WEBVTT - Robert Koenigsberger on Emerging Markets 0:00:02.000 --> 0:00:07.120 This is Mesters in Business with very Results on Bloomberg Radio. 0:00:08.960 --> 0:00:12.639 This week on the podcast, I have an extra special guest. 0:00:13.119 --> 0:00:16.840 His name is Robert Koenigsberger, and he has a fascinating 0:00:16.880 --> 0:00:23.160 career in emerging market, opportunistic and distressed debt investing. Uh. 0:00:23.200 --> 0:00:26.200 He started at a small boutique before going to Marry 0:00:26.320 --> 0:00:30.760 Lynch and Lehman Brothers and ultimately launching his own shop 0:00:31.040 --> 0:00:36.320 called Grammarcy Funds Management. UH. If you're interested in what 0:00:36.479 --> 0:00:40.760 it's like investing in emerging market debt, how that part 0:00:40.840 --> 0:00:44.440 of the investment from it has changed over the decades 0:00:44.600 --> 0:00:48.640 as the world itself has changed. Uh. He began in 0:00:48.840 --> 0:00:53.120 South America and Latin America UM, before investing in places 0:00:53.200 --> 0:00:57.600 like Russia and China and Turkey. UM. Fortunately for them, 0:00:57.640 --> 0:01:00.720 they were out of Russia long before the most recent 0:01:00.800 --> 0:01:05.920 invasion of Ukraine happened. Uh. It's just a fascinating conversation 0:01:06.000 --> 0:01:09.480 about looking at the world from both bottoms up and 0:01:09.520 --> 0:01:14.479 top down, as well as thinking about what valuations are like, 0:01:14.720 --> 0:01:19.040 how likely our macro events to impact you getting not 0:01:19.120 --> 0:01:22.520 just a return on capital, but, as his famously said, 0:01:22.520 --> 0:01:26.440 in fixed income, a return of your capital. It really 0:01:26.560 --> 0:01:29.680 is a very, very different approach than what we think 0:01:29.720 --> 0:01:33.600 of as as typical equity investing, and and it not 0:01:33.680 --> 0:01:38.000 only has the advantages of uh there being inefficiency, so 0:01:38.040 --> 0:01:41.120 there's a potential to generate alpha, but if you do 0:01:41.200 --> 0:01:45.160 it right, it's pretty non correlated with probably the rest 0:01:45.160 --> 0:01:48.880 of your portfolio. I found it fascinating and I think 0:01:48.920 --> 0:01:51.920 you will also, So, with no further ado, my interview 0:01:52.280 --> 0:01:56.680 with Grammarcy Funds Managements Robert Kohonensberger, let's talk a little 0:01:56.680 --> 0:01:59.480 bit about your background. You you get an MBA in 0:01:59.600 --> 0:02:03.360 Warton and then a master's in International Studies in Latin America. 0:02:03.880 --> 0:02:07.920 Your graduate thesis was on the origins and implications of 0:02:07.960 --> 0:02:11.200 the Latin American debt crises. It seems like you were 0:02:11.280 --> 0:02:16.240 built to trade distressed em debt built and lucky quite frankly, 0:02:16.320 --> 0:02:18.200 you know. Um, I actually go back to undergrad where 0:02:18.200 --> 0:02:20.440 I did political science and history of of Latin America, 0:02:21.120 --> 0:02:23.080 and I was asked to do a similar thesis on 0:02:23.680 --> 0:02:26.119 you know, to do a thesis, and my parents told 0:02:26.120 --> 0:02:27.560 me I had to find a job at the same time, 0:02:27.600 --> 0:02:29.400 and so I try to put the thesis and the 0:02:29.480 --> 0:02:32.480 job searched together. And the only issue in Latin America, 0:02:32.639 --> 0:02:35.519 which was my major back in eighty seven was the 0:02:35.560 --> 0:02:38.639 