Investing Billions - E327: $7B CIO: The Right Way to Invest in Emerging Markets

Episode Date: March 18, 2026

What if emerging markets aren’t a trap, but most investors just approach them wrong? In this episode, I sit down with Robert Koenigsberger, Founder and CIO of Gramercy, to explore how he has built a $7 billion emerging markets platform by focusing on high conviction, structured private credit, and long-term partnerships. After nearly four decades in emerging markets, Robert has pioneered strategies that capture the upside while managing risk, proving that careful underwriting, local knowledge, and disciplined execution outperform passive index approaches.

Robert, you're a founder and CIO of a $7 billion fund focused on emerging markets. Everybody that I've ever met tells me emerging markets is a trap. Why is emerging markets not a trap? Look, I think that's a great question. And I think people perceive it to be a trap because of the way that they've approached the asset class. And what I mean by that is I think most investors have thought of emerging markets more of an afterthought and more of a yes, no, digital, should I do it or should I not do it as opposed to how it should do it. So what do they end up doing?

and they end up kind of buying the wrong thing at the wrong time. They stick with it for too long. They capitulate and they blame it on the asset class. But that's not necessarily how they invest in developed markets. In developed markets, they think about where do I want to be? Where do I want to be in fixed income? Do I want to be in equity? Do I want to be in growth?

Do I want to be in value? But in EM, it just seems to be yes, no. Or they'll go and do one investment in one country. It doesn't work out. And they say the entire asset class makes no sense to them. I invest in Indonesia. Emerging markets doesn't work. I mean, there's been times where, you know,

someone will say give an example of, somewhere you're working right now and say, oh, we're working in Turkey right now. They're, oh, Turkey? Would never invest there. I was like, well, let me guess. You did one private equity investment. The currency was at 1.5. Today it's at 43.

The company's in great shape, but you're not. He said, exactly. They said, well, that's about how to do the asset class, not if to do the asset class. Because at the same time, you probably could have conned and done a private credit, structured loan in U.S. dollar, gotten collateral, uncorrelated collateral, and not needed some sort of super monetization event to get your capital back. So, look, I just think. It's all about how people do it.

And they tend to come in late cycle, and they come in with very low conviction. And when does low conviction ever work out? It's absurd if somebody did that to the US, they would invest into some factory in Ohio, and then they would say the United States doesn't work. People do that for emerging markets. When we last chatted, you said that emerging market indices have done more harm to emerging markets than almost anything. Why is that?

Let's continue on the last concept, which is now someone's made up their mind to go into the market. And quite frankly, they're usually chasing last year's returns when they do it. And they look at an index and then they buy some sort of index tracker. So they've made their decision probably later than they should have. And by definition, when you go into an index, you're going into low conviction, right? You're buying what somebody else told you to buy. In our case, an emerging market debt, it's JPMorgan, right? So they create the JPMorgan, Emerging Market Bond Index.

And it does some really bad things to investors, right? So when I started Gramercy back in 1998-99, Argentina was 18% of the index. we were already writing research about the coming default in Argentina. Why the heck is it safe to be market neutral or benchmark neutral Argentina at 8, 9 or whatever? And you can say that was a long time ago, but in 22, the same index forced you to own Russia and Ukraine just as Russia was invading Ukraine. The issue is that these indices are just completely passive? What's the issue exactly? By definition, when you buy an index, you don't buy what you've necessarily decided you want to buy.

You've decided what someone else should tell you that you should own. But then, look, I get the whole ETF effect in developed markets. I don't get it in emerging markets. And what I mean by that is if you look at the last five years in emerging markets debt, the index, the blended index has maybe done an average of eight or, not an average, probably eight or nine percent total return over that period. Over that five years, the dispersion of outcomes within that index have been down 95% and plus 200%. So to me, that seems like an environment that a bare minimum is target rich for active management

or another way you're somewhere between negligent and grossly negligent to take that approach as opposed to a high conviction approach. What's the right way to approach emerging markets and what has worked? I'll start with the notion of high conviction. And the emerging market story over the past 20, 25 years, if you were Rip Van Winkle actually came true, right, which is you've got these upwardly mobile economies, populations, GDP growth, and you've had better returns than the U.S. comparable risk elsewhere. The challenge is that you've got these upwardly mobile economies, populations, The challenge has been is that people haven't been Rit Van Winkle. They have been trapped by the cycles that have occurred within emerging markets.

