Volume 3, No. 1 2007 Greenwich Roundtable Exploring New Quarterly Frontiers Of Investing Issues And Outlook On Emerging Markets Investing 4 Robert Citrone, Discovery Capital Management LLC Ronald G. Percival, RGP Investment Advisors LLC Lucia Skwarek, Greylock Capital Management LLC 1557-2390 (200701) 03:01 China: Sleeping Beauty Or Waking Giant 14 Jim Rogers, Adventure Capital The Last Frontier: Africa, 17 The Middle East, And Eastern Europe John Niepold, Emerging Markets Management, LLC Regional Perspectives 21 In Equity Investing: Europe John Bennett, Global Asset Management James Kester, Allianz Group India: Bengal Tiger 27 Or Bureaucratic Elephant? Samir Arora, Helios Strategic Fund Ashish Dhawan, ChrysCapital Frank Wisner, American International Group, Inc. The Outlook On Investing 37 In Latin America Peter Gruber, Globalvest Management Company, LP Ernesto Zedillo, Center for the Study of Globalization, Yale University Russia Now: Fool’s Gold Or El Dorado? 44 Marshall Goldman, Wellesley College & Harvard University George Siguler, Siguler Guff & Co. Frank Mosier, Kazimir Partners TheGreenwich Roundtable he Roundtable operates as an intellectual cooperative for the alternative investment T community. In general, its 120 regular We are a not-for-profit members are institutional and private investors. research and educational In addition to regular members, associate member- organization located in ships are available and are designed as a web-based membership intended for those qualified investors Greenwich, Connecticut for who reside 75 miles beyond Greenwich, Connecticut. Candidates for associate membership must be actively investors who allocate capital allocating capital to alternative investments, or be an advisor. Associate members have access to the to alternative investments. Greenwich Roundtable website with audio recordings, written transcriptions and summaries of symposiums, as well as Standard & Poor’s Greenwich Roundtable Most importantly, the password-protected library Quarterly, the Roundtable Newsletter and the Best of audio transcripts is considered the largest Practices in Hedge Fund Investing series. We extend audio database of alternative investment to associate members invitations to our monthly discussions. We encourage you to submit an symposiums on a space-available basis and every application for associate membership by visiting Founders Council evening session. www.greenwichroundtable.org. Standard & Poor’s Greenwich Roundtable Quarterly Managing Editor Alex Poletsky [email protected] Standard & Poor’s Greenwich Roundtable Quarterly is published quarterly. Annual subscription: $499.00. Reproduction in whole or in part prohibited except by permission of Standard & Poor’s and Greenwich Roundtable Inc. Standard & Poor’s is a division of The McGraw-Hill Companies. Officers of The Greenwich Roundtable Advisors McGraw-Hill Companies, Inc.: Harold W. McGraw, III, Chairman, President, and Chief Executive Officer; Kenneth M. Vittor, Executive Vice President and Frederick L. Baker III General Counsel; Robert J. Bahash, Executive Vice President and Chief Financial Officer; Frank Penglase, Senior Vice President, Treasury Operations. Susan Benjamin Board of Trustees of the Greenwich Roundtable Inc.: Stephen Bondi, Asset Alliance Corporation; John Griswold, Commundfund Group; Edgar Barksdale, Federal Street Partners; Peter Lawrence, FLAG Venture Partners; Stephen McMenamin, Indian Harbor LLC; Marc Goodman, Kenmar Advisory Corporation; Editor Ken Shewer, Kenmar Advisory Corporation; William Brown, UBS Alternative and Quantitative Investments. 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Neither S&P nor GR warrants that the content of this publication is based on reasonable assumptions, and they hereby expressly disclaim responsibility and liability for any loss or damage arising out of the use of, or any reliance on, this publication. ISSN 1557-2390 Each article’s content was composed by the author specified, and any opinions and advice expressed herein are solely those of the author and not of S&P or GR. This publication is intended for the exclusive use of sophisticated investors or qualified purchasers, as defined under federal and state securities laws. This Visit the Greenwich Roundtable Inc. website: publication does not constitute an offer or recommendation to buy or sell any fund, security, structured