The Ethical EMFM PE/VC Fund is a sub-fund of the Triple F Ethical Fund. It provides those well-informed investors who are seeking high-risk/high-return exposure to Emerging and Frontier Markets (EFM) with an attractive proposition. Parmenion Group key staff has a lot of experience in these markets and our databases consist of 100s of specialized asset managers and financial information about some 150 emerging and frontier markets countries.
Champions of the future
The Fund will provide our investors with exposure to promising non-listed firms in EFM countries that have lots of potential to become champions in their own country or region and maybe even make a difference globally. An analysis of the performance of top firms in EFM countries indicates that most of them have gone through such a development within a relatively short time frame. They actually did so even faster than their country’s economy as a whole, with these economies growing to such an extent that their relative weight of global gross domestic product (GDP) has grown from less than 10 percent some 30 years ago to about 30-40 percent now.
Taking into account the above-average macroeconomic growth rates in these countries and the fact that the percentage of companies that has found their way to the stock markets is still far lower than in developed markets, we can derive that there is far more to come.
Fair business opportunities
Research has also indicated that it does not really hurt to apply our ethical screens on the opportunity set: companies that follow principles of fairness have on average done at least as well.
We do therefore believe that a diversified investment approach in EFM private equity and venture capital makes sense from a risk-adjusted return perspective. Our return target is 18% per annum, but we stress that the Fund is closed-end and only to be recommended to qualified, well-informed investors who are well-advised on the relative share that private equity and venture capital should have within their overall portfolio allocation.
At the same time the investor will have the opportunity to actively contribute to the growing importance of fair business practices in these countries.
A strong portfolio with local managers
The Fund will use active, best-of-breed managers when available, but it won’t shun direct investments in gem stone opportunities when our analysts and/or partners in emerging or frontier markets bump into these. The set of selected bottom-up managers is a unique one, in that it consists not just of well-known Western EFM specialists. Our research has indicated that one of the problems with too large an exposure to ‘outside’ EFM specialists is that they tend to over-allocate to local larger-size opportunities. Whenever global developments, or even developments in the developed home markets of these asset managers and their investors (!), tend to initiate changes in portfolio allocations to EFM countries, these larger companies are over-sensitive to global factors. Local, best-of-breed specialists have a larger exposure to small- and mid-cap companies and this provides a defensive buffer during such periods through the reduced sensitivity to global economic factors.
Parmenion Group in general and Parmenion Ethical key staff in particular have built long-lasting relationships with those managers, and over the last 15 years our hands-on investment experience with them has been good. Standard criticism from Western providers was always that ‘they cannot be trusted and/or that their fund structure wasn’t as solid as the one we are used to’. Well, the bulk of local providers are giant brand names that have created fund vehicles in well-known fund domiciles like Luxembourg, Switzerland, Ireland etc. There is no clear-cut evidence that they have acted less as a fiduciary than Western providers did. Fraud and bad performance have no geographic boundaries, and it is indicative that the 2008-09 Global Financial Crisis was mainly a crisis of Western huge financial institutions.
A hybrid fund that also incorporates direct investments in gem stone opportunities
As indicated, our first goal is to add best-of-breed funds focusing on EFM private equity and venture capital to the Fund. But the Fund is hybrid in that we also will incorporate direct investments in gem stone opportunities in selected industries. When doing so, we will focus on those cases where we are convinced that our expertise in emerging and frontier markets (especially in the regions Africa, MENA and Emerging Europe and to a lesser extent Emerging Asia) in combination with sector skills (FinTech, Financial Services, Renewables, Fashion & Luxury, Entertainment, B2B Services and Retail) add value.
The Fund envisions an investment of about 70-80 percent in selected best-of-breed funds and 20-30 percent in selected direct investments. Parmenion Ethical’s double ethical filters do of course in all cases apply.
If you are a well-informed investor who wants to know more about our approach to EFM investing in private equity and/or venture capital, or if you want to invest in the Triple F Ethical EMFM PE/VC Fund – either directly ( the sub-fund has its own ISIN code) or via an allocation to the Triple F Ethical Fund – feel free to contact us with your questions.