And each of these cycles has had a name, right? So dislocation events. One was called the tequila crisis. Then we had the Asian debt crisis. Then we had the Barca crisis. Then we had the Campania crisis. Then we had the Tangu crisis in Argentina. Then we had the global financial crisis.

You would think that a monkey could figure out how to allocate and trade into this market. There's very identifiable cycles that have occurred. But people have done this strange dance between fear and fear of missing out. So last year was a great year for emerging market debt and quite frankly for local markets and emerging markets. What do people want to buy this year? Local emerging market debt. The FOMO has kicked back in. And what will happen is people will allocate to the wrong thing. There'll be a gap. They'll capitulate and they'll blame it on the asset class. So how should you do this? Take a high conviction approach. Try and capture the return that's embedded in the asset class, but avoid the downside that has become embedded in people's mind. The behavioral mistakes that people have made. So take a top down and bottom's approach.

I call it like a barbell. Anchor the barbell in high conviction yield. So once you have high conviction yield that comes from your single best ideas, underwrite everything you own, underwrite everything you don't own, and what you don't own is equally important. And then when you have high yield, the opportunity cost to move away and make the other mistakes that people have made,

which is people tend to buy distressed when it's not distressed and opportunistic when it's not opportunistic in special situations when they're not special. And David, that's because they don't really have the conviction on the other side of the barbell. And they get shaken out of volatility really quickly. If you don't have conviction, you end up capitulating. One of the hardest things of investing is seeing what's shifting before everyone else does.

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Check it out for yourself at Alpha-Sense, dot com slash how I invest. This rooted thesis that I talk a lot about, which is everybody wants to know when to buy an asset. They never want to know the thesis. And the reason that's a problem, best example of this is Bitcoin. If I had come to you in 2011, told you to buy it for $40, it went up to $100, then it went up to $200 and you sold.

Great. You would have gone to 5x if you didn't have a fundamental thesis. But if you had held it, if you had a fundamental thesis, you'd be up $1,000, $200,000. A lot of people don't think about the second order effects of having a rooted thesis. It's not only keeps you from selling when the asset goes down. It also keeps you from selling when the asset goes up. You just have a fundamental view on asset. I couldn't believe more.

I mean, we call that something different here. We call that planning the trade and training the plan. And so when you underwrite something, you say, this is where I want to buy it. This is where I think there's value. And because of the thesis, this is where I think I should exit it. So what do people typically do? As it approaches their target, they talk themselves out of it because volatility has made them rethink it. And when it's well below their actual target, they tend to sell too early.

So we like to do what I call the happy trade, not the grumpy trade. Plan three levels on the way in and plan three levels on the way out. So what does that mean? I want to own the saying at X. Well, I should get myself from an own it at Y and Z because there's all sorts of reasons. I'm not smart enough to pick the bottom. But what a lot of investors do is they wait for X. X doesn't come and they miss the trade.

So for us, it's plan the trade, buy it in three levels. If I buy it after the first level and it keeps going down, I'm happy. But if it grips, I'm happy as well. The worst thing is the grumpy trade where you did nothing. And I think that's a derivation of what you're talking about, which is, you know, people took all the risk. They said, I think it's worth X and I should get out at Z. But they change your mind at Y.

Not because any information changed. They just, their psychology changed. You have the job of deploying $7 billion into emerging markets. How do you go about investing that and tell me about your first principles? This is an asset class where you should come in with high conviction. We like to think about this asset class, less about beta and more about how you get returns. It's a place to go and get returns. It's a lonely place.