Latin American debt crisis. So I did my study on that, 0:02:38.919 --> 0:02:40.880 and I got fortunate enough to meet a gentleman who 0:02:40.880 --> 0:02:43.480 had been the finance minister of Peru. He had been 0:02:43.520 --> 0:02:45.720 the head of Wells Fargo International. He lent it, he 0:02:45.760 --> 0:02:47.920 borrowed it, he defaulted on it, and had this he 0:02:47.960 --> 0:02:50.960 had this great boutique out in California. So um, I 0:02:50.960 --> 0:02:53.680 feel really fortunate to uh to have spent thirty five 0:02:53.760 --> 0:02:56.520 years doing the same thing in emerging markets. And you know, 0:02:56.800 --> 0:02:59.400 the gentleman I worked with was just a great professional. 0:02:59.520 --> 0:03:01.720 So late eighties, early nineties or a VP for an 0:03:01.720 --> 0:03:06.200 advisory firm that leads some sovereign debt restructurings and transactions 0:03:06.200 --> 0:03:09.600 in both South America and Central America. Tell us what 0:03:09.680 --> 0:03:13.240 that experience was like during that period. Emerging markets in 0:03:13.280 --> 0:03:15.640 the late eighties was very different than the emerging markets 0:03:15.639 --> 0:03:18.600 of two. I think it's fair to say it was 0:03:18.639 --> 0:03:21.680 a bit of the wild West. Um, you know, go back, 0:03:21.919 --> 0:03:24.799 you know the entire you know, it was the last decade, right, 0:03:25.000 --> 0:03:28.840 theties was the last decade. And in Latin America, Mexico 0:03:28.919 --> 0:03:32.440 defaults in eighty two. Virtually the entire regions in default 0:03:32.480 --> 0:03:35.480 by by the end of the decade. So what it 0:03:35.520 --> 0:03:37.840 was like was, you know, putting Humpty Dumpty back together 0:03:37.880 --> 0:03:42.120 again and dealing with countries that had defaulted debt and 0:03:42.160 --> 0:03:44.520 taking them through what's now known as the Brady debt 0:03:44.520 --> 0:03:48.760 restructuring and having these bonds that nobody really understood come 0:03:48.760 --> 0:03:50.520 out of it. And that, quite Frankie, was was the 0:03:50.520 --> 0:03:53.320 beginning of the asset class. And I remember, like, you know, 0:03:53.360 --> 0:03:55.720 even like we were doing, you have countries that that 0:03:55.840 --> 0:03:58.440 were shared borders, that couldn't talk to each other, that 0:03:58.880 --> 0:04:00.080 one of the other, and you can get in the 0:04:00.120 --> 0:04:02.000 middle and do some sort of of debt swap or 0:04:02.000 --> 0:04:04.000 a buy back or what have you. And so one 0:04:04.000 --> 0:04:06.560 of my fond memories was like Guatemala, I think it 0:04:06.560 --> 0:04:09.360 was in the nine and I didn't know what FX was, 0:04:09.400 --> 0:04:11.040 I didn't know what letters of credit were, and I 0:04:11.080 --> 0:04:12.320 had to go get a letter of credit. I had 0:04:12.360 --> 0:04:14.440 to go to Guatemala, I had to present it and 0:04:14.480 --> 0:04:16.520 then we did a buy back. But we got paid 0:04:16.520 --> 0:04:19.080 in cansalis, which was the local currency. And so my 0:04:19.160 --> 0:04:21.320 job for basically two weeks was to get up, go 0:04:21.480 --> 0:04:23.320 sell as much f X or by as many dollars 0:04:23.320 --> 0:04:24.679 as I could, and then go back to the hotel 0:04:24.720 --> 0:04:27.280 and ship by the pool. That's not a bad gig. 0:04:27.480 --> 0:04:31.120 It was great. So so you go from that onto 0:04:31.279 --> 0:04:34.200 Mother Meryl for