones from our journey so far.
The first challenge came for me and my colleagues, Oleksiy Soroka and Zeke Diwan, when we took over management of the Allianz Emerging Markets Bond strategy just three months after entering the company. By April 2014, we had been joined by a further five professionals – Naveen Kunam, Shahzad Hasan, Vlad Andryushchenko, Eoghan McDonagh and Daniel Haas we launched three new funds to extend the global EMD coverage and complete the first stage of my strategic plan. We launched a fourth fund in the US at the beginning of September, taking total assets under management to an impressive US$1.8bn. I could not be more pleased with this progress, but this is just the beginning of a very ambitious plan to make Allianz Global Investors a benchmark in global emerging markets debt management.
We are sovereign specialists and credit experts, who combine top-down country analysis with bottom up credit research to construct portfolios across the entire EMD risk spectrum.
Emerging market debt is a vast, varied and at times volatile asset class that can deliver a valuable contribution to overall portfolios in the hands of experienced, specialist investors. Given this scale and complexity, I felt it was essential for Allianz GI to have a global presence augmented by decentralized decision making so that our regional teams are empowered to act in the interests of clients in real time.
Our coverage of Latin America, Emerging Asia and Central & Eastern Europe, the Middle East and Africa is hence driven out of New York, Hong Kong and London, where I am pleased to say that we are regarded as local investors, with all the privilege and credibility that status conveys.
Our investment process benefits from duality as well. We are sovereign specialists and credit experts, who combine top-down country analysis with bottom up credit research to construct portfolios across the entire EMD risk spectrum. How does this work in practice, I hear you say. Well, take Chinese real estate as an example.
Around 20 to 25 million people a year are moving from the Chinese countryside to the cities, requiring significant investment in urban infrastructure. Great sovereign angle. Yet, there is not enough public finance available for all these projects, which is where bottom up analysis of the private companies that have stepped up to fill the funding gap can be so invaluable.
Quite simply, you cannot afford to enter the sector through third level builders in third tier cities without a firm conviction. In this context, we look for well-run companies that can pre-fund cash flows throughout the lifecycle of a construction project, usually because they have existing credit lines and a strong relationship with local banks. They must also have a track-record of delivering projects on time and be on good terms with the local authorities, which are influential if not key to this entire sector.
Another example of personal relevance to me, is my native Argentina. I have anticipated that it would default twice in the last 13 years and I cut my exposure to zero ahead of both occasions. A money manager needs to understand the emotional drivers that may impact investment decisions and flows in the wider markets without falling victim to such influence himself. This was an example, however, of how the diverse cultural backgrounds in our team give us a unique insight into how events will unfold in a particular country. On both those occasions, the market thought that Argentina would avoid a default, and on both occasions I knew the market was wrong! Similarly, in the CEEMEA region, we took early action to diversify away from Russia before the full extent of the country’s involvement in Ukraine had unfolded. As a native of Ukraine, Oleksiy’s cultural insight was crucial to that decision.
AllianzGI’s EMD team has achieved a huge amount in a short space of time, but we have ambitions to do far more in the years to come. In 2015, we plan to further refine our investment process to ultimately scale up conviction ideas into multiple client solutions. As much as I am proud of what we have achieved, I am even more enthused about what we will do in the year ahead.”