I think people put too much emphasis on liquidity in this market. So the idea that the safe way to emerging markets is through liquid emerging market debt. liquid fixed income. It's like the gateway drug to emerging markets. And then everybody buys it and what do they find out? One, they didn't really need the liquidity because a lot of allocators, pension funds that have been on your show, what have you, they make a decision. It's strategic, right? We're going to be two, three, four percent for a long time. And if we change our mind, it'll take two years. But they park all their money in T plus one. Right. So number one is the liquidity is not there when you want it, but the opportunity cost for parking and liquidity when you

don't need it is too high. And what do I mean by that? Where we see a lot better return potential is in structured private credit in emerging markets, two, three year duration paper, not one year, but you can get a thousand basis points over what liquid's getting you, and you get more return, you get less risk, and you explicitly give up some liquidity,

not a lot, and you get handsomely paid for it. I think that to us is what is one of the most interesting opportunities in emerging markets today. Give me an example of this kind of investment. If you were buying the index, you would buy Mexico,

and one of the things you would buy in Mexico, buy in Mexico is a company called Pemex, which is the quasi sovereign oil and gas company of Mexico. And over the past few years, if you had purchased short duration bonds in Pemex, you'd get about 5, 6% yield. But what do you get and what do you not get? So when you buy a bond, how is it baked? So the way of bonds underwritten in our market is, J.P. Morgan or some bank calls you at 815. They say, we're doing a billion dollar deal for Pemex. It's 10 times over subscribers. how much do you want. So there's no opportunity to get your DNA on the establishment of that credit at all. And by the way, it comes with a bond trustee, which isn't really there for bondholders,

that are there for themselves, and it has a collective action clause. So what does that mean? You don't bake the credit and you don't have the opportunity to work it out because of the collective action clause. You get forced into what others want. And for all that, you get 5% or 6% and it's liquid, except for when you need liquidity in these dislocations that I talked about before. An alternative would be we lend to suppliers of PEMEX. People will lay the pipes or build the platforms or whatever it may be, we get correlated collateral, which is a receivable from PEMX itself, and then we get uncorrelated collateral, things that have nothing to do with the business, shopping malls, real estate, whatever the family groups may have. And we're coming

in at like a thousand basis points over that, like 16, 17%. This is 12 to 18 month paper. We're not talking about 10-year infrastructure paper or what have you. It's advertising. It's not pick. It's cash pay, et cetera. So give up 12 to 18 months of liquidity, pick up 1,000 basis points. pick up collateral and pick up on correlated collateral, I think that's a tradeoff we're supposed to do all day long. Tell me about your philosophy on currency risk. Do you always hedge it out? Is there sometimes times to take it on?

I'll say that generally that we look at currencies in emerging markets is nothing more than opportunistic from time to time. There's distress. Now, we run a lot of different return streams. We have fixed income, private credit, special situations, whatever may be. So if I think about it from a private credit, which we just talked about, the PAMX loan, We're going to lend in US dollars. If not in US dollars, it's going to be Paisos hedgeback to dollars.

If one's getting mid-teens returns in dollars and you can mitigate that currency risk, why take it? It just adds another layer of risk that's unnecessary. Another layer of risk that's unnecessary. And to your point, what's the thesis? What's the target return? And what's the safest path to that target return? So if target returns mid-teens and you can get that in dollars and get collateral on correlated collateral, the currency just becomes noise.

And let's talk about private equity in emerging markets, and that's kind of the Turkish example I gave you a moment ago. When you buy private equity in emerging markets, you commit to something for 10 years, and you have currency headwind in your face the entire time. And over 10 years, why take that risk when you can lend in dollars, get private equity type returns? Like a private equity manager will say, well, I got you a moik.

They like to talk moik, two, three times moik. well, you give me money for 10 years, I'll get you money too, right? But if you look at their IRAs, right, the IRAs that we're putting up, the yields that we're getting in private credit in short duration and then turn it over and over again, well, it's just keep to take our number for 10 years. It's more than three times, right? Why take that extra risk? People talk about assets as if they're priced, but there's always supply and demand dynamics.