three years where you traded distress d M. 0:04:34.560 --> 0:04:36.880 Then you're a VP of Lehman Brothers. And this was 0:04:37.839 --> 0:04:40.360 late nineties, not the Lehman Brothers we kind of a 0:04:40.480 --> 0:04:43.880 familiar with from the financial crisis. What was it like 0:04:44.040 --> 0:04:46.800 at those big shops Mery Lynch and Lehman Brothers doing 0:04:47.160 --> 0:04:50.200 distressed E M debt? Sure? I mean that, first of all, 0:04:50.200 --> 0:04:52.479 they were They were great experiences because you know, I 0:04:52.520 --> 0:04:55.720 started in a very small, boutique, boutique environment. And again 0:04:55.720 --> 0:04:58.800 I'm on political science and history major prior to to 0:04:58.920 --> 0:05:02.120 graduate school. So to actually get experience in finance, to 0:05:02.240 --> 0:05:05.880 lead the bank's efforts in investing in sovereign debt restructions, 0:05:05.880 --> 0:05:09.320 and to bring our clients along was was a great experience. Um. 0:05:09.360 --> 0:05:10.760 You know, I got to learn a lot about about 0:05:10.760 --> 0:05:14.560 how markets function or not UM and I got to 0:05:14.600 --> 0:05:17.960 get his feel for Wall Street politics, which I found 0:05:18.000 --> 0:05:20.279 out really weren't for me, and and all the conflicts 0:05:20.279 --> 0:05:23.160 of interest that one finds in Wall Street. You mentioned 0:05:23.160 --> 0:05:26.560 earlier that the late eighties early nineties were very different 0:05:26.960 --> 0:05:30.280 than the state of EM debt today. Um, how has 0:05:30.279 --> 0:05:33.919 the industry changed? How is E M distressed debt today 0:05:34.520 --> 0:05:39.040 different than it was thirty years ago? So distressed as 0:05:39.080 --> 0:05:41.440 different and EM is is different. You know, i'd start 0:05:41.480 --> 0:05:44.200 with break it down. You know when when I got 0:05:44.200 --> 0:05:48.200 to Maryland, Um, and you looked at the trade blotder 0:05:48.200 --> 0:05:50.360 of who you were trading with. It was basically banks 0:05:50.360 --> 0:05:52.680 trading with each other and every so often a client 0:05:52.720 --> 0:05:55.600 would come by. So it's a tremendous amount of proprietary trading. 0:05:56.000 --> 0:05:58.320 You know, hedge funds in the back book, a little bit, 0:05:58.400 --> 0:06:01.920 a little bit of a front look. So I would 0:06:02.080 --> 0:06:04.159 characterize it as a bit of a bazaar, unless of 0:06:04.160 --> 0:06:05.720 a market, because you know, I was at Meryl and 0:06:05.760 --> 0:06:07.880 I would call JP Morgan and I would sell something 0:06:07.920 --> 0:06:09.400 to them, and they would call Chase and they would 0:06:09.440 --> 0:06:11.200 call Naman. It was just a roundabout and then the 0:06:11.200 --> 0:06:13.400 market would drop five points or what have you. So 0:06:13.640 --> 0:06:17.039 musical chairs the last one holding got got stuck with it. Yeah, 0:06:17.200 --> 0:06:19.880 and um, so you know I tend to have create 0:06:19.880 --> 0:06:22.080 a lot of volatility. You know, if if everyone wanted 0:06:22.080 --> 0:06:24.080 to buy herself the same thing at the same thing, 0:06:24.440 --> 0:06:28.039 same time. Today the markets massively larger. You know, it 0:06:28.160 --> 0:06:30.840 was predominantly a sovereign market back then. You know, um, 0:06:30.880 --> 0:06:35.240 now it's sovereign, quasi sovereign, U S dollar local corporates, 0:06:35.360 --> 0:06:40.200 high yield, etcetera. What's