this assignment I am conducting a presentation to the investment team in a large, well established pension fund with a goal of convincing the team that we should gain exposure to emerging markets and developing economies in our investment selections. I have selected a well-founded Indian Infrastructure fund that has excellent credibility and very high potential for considerable gains. The purpose of my presentation is to show the importance of environmental and social governance factors have on consumer investment choices and how this will impact the future of the superannuation and pension industry. As well as the opportunity for early adoption into these practices.

1. UNLOCKING INVESTMENT AND FINANCE IN
EMERGING MARKETS AND DEVELOPING
ECONOMIES (EMDES):
FINAL PROJECT
Kayleigh Baker

2. Hypothetical Investment Strategy
• From the perspective of a portfolio investor
• Organization: Large pension fund in an advanced economy with an “interest in gaining
exposure to the high growth rates in EMDEs” through investing in a managed fund.
• The below graph shows Historical GDP Growth for East Asia & Pacific to be the highest
in comparison with emerging Latin America and African GDP Growth.
• Growth in East Asia & the Pacific region is projected to be 5.9% in 2020 compared with
2.5% and 3.3% in Latin America and Africa respectively. (TWB, Global Economic Prospects)
• For these reasons the regional area chosen for investment is the Asia-Pacific.
WBG:https://databank.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG/1ff4a4
98/Popular-Indicators#

3. Risk Reward Trade Off
• This states that investors associate high levels of uncertainty or risk with high
potential returns. (Investopedia)
• Investing in Emerging Economies carry very high levels of risk as there are a
lot of uncertainties and returns tend to be volatile.
• Investors should have a long-term investment time-frame and not a high
exposure to these assets in their portfolios to ensure they can sustain short-
term volatilities in search of higher gains.
Source: https://www.ralphwakerly.com/investing/the-risk-return-tradeoff/

4. Macroeconomic & Industry Trends
Macroeconomic Trends:
• Rise of aging population – This will generate higher costs in health and aged care. As
well as fears of pension funds running dry therefore heavily relying on government
support .
• Climate change – As there are intensifying extreme weather events and natural
disasters, it is getting harder and harder to ignore the affects of climate change.
Individuals are making conscious choices to combat climate change from reducing
plastic usage to boycotting business’s that are seen as unsustainable to the planet.
Trends in the current superannuation & pension industry:
• Upsurge of contributions into superannuation monies being millennial investors –
Millennials are nearly twice as likely to have made a purchase because of a brand's
environmental or social impact and 73% are prepared to pay more for sustainable
goods. As well as 84% of millennials cite investing with a focus on ESG impact as a
central goal. (Investment Week)
• Therefore we can see asset owners taking steps to integrate sustainability issues and
ESG related matters into their investing criteria. (Harvard Business Review)

5. What does that mean for us?
Have to be prepared for a disruptive change!
There is a shift in focus from investors just wanting financial returns, to also searching for
investments that will have environmental and social impact.
In the future, majority of the working population will be these types of investors, and
therefore there must be platforms and investment options to cater to this.
Sustainable and ESG Investments are not as risky as they seem
Studies have demonstrated the positive relationship between high performance on
relevant ESG issues and superior financial performance. (Harvard Business Review)
Source: https://sustainabledevelopment.un.org

6. What long term, sustainable
investment opportunities do you want
to gain exposure to?
• The growth of EMDEs are highly dependent on infrastructure and innovation with a
huge demand for private finance to bridge the gap between domestic and international
resources. (Asian Development Bank)
Initially investing in infrastructure in emerging Asia Pacific will have flow-on affects that
will support the engagement and implementation of the UN’s Sustainable
Development Goals. Therefore investors have the opportunity to support
environmental and socially impactful ventures, while also receiving high growth
yielding returns.

7. What asset classes are best to provide
you that exposure?
• Governments in developing economies have been increasingly interested in attracting
public-private partnerships (PPPs) for infrastructure investments (including bank-
financed projects). (World Bank Group)
• These types of investments can be assessed through alternative asset class types
such as managed funds (MFs), Private-Equity Funds (PEFs) and Exchange-Traded
Funds (ETFs).
MFs, PEFs and
ETFs should only
make up a small
percentage of the
overall portfolio (ie.
No more than 10%.)
Depending on client
risk preference.