Once some asset gets really out of favor, the price goes to a price where it's very favorable to come in. You were talking about people do the exact opposite. They ride momentum versus trying to go in. for value. Is that why this trade exists in that there's not many investors that want to own suppliers to Pemex? A couple things. I mean, I think private credit emerging markets today, like we talked about in the case of Pemex, you're typically, you want to be solving for market failure, and you want to be getting paid for market failure. And I think that's what developed market

private credit was doing in the U.S. in 2009 and 2010. The market failure was the sucking sound of capital that left the banks, the proprietary capital, that was no longer available. to be lent out. Well, we've seen that in places like Mexico and Turkey and whatever it may be, which is, you know, if you go to a place like Mexico and Pemex, you know, the bond investors are buying bonds. Banks are being told that they have to lend seniors secured locally and they don't really have the capacity for the supplier credits. They're lending directly. You know, they use up their entire line on Pemex direct, not on the Pemex suppliers. There's nobody left to lend despite the collateral that's there. If I go to Turkey, 2018, you know, we were getting like high team.

returns in dollars, LTVs of like 33%, gas stations, shopping malls, land at the new airport as our collateral. And why were we getting that? Because Turkey was in the midst of a financial crisis and banks were being told they can no longer lend. And we were able to find borrowers that had great assets, and mismatches between those assets and the libelers that they had created for themselves. And we had one borrower. They were a supplier. They would take post-dated checks for their product. We call post-dated checks. They called that. commercial paper, January, February, March, April. And then they would take all those checks and they would go to a bank and they would factor them. Well, in the midst of a financial crisis,

the bank stopped funding. So all of a sudden, they've got these liabilities and they can no longer turn their assets into cash. So we're able to turn the assets into cash and rely upon the value of the assets. Start the conversation talking about how absurd it is to group all emerging markets as one trade, Turkey, Indonesia, and other countries. But at the same token, aren't each of these markets very specialized, have specific relationship networks, specific diligence. How are you able to have a fund that focuses on all of emerging managers? When you want more, you start your business with Northwest registered agent.

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See Experian.com for details. You have to be able to approach the asset class both top down and bottoms up. And the bottoms up for us, which is missing in that question is we have local teams throughout emerging markets. So I want to talk about a private credit alone to Pemex. We have a partner in Mexico who's dedicated to us, who has nearly 100 employees on the ground, engineers and what have you, that are focused on the supplier credits that we're dealing in Mexico.

Now, we don't give them the investment decision, nor do we simply pay them to source credit. We require that they co-invest alongside with us. So we have lending platforms in places like Mexico, Brazil, Peru, Turkey, Africa, et cetera. And the cool thing about lending platforms and local presence is information in emerging markets, doesn't know if it's long only or alternative in nature. It's just information. So one needs to be properly set up to capture that information. So go back to Pemex's example,

when COVID hit and oil went to negative 30 or 40 or whatever it was, well, the bonds at Pemex that I told you about that were issued at 5, 6%, you know, the longer duration bonds in Mexico went from par to like 50 cents. At the same time, our suppliers were paying us. So we knew that Pemex was paying our suppliers and our suppliers were paying us. So this wasn't a fundamental issue. There was something technical going on in the market. Now, our private credit team could just sit on that. But of course, we have an open architecture to capture this information. They're like, hey, by the way, we're getting paid on our credits. There's not a fundamental issue in the oil sector in Mexico in 2020. We're getting paid. Well, that's informative to people

are doing other business elsewhere on the platform to understand that what they're seeing in New York is very different than what's happening in Mexico City. Tell me about your team. Are you focused on a couple countries and how do you deal with the cyclicality of emerging markets? How do you strategically place your team and your relationships? First of all, we have four major teams. So we have four different return streams and four teams. And that's different than some alternative credit shops. I mean, we made a decision nearly a decade ago to go from like a founder led firm with all the investment processing people around the founder to classic CIO PM construct, align the investment teams with the success of their product.

the performance of their product and what have you. So within our business, we have four individual strategy groups and four individual businesses. And the cool thing is they tend to be very uncorrelated to each other. So what's going on in public credit can be very different than private credit and special situations are kind of uncorrelated to both.