quasi sovereign? Sorry, like state versus 0:06:40.440 --> 0:06:43.440 national or something and so so usually and I usually 0:06:43.440 --> 0:06:47.240 talk about quasi sovereign and sovereign adjacent. So sovereign is 0:06:47.320 --> 0:06:50.599 just the dead obligation of the country. Quasi sovereign is 0:06:50.640 --> 0:06:54.160 typically an entity owned by the state that issues GSC 0:06:54.560 --> 0:06:57.279 or like take pan X in Mexico as opposed to 0:06:57.279 --> 0:07:01.200 Mexico right, Um, and then sovereign adjacent are interesting as 0:07:01.200 --> 0:07:03.640 well because they're not explicitly owned by the state, but 0:07:03.680 --> 0:07:06.320 they're so important that there's some sort of nexus between 0:07:06.320 --> 0:07:09.159 the sovereign and that and that corporate. But you know, 0:07:09.200 --> 0:07:11.560 today the markets, you know, think about now there is 0:07:11.600 --> 0:07:14.240 a buy side e t F S four jacts. The 0:07:14.280 --> 0:07:16.360 by side is so much larger than the street. It 0:07:16.440 --> 0:07:18.400 used to be just the street street had a lot 0:07:18.400 --> 0:07:22.000 of balance sheet um. Today, if you take emerging market 0:07:22.040 --> 0:07:26.360 corporates as an example, there's go back five years, ten years. 0:07:26.680 --> 0:07:29.200 Emerging market corporates are five times larger today than they 0:07:29.200 --> 0:07:32.440 were back then. Go back to right after two thousand 0:07:32.440 --> 0:07:36.160 and eight, every bank made markets, every bank had had 0:07:36.200 --> 0:07:38.920 balance sheet. Today you have less banks, less balance sheet, 0:07:39.000 --> 0:07:41.600 less market making, and a really big buy side. So 0:07:41.640 --> 0:07:44.520 you have inelastic you know, in elastic supply when people 0:07:44.520 --> 0:07:46.080 want to buy, Like if you have a dollar there 0:07:46.200 --> 0:07:48.480 there'll be someone in emerging markets that wants to issue 0:07:48.480 --> 0:07:50.280 a bond and take that dollar from you. But when 0:07:50.320 --> 0:07:53.160 there's outflows, you don't have an elastic demand, and that's 0:07:53.200 --> 0:07:55.960 where you tend to get this this volatility and dislocations 0:07:55.960 --> 0:07:58.800 that we've seen. So let me stick with sovereign adjacent 0:07:59.160 --> 0:08:01.800 In the US, as we learned during the financial crisis, 0:08:02.480 --> 0:08:05.840 the government sponsored enterprises like Fannie Mae and Freddy Mack 0:08:05.960 --> 0:08:08.960 and by extension um Sally. May you go down the 0:08:08.960 --> 0:08:11.679 whole list of these things, the U. S. Government's full 0:08:11.720 --> 0:08:15.160 faith and credit. Even though it wasn't obligated to these 0:08:15.360 --> 0:08:20.560 quasi publicly traded, quasi private entities, the U. S. Government 0:08:20.600 --> 0:08:24.760 still ended up standing behind them for systemic reasons. So 0:08:24.840 --> 0:08:27.960 that's here in the United States. Do you have similar 0:08:27.960 --> 0:08:31.320 situations in Latin America and elsewhere or is it just 0:08:31.440 --> 0:08:34.640 country by country it's all completely different. First of all, 0:08:34.760 --> 0:08:36.760 let's unpack that. I mean, emerging markets is not this 0:08:36.840 --> 0:08:39.360 home much any asasset class. So almost anything and I 0:08:39.400 --> 0:08:41.320 could talk about it would be different. You know, there'd 0:08:41.320 --> 0:08:44.600 be dispersion