8. What fund managers should you
commit your funding to?
As per the private equity database given in the assignment resources, the following
private equity fund was chosen for investment:
NIIF Master Fund - The National Investment and Infrastructure Fund
• Primarily invests in operating assets in core infrastructure sectors such as roads, ports,
airports, power etc. focused in India.
• Has a very strong executive committee and investment team with decades of industry
experience.
“We believe in transparency, diversity and an ethical approach with zero
tolerance to corruption.” (https://niifindia.in/our-team)
• Has strong ESG framework based on international practices
• Long-term investment horizon with commercial, collaborative and sustainable
objectives being their core investment philosophies.

9. What risks should you consider?
There are many risks associated with emerging markets that can hinder the success of
doing business in the region such like:
• Political and social risk – Unstable political environments create uncertainties in
regulation and law that can cause unrest and even war. This pushes commerce down
the list of priorities.
• Corruption – Ineffective channeling of public and private funds can not only disrupt
public services but can cause rises in international illegal and criminal activities such as
money laundering and tax evasion.
• Currency risk – Changes in price of one currency against another. This can also be
used as an advantage if the local economy grows, the currency becomes stronger
therefore capitalizing on returns.
• Liquidity risk – As this is seen as a long term investment. If you need to withdraw funds
at short notice, there is a risk that you will need to sell your holding at an inopportune
time i.e. at a loss.
(Source: MIGA - World Investment & Political Risk)

10. How will you evaluate these fund
managers for their performance and
impact?
A study conducted by the Nottingham University Business School in Kuala Lumpur found
there were three important factors which dominated the choice of mutual funds in
emerging markets being:
1. Past performance
2. Size of funds
3. Cost of transaction
(Source: Ramasamy & Yeung (2003),MCB)
While past performance figures are usually hard to obtain in emerging markets, news and
press articles are a great indication of the support, partnerships and projects NIF has in
the investment pipeline. NIIF is anchored by the Government of India and has
collaborative partnerships in developed markets.
While financial returns are great, it is also important to measure the impact through
quantitative measures such like GDP, inflation, currency and employment of the Indian
economy.

11. Sources
• The World Bank – Global Economic Prospects https://www.worldbank.org/en/publication/global-
economic-prospects
• Investopedia - https://www.investopedia.com/terms/r/riskreturntradeoff.asp
• The Risk-Return Tradeoff - https://www.ralphwakerly.com/investing/the-risk-return-tradeoff/
• Harvard Business review “The Investor Revolution” - https://hbr.org/2019/05/the-investor-revolution
• Investment Week “Markets as mirrors: Millennials and the growth of sustainable investing” -
https://www.investmentweek.co.uk/investment-week/opinion/3069809/markets-as-mirrors-
millennials-and-the-growth-of-sustainable-investing
• Inderst, G. 2016. Infrastructure Investment, Private Finance, and Institutional Investors: Asia from a
Global Perspective. ADBI Working Paper 555. Tokyo: Asian Development Bank Institute. Available:
http://www.adb.org/publications/infrastructure-investment-private-finance-and-institutional-investors-
asia-global/
• World Bank Group “Institutional Investment in Infrastructure in Emerging Markets and Developing
Economies” - https://mpra.ub.uni-muenchen.de/62522/
• Private Equity Funds - https://www.privateequityinternational.com/database/
• National Investment & Infrastructure Fund - https://niifindia.in/
• Multilateral Investment Guarantee Agency (MIGA) “World Investment and Political Risk: -
https://www.miga.org/sites/default/files/archive/Documents/WIPR13.pdf
• Bala Ramasamy, Matthew C.H. Yeung, (2003) "Evaluating mutual funds in an emerging market:
factors that matter to financial advisors", International Journal of Bank Marketing, Vol. 21 Issue: 3,
pp.122-136, https://doi.org/10.1108/02652320310469502