So one is the way that we're organized. So each one of those teams will have portfolio managers, internally, analysts internally, lawyers internally. I mean, this is a very legal intensive business. But then we also have our platform partners I mentioned close to 100 in Mexico, 35 in Turkey, another 20 in Peru, whatever it may be, that are essential.

But even that's not enough. I think a big differentiator for us is we've been around as a team for 28 years. We've been in EM, 35, 40 years, depending on who in the business you're talking to. And we grew up before emerging markets emerged. We were involved when emerging markets was a lesser developed country debt crisis. And so much of the region was in default. And our expertise back then was run how do you put Humpty Dumpty back together again? Well, in order to do so, you needed a U.S.

lawyer, a U.S. financial advisor, a local FAA, and a local legal advisor. Well, that network remains with us today. So having a great team in Greenwich, Connecticut, and London, and Buenos Aires, and Mexico City is great. Having great platform partners is great, but having a network of relationships for 35 plus years that can give you color on people. And David, I think one of the big differentiators of emerging market credit versus developed market credit is in developed market credit, you have to figure out

where are you in the capital structure? What judge do you get? And what did he or she have for lunch to determine your outcome of bankruptcy? In emerging markets, we have to underwrite people. We have to underwrite all the credit and where you want to be the capital structure, the structure and what have you underwrite people first. Who are we lending to? What's their credit culture and how they behaved in times addressed in the past to predict how they're going to behave in the future? That's where we start. Because ultimately, of course, contracts matter and structure matters and jurisdiction matters, but it only matters when you get the people wrong. Because if you underwrite people properly, all that secondary, that spells a suspended.

Why is it that people are even more important than the jurisdiction, the paper, the laws? Because credit is about the ability and willingness for someone to pay you. Ability is pretty easy to figure out, right? Financial analysis and da-da-da-da-da. The willingness, like you can work with someone who's lacking ability. You cannot work with someone who's lacking willingness. Right? So you have to have people of good character who have a credit culture that's supportive of credit, not just jurisdiction, but the way people behave. And then evidence of how they and that culture behaved in times addressed in the past. So we do things like, and maybe we over over screen with these biases, but we'll talk about, we think Columbia has a credit culture, a culture of a payment. And they pride themselves in the fact that when the rest of Latin America was in default in the 1980s, they weren't. They paid. Mexico has a culture of collection.

If you work the credit, you'll get paid. There's all sorts of different levels of how to collect upon that credit. There's other countries where I would say credit is an oxymoron. I'm thinking one in particular where you're not even allowed in the courtroom as a creditor when there's a bankruptcy proceeding and you wake up in the morning and read what you got. We're just not interested. So that's the people part of it. And I've been doing this for 38 years and a younger analyst will come in and talk about,

you know, Mr. or Miss ABC and Y country. I'm like, whoa, you know, let me tell you story. Let me tell you how they behaved in the past. Or let me give you the names of some people locally that we've dealt with who know those people really well because it matters. Sometimes I wonder if developed market credit is people agnostic. We cannot be people agnostic.

One of the difficulties of emerging markets and also arguably the opportunity is the geopolitical risk of the specific country. Do you just go risk off on certain countries? And when do you decide whether you're doing any opportunities in a country? Or is there always an opportunity that you'll take for the right return? It's talking about geopolitics, starting to think about the top-down, how macro is affecting what we're doing. And we're clearly not a macro shop. I have the good fortune of working with someone who I think is the most brilliant top-down decoder in the world.

That's Muhammad. And with Muhammad, we have institutionalized the process to help answer that question, which is, we want to make sure that our top-down is informing our portfolios. influence in our portfolios and from time to time imposing a view on those portfolios. And early on in my career, I didn't have the confidence as the CIO to go and impose and say, you can't be in that country because I think I know it better than you do.