of of of factors. But when you think 0:08:44.640 --> 0:08:50.520 about you know, bailouts of corporates, UH, sovereign at Jason 0:08:50.600 --> 0:08:53.080 or what have you, we've certainly seen it in emerging markets, 0:08:53.080 --> 0:08:55.520 and I would say the most you know, the greatest 0:08:55.520 --> 0:08:57.559 example right now is in China property. If you've seen 0:08:57.600 --> 0:09:01.000 what's going on there. So it started as a crisis 0:09:01.040 --> 0:09:03.760 for ever Ground, right and I think the Chinese government 0:09:03.800 --> 0:09:06.920 wanted to kind of isolate Evergrand and then insulate the 0:09:06.920 --> 0:09:08.840 rest of the sector. And now what we've seen is 0:09:08.880 --> 0:09:11.800 that it contaminated, you know, the Everground just poured over 0:09:11.840 --> 0:09:14.120 to even the best names like a country garden or 0:09:14.120 --> 0:09:16.720 what have you. And so right after the Party Congress, 0:09:16.760 --> 0:09:19.520 we've just seen massive amounts of aid. I would argue 0:09:19.520 --> 0:09:21.679 that that what we're witnessing today is the TARP program 0:09:21.679 --> 0:09:24.760 in China for for for the property sector, and you 0:09:24.800 --> 0:09:27.440 can see, you know, assets have gone. We were buying 0:09:27.559 --> 0:09:31.480 performing bonds at eight cents on the dollar. Wow, that 0:09:31.520 --> 0:09:33.520 you had to pay for a crude right, which is 0:09:33.559 --> 0:09:36.040 which is a weird concept to pay for a crew. 0:09:36.400 --> 0:09:38.600 So so it's it's a crude interest. So maybe it's 0:09:38.600 --> 0:09:41.120 got four points of interest on an eight cent bond 0:09:41.400 --> 0:09:43.480 that typically when something trades to eight, people don't think 0:09:43.480 --> 0:09:45.760 it's going to keep paying. Um. And then once the 0:09:45.760 --> 0:09:48.880 program came out this Chinese tarp, if you will, Um, 0:09:48.960 --> 0:09:50.679 all of a sudden, eight cent bonds were trading at 0:09:50.679 --> 0:09:53.640 thirty two this morning. They're like sixty Wow, just on 0:09:53.679 --> 0:09:56.240 this this this bailout notion. How do we get me 0:09:56.320 --> 0:09:59.120 some of those? That sounds very attractive and we'll talk later. 0:10:00.559 --> 0:10:02.560 So I was going to ask you what trades or 0:10:02.640 --> 0:10:06.560 deals stand out is especially memorable that seems to be 0:10:06.640 --> 0:10:10.679 fairly recent memorable Anything from the uh wild West days 0:10:10.720 --> 0:10:13.079 that sticks out is I mean, I love the idea 0:10:13.120 --> 0:10:15.440 of just going out buying dollars and then sending pool 0:10:15.480 --> 0:10:18.360 side for the rest of the day. It was, um, 0:10:18.400 --> 0:10:21.520 you know, Margarita's or whatever they the local drink was. 0:10:22.120 --> 0:10:24.040 What else really stands out? You know, if I go 0:10:24.080 --> 0:10:26.760 back to the to the late eighties or early nineties, 0:10:26.760 --> 0:10:29.520 and you know, you're asking about distress then versus distressed today. 