product, futures contract, or other investment product. www.greenwichroundtable.org This document should not be used or relied upon by anyone as the basis for an investment decision, and any investments made in whole or in part by a party in reliance on this publication is made at the investing party’s sole risk. In no event shall S&P or GR have any liability for costs, fees, or any losses arising out of any errors or omissions in the data or other information that is contained in this document. Introduction Emerging Markets Redux nside this issue of Stanrard & Poor’s Greenwich Roundtable Quarterly, we explore the Iemerging markets. We began our (re)exploration of these underdeveloped markets in the fall of 2002. The chill of 9/11, the bursting bubble, and a U.S. recession were beginning to lose their grip on our psychology. We began to contemplate asset classes or marketplaces that might begin to repair the damage our portfolios had suffered after the fall. Some were predicting a rally in U.S. stocks and some began to look for inefficient pricing in more unconventional markets. Russia was singing its siren song again. Brazil had new prospects for the seasoned investor. China was rumored to be in the midst of an historic economic revolution. And English-speaking India with her billions was also rumored to be on the verge of taking off. It was too tempting to ignore. In China, we were treated to an eye-opening recitation of the unusual opportunities and the many risks that confront foreign investors. Jim Rogers, often called the Indiana Jones of invest- ing, continued the bullish drumbeat he first started in 1996. In Russia, oil and inefficient busi- nesses seemed to be the opportunity. Volatility and property rights are the risks. And establish- ing the rule of law is the challenge facing the reformers. George Siguler is the pioneering private equity manager who has experienced windfall profits and sudden collapses. Marshall Goldman is the skeptical advisor to governments and corporations who continues to be wary. In India, we examined an outsized opportunity with a great deal of caution. With the world’s largest middle class population, its entrepreneur-friendly economy, and a will to improve its standard of living, India’s prospects for profits seem limitless. However, its lack of infrastructure and its unwieldy bureaucracy pose formidable challenges to progress. Ambassador Frank Wisner is the highly regarded career diplomat who also guides external affairs for one of the oldest U.S. corporations in Asia. Ashish Dhawan is a successful venture capitalist operating in India who is setting the tone for private market investments. Samir Arora is a gifted stock picker and one of the few seasoned hedge fund managers on the continent. Rian Dartnell led our head-long charge into the emerging markets. There was not a market where he didn’t know the best managers or, at least, know someone who did. As a youngster, Rian lived in the Middle East and Europe with his parents. As an adult portfolio manager, he lived in South America and Africa. Rian’s standard of excellence and his instinct for making money embody what we do well at the GR. Please join me in showing our appreciation to Rian for assembling this unique collection of emerging market essays. The strength of the Greenwich Roundtable is our independence and our interdisciplinary perspective on investing. Our vitality comes from our members who are all seasoned in non- traditional investing. As we enter a new year, we still mourn the passing of Hunt Taylor. Hunt was a dedicated trustee and one of our favorite moderators. He moderated so many pioneer- ing sessions and he did so with great flourish. Hunt loved the audience. And the audience loved Hunt. Hunt continues to live on in our hearts and our minds. Vaya con Dios, amigo. We will miss you with all our might. Stephen McMenamin [email protected] Standard & Poor’s | Greenwich Roundtable Quarterly 1 Standard & Poor’s Greenwich Roundtable Exploring New Frontiers Quarterly Of Investing In This Issue Vol. 3, No. 1 | 2007 Issues And Outlook On Emerging The Last Frontier: Africa, The Middle East, Markets Investing And Eastern Europe 4 The Table Has Been Set And The 17 Knowing The Rules Of The Game Guests Are Coming To Dinner John Niepold, Emerging Markets Management, LLC Robert Citrone, Discovery Capital Management LLC A few rules justify investing