Well, when you institutionalize a process for that, it's not about individuals, it's about the process. So another way thinking about this is, you know, when you're strictly a bottoms-up shop, you need to make sure that you don't buy good homes and bad neighborhoods. So what we do is we marry the top-down with the bottoms-up, And every so often we impose a view. And I can give you one example.

At the end of 2019, early 2020, if you recall, everything seemed overbought. Nobody knew what to do with their cash, maybe a little bit like today's environment. So much FOMO, like there's no value, but felt like musical chairs, but not ready to get off yet. And we wrote a piece about the coming dislocation in emerging market debt. And we said to people, you know, batten down the hatches, but don't be afraid to buy the next dislocation in emerging markets. And lo and behold, it came. It was COVID, right? And everybody told us in 2019, thanks.

Great. Give us a call. When the next to this location comes, we're ready, we have tons of cash. Well, nobody listened to batten down the hatches and nobody listened to March of 2020. I had nothing better to do than call them. And they kept saying things like, oh, this sounds great, but we're super busy and we can't get to this until July or maybe the October board meeting and they miss everything. I think one of the most underrated things in private markets is LP base. I think LPs can make or break a fund.

When you're dealing in something so volatile like emerging markets, how do you think about your LP base and where have you found product market fit between where you're investing the asset class and also your investors? We try not to convince people to buy emerging market risk. We try and convince people who already have emerging market risk to take a better approach to it. So I mentioned like, you know, pension funds, sovereign wealth funds, what have you. They made it as they made a decision to be in an asset class. So you don't have to convince them. You just have to convince them that maybe there's a more intelligent way to do it.

So, so that's one. Two, and probably, probably, I think it's really important that in order to meet and beat your client's expectations, you have to set those expectations properly and you have to educate them properly about what to expect when certain, certain things happen. When I think about optimization of LPs, and particularly as we moved our business, more from public credit to private credit over the last decade, you have to have a client that meets the liquidity provision that they're investing in. And I think this is pretty timely, look at some of the things that are going on domestic private credit today

and funds that are being gated or what have you. No one's talking about the underlying asset quality. They're talking about a mismatch that you have investors, retail investors who want out yesterday or tomorrow, and assets that aren't liquid till the day after tomorrow. So I think as you are constructing partnerships with LPs. Don't convince them to buy something that they're not comfortable with.

Try and talk to them about how to solve the problems that they've had in the asset class in the past. Make sure that they have the proper alignment between the assets that you're managing for them and liquidity. And I think the bias is really towards institutions, not retail. Two great points. You're not trying to sell emerging markets to LPs. You're essentially selling them alpha.

Don't just do beta. Beta is not good enough. Do alpha. So there's another, I believe you mentioned, a thousand base points for 10%. The second aspect is really partnering with your LP base and making sure that they have a prepared mind and setting the expectations with them ahead of time of what the asset class means, what the fluctuations means, and why that's actually an advantage and not disadvantage to your strategy. When it comes to your LP base, you've been running this for quite a while. How have you evolved your strategy and what are some lessons that you learned along the way? Our evolution has been anchored in the following, which is one, you always have to be responsive to what your clients are asking for today.

But you have to think about what they'll be asking for tomorrow or what you think they should be doing tomorrow. And emerging markets is rich with that opportunity to optimize along the way. You have to understand where there's opportunity today and where there isn't. And I think what we've learned in this asset class, if not all, is that if you don't evolve, you're going to die. And so we started as an emerging market distressed hedge fund in the late 1990s because that's where the opportunity that really was. It was in the patient going in and out of the emergency room and how do you put Humpty Dumpty back together again?

And if we could take our capital and our expertise, we could create alpha for our clients. When the financial crisis said in 2008, we stepped back and we said the entire world's distressed, should we just do NPLs in Portugal? Right now. That's not who we are. We bring nothing to the table in terms of expertise and doing NPLs in Portugal just because we did them in Mexico or whatever. At that point, we just kind of evolved towards what are our clients asking for. It's no longer just about to stress. They're asking for fixed income.