0:10:29.559 --> 0:10:31.040 And you know, I think one of the most interesting 0:10:31.080 --> 0:10:33.920 things in distresses when people are throwing away the keys, 0:10:34.600 --> 0:10:36.439 you want to be there to catch them. And I 0:10:36.520 --> 0:10:38.800 remember one one time, and I think it was eighty 0:10:38.840 --> 0:10:41.200 nine or ninety, We're right at the end of the 0:10:41.880 --> 0:10:44.280 you know, the Lost decade and emerging markets, and all 0:10:44.280 --> 0:10:46.120 the banks are basically not all the banks, but a 0:10:46.120 --> 0:10:47.560 few of the banks are is like just getting out 0:10:47.559 --> 0:10:50.680 of Latin America and one of them just get me out. 0:10:50.880 --> 0:10:54.280 Just that's it, full capitulation, that's right. So one example 0:10:54.360 --> 0:10:55.760 that was a lot of fun, I think was eighty 0:10:55.840 --> 0:10:58.160 nine or ninety Bank of America decided they wanted to 0:10:58.200 --> 0:11:02.080 sell their branch in Lima, Peru, and they the price 0:11:02.120 --> 0:11:05.240 tag was a million dollars. I'm like five years old. 0:11:05.920 --> 0:11:08.079 My boss, as gentleman mentioned, had been the finance Minister 0:11:08.120 --> 0:11:09.400 pru He's like, I need you to go down to 0:11:09.440 --> 0:11:11.160 Prue and and take a look at the bank due 0:11:11.160 --> 0:11:13.960 to diligence, right, twenty five years old. So I don't 0:11:13.960 --> 0:11:15.920 know if you've ever been to Lima. But in in 0:11:15.920 --> 0:11:18.320 in the center of Lima and santing Cerro, there was 0:11:18.360 --> 0:11:21.040 a retort, no, like a roundabout, and one big tower. 0:11:21.880 --> 0:11:23.920 On the top of the tower it says Bank of America. 0:11:24.679 --> 0:11:26.319 We didn't have cell phones or whatever you so I 0:11:26.360 --> 0:11:27.920 got to run back to the hotel and I said, 0:11:28.000 --> 0:11:31.520 you know, Carlos, is the building included? So yes, I said, 0:11:31.640 --> 0:11:33.800 it's got to be worth a million bucks, right, So 0:11:33.840 --> 0:11:36.880 we paid a million dollars for that made three million 0:11:36.880 --> 0:11:39.720 dollars trading facts before we sold it, and it was 0:11:39.720 --> 0:11:42.720 sold for fifty million dollars three years later, and that 0:11:42.840 --> 0:11:45.160 became the beginning of one of the largest groups in 0:11:45.400 --> 0:11:48.920 in Prue today. And so fast forward after after graduate school, 0:11:48.920 --> 0:11:51.960 I'm having lunch with a friend from school and Eric 0:11:52.000 --> 0:11:54.199 says he's working for Bank of America. And I said, Eric, 0:11:54.240 --> 0:11:56.120 what do you guys? What are you guys doing? Is Oh, 0:11:56.120 --> 0:11:58.360 we're thinking of opening a branch in Lima, Peru. Oh 0:11:58.440 --> 0:12:00.520 do I have a building for you? And you know 0:12:00.520 --> 0:12:02.880 another one real quickly. You know, Russia has been so 0:12:02.960 --> 0:12:05.079 much in the news these days, and I remember the 0:12:05.160 --> 0:12:08.280 wild wild West, and Russia was the Yelts era, the nineties, 0:12:08.320 --> 0:12:11.079 the era of default. And I remember going there with 0:12:11.120 --> 0:12:15.800 a group of investors in it was nine June. Their 0:12:15.920 --> 0:12:18.560 defaulted debt was trading at six cents. And we go 0:12:18.600 --> 0:12:20.920 into this conference room at Vanessa conam Bank, which was 0:12:20.960 --> 0:12:24.439 the Thebligor, the Export Import Bank of Russia, and this 0:12:24.559 --> 0:12:27.200 trader walks in and he's completely disheveled and he goes, 0:12:27.440 --> 0:12:29.440 I want to know who's buying back my debt. You 0:12:29.440 --> 0:12:30.920 guys are getting in my way. I'm trying to buy 0:12:30.960 --> 0:12:33.200 back my debt. Greatest buy signal that any of us 0:12:33.200 --> 0:12:35.440 that I've seen the problems. We don't have cell phones, right, 0:12:35.720 --> 0:12:38.679 so it's like race back to the hotel to see 0:12:38.720 --> 0:12:40.520 who can call their training death fast enough to buy 0:12:40.600 --> 0:12:42.520 Russian And if you look on your Bloomberg screen today, 0:12:42.679 --> 0:12:44.360 on that day, the asset went from six cents to 0:12:44.360 --> 0:12:48.160 twelve cents, just on this meeting. That's amazing. I love 0:12:48.200 --> 0:12:51.040 this quote of yours, which now I understand much better. 