Maybe even a way that we don't think makes sense for us, but they're the clients. So we should give them what they're asking for today and say, hey, maybe there's a more intelligent way to do fixed income in the future. So we did things like give them US dollar and local, but we gave them corporate and corporate high yield. And then that gave us the ability to do blended strategies. And then more recently, we said, look, we didn't start doing private credit because Apollo and everybody else started doing it. We were doing private credit emerging markets because we think that's the right way to get returns from emerging markets for the reasons that we've discussed. Give up a little liquidity, get more return, take more risk. So it wasn't about that's where the

market's going in the U.S., and maybe we can make it go that way in emerging markets. It's like, that's the way to get returns in the asset class. So we evolved towards that. And then ultimately, you know, our latest and greatest, if you will, is if you have all the return streams, you can partner with your clients in those return streams, or you can run some sort of asset allocation on the top. So we also offer like a single best ideas concept for our clients to partner with us there. And that's not just about asset allocation. We've talked a little bit about asset allocation, but it's about governance. I think one of the challenges investors have had in emerging markets is they understand that being tactical is necessary, but they're not necessarily

set up to be tactical. And the example I gave before, which is, yeah, give me a call. Well, it takes them six months to make a decision. So when you create some sort of single best ideas, multi-asset up at the top, it gives the client the ability to underwrite you in the return streams once and then hold you responsible for making the right decisions. One of the things I see the smartest managers doing is what I would call a form of structural alpha, which is partnering with specific asset class to create specific products. I've had managers do that in the Taft-Hartley Act, pension funds, and insurance funds. Have you made specific products for specific verticals? Or is that not something that you do. So our private credit and our multi-asset was intended to be customized complement to the

emerging market debt that people were already doing. So the plain vanilla, the entry, the gateway drug that I mentioned before, we're like, look, there's a better approach. We're not telling you to go all or nothing, but you could complement that better, what you're doing with a better approach. So that was tailor-made towards pension funds, sovereign wealth funds, long-time allocators. You mentioned insurance. More recently, we have developed the rated note feeder, which is, a way to get a rating around the risk that you're managing and package it in a way that's efficient for the insurance companies. And that clearly came out of developed markets and the rated note feeder has been around for a while. But I think we're the first manager to do it in emerging

markets because we're one of the first to do private credit here. But we try to solve a problem that our clients in the insurance vertical were talking to us about. I've had a CIO of a $20 dollar asset management firm, talk about the need to have an anchor for a new strategy that they built out. Is that your North Star, if you could get a pension fund or a strategic partner to anchor? That's when you know you might have legs and new strategy. That's one of the things that you learn along the way, right? When you are myopically thinking about a market and the opportunities in the market, you may think about it very differently than the market than the LP market. So, you know, I think early on, we get so excited about an opportunity or return stream

whatever me that we would just put it together. And I kind of call it. it teenage behavior and then we would take it to market. Right. And then we grew up a little bit. We matured and we said, hey, and we did this through a series of strategic plans. And I remember one of them we said, we're not going to launch products without anchor investors. Now, that seems like lazy like, well, of course you shouldn't do that if you don't, you know, if you don't have that first investor. But for us, it was like, we wanted the first investor to validate the concept, but to help

develop the product because like we manage, we manage risk, we manage opportunity. go get alpha, but I can't tell you that how a state pension fund necessarily has to bring that in on their side. So a lot of what we've done, whether it was a multi-assant and SMA form, the private credit, we partnered with our LPs early on to not only try and increase the probability of our success, but to make sure, certain that we were solving a problem that they were trying to solve for. It's literally a marketplace. You have a strategy that you think is good and then you need something that has demand and you have to find something, co-centric circles. You find something that is both good and is good for the customer base.

David, I think it's a difference between sales and marketing, right? Like sales, you take what you have and you're trying to sell it to the market. Marketing is you're trying to understand what the market really needs and in our case, trying to develop that with them. You mentioned earlier on you don't look to educate people on emerging markets. Is that a rule you ever break? So let me clarify if I said it incorrectly. It's not that we don't want to educate. We don't want to convince them to take a risk that they're not comfortable with. We're all about education and there's so much content and so much material that we have on our platform that we probably take for granted that we're trying to purposely

go out there and cascade it to our clients so they understand whether it's a top-down macro meeting that's become a weekly for our clients or a quarterly for our clients or whatever may be. But we definitely want to educate our clients. Again, if you're going to meet and beat their expectations, you have to properly educate them. have to properly set those expectations. So it's an education that goes from, as we talked about before, not yes or no, but how.

We have to teach them about the cycles that have been embedded in this asset class. We talked a little bit about that, tequila crisis, vodka crisis, company, in your crisis, and why once you continue to expect cycles, what the cause and the effect of those cycles have been. And we have to unpack other risks that we talked about, which is in the end we need to talk about political risk

and currency risk and governance and liquidity. So I don't know, I don't want to leave you with the impression that we don't want to educate our clients. I'm uncomfortable trying to convince someone to do something that they're not comfortable with. My point there before was there are hundreds of billions of dollars that are already comfortable with emerging markets and what I would call the suboptimal approach. I'd like to talk to them and educate them about a better approach. It's a thin line between finding people that are sold on emerging markets, but not yet sold on necessarily how you access it.

Correct. Have it be a compliment and optimization of something you're doing as a opposed to something novel that you've never done. When it comes to emerging markets, is there a frequent aha moment where investors like, oh, now I get it? And if so, what is that? I think the aha moment that we've seen recently is around this notion of high conviction. I mean, when you talk to people about the last 20 years has all been about moving towards passive, right? And emerging markets got pulled into that as well. And yes, you know, paying 20 basis points is better than paying 200 basis points or paying.

paying 15 is better than 150. But I think the aha moment for people is starting to focus on what's the net return that I'm getting relative to the risk that I'm taking? If you could go back to 1998 when you had just first started Gramer C, what is one piece of timeless advice you'd give a younger Robert that would have helped you either accelerate your career or help you avoid custom mistakes? If I can only choose one, I would seek mentorship early and often. And, you know, I mentor a lot of young people.

I mentor mid-level career people. I myself am getting mentored. I wish I had taken that advice much earlier. I think there's this notion that when people graduate from undergraduate or graduate school, that somehow they're baked and they're done and we're supposed to know everything. And the reality is we know very little at that point. And there are always people who have the wisdom and the ability and desire to be mentors that can help you accelerate what you're trying to do. and you can learn from their mistakes

as opposed to make the same mistakes they made. So definitely seeking mentorship early and often. Is that an ego thing? Is that a fear of rejection? Is that a lack of skills? What caused you not to seek mentorship? I think it was thinking that I would be annoying people. Like I probably didn't really realize.

Being considerate. Being considerate, right? Like does that person really have time for me? And the answer was, yeah, they did. People do want to help. Right. And they particularly when they like if you have a story, right, like in what did we do? We, we came into a market, but we were entrepreneurs. We built a business, right? And we had a story behind that business and it had all sorts of fun narratives to that. People, people really got

excited about that. And I wish that, you know, I wish that I had sought that mentorship earlier. Said another way by not seeking mentorship. You're oftentimes robbing the other person from, from their mentorship, from them giving back and giving back to the next generation. Yeah, absolutely. And I mentor a young man today, and I learn more from him than he learns from me. We go back and forth, and I'm learning about the way that his generation thinks about things,

and he's learning, getting hopefully some wisdom from me, but I really enjoy it because it's like being on a board. Like you can be on a board, people think you're on a board to provide wisdom. But actually, when I sit on a board is like, wow. Like, what I learned on board A, I can definitely apply to board B. And it probably applies to Gramercy as well. Well, Robert, this has been an absolute masterclass. Thanks so much for jumping on.

Thank you. Appreciate it. If you found this conversation valuable, please click follow how I invest so that you don't miss the next episode with the world's top investors.