0:12:51.679 --> 0:12:55.920 I've been doing emerging markets since before they emerged. Yeah, 0:12:55.960 --> 0:12:58.800 I mean, um, you know, that's that's oftentimes when I 0:12:58.880 --> 0:13:00.960 talk with clients about because as you know, if you 0:13:00.960 --> 0:13:03.319 go back to the nineteen eighties, um, it was. I 0:13:03.360 --> 0:13:05.760 wouldn't call it an asset class. It was a bunch 0:13:05.800 --> 0:13:09.240 of bank loans in default. Um it was submerging at 0:13:09.240 --> 0:13:11.640 the time, right, And it was, I guess, you know, 0:13:11.720 --> 0:13:14.880 unpolitely called the Third World debt crisis lesser Developed country 0:13:14.880 --> 0:13:16.640 debt crisis. But no one was thinking about putting an 0:13:16.679 --> 0:13:20.360 index around a bunch of defaulted bonds. So I was 0:13:20.400 --> 0:13:24.280 fortunate enough to be there as we transformed defaulted loans 0:13:24.320 --> 0:13:27.880 to performing bonds. And then when JP Morgan made the 0:13:27.920 --> 0:13:32.280 index in part, I think that was really the beginning 0:13:32.400 --> 0:13:35.600 of emerging markets debt as an asset class. Quite fascinating. 0:13:35.679 --> 0:13:38.520 So so let's talk a little bit about Grammarcy. What 0:13:38.679 --> 0:13:43.080 led you from big shops to launching your own firm? Um? Well, 0:13:43.160 --> 0:13:46.800 and were you always international debt focused? Yeah? A few things. 0:13:46.880 --> 0:13:49.760 I mean, Um, I started in a boutique environment, and 0:13:49.800 --> 0:13:51.640 I never really thought that I was gonna stand Wall 0:13:51.679 --> 0:13:53.560 Street for a long period of time. I always wanted 0:13:53.600 --> 0:13:57.480 to do something entrepreneurial. Obviously I wanted to stay invested 0:13:57.559 --> 0:14:00.640 and have a career in emerging market debt UM. But 0:14:00.800 --> 0:14:05.360 so you know, the factors behind starting Grammarcy were a few. Um, one, 0:14:05.440 --> 0:14:07.520 you know, I mentioned conflict of interests on Wall Street, 0:14:07.679 --> 0:14:12.040 and when you are going through a sovereign debt restructuring, 0:14:12.320 --> 0:14:15.920 that's just a negotiation. I'm sitting there representing the bank, 0:14:16.000 --> 0:14:19.080 and I'm sitting across from the senior debt negotiator from 0:14:19.080 --> 0:14:21.680 the Russian Federation or wherever it may be. And I 0:14:21.720 --> 0:14:24.880 remember at the banks, you know, on my sides would 0:14:24.880 --> 0:14:29.160 be someone from investment banking, someone from corporate relations. And 0:14:29.200 --> 0:14:31.080 so I'm just pushing to get the bank and our 0:14:31.120 --> 0:14:33.400 clients paid, and these guys are thinking about the next 0:14:34.240 --> 0:14:36.640 the next trade in Russia or whatever it may be. 0:14:36.720 --> 0:14:38.960 So one is you know, I really, I really wanted 0:14:38.960 --> 0:14:42.720 to have a conflict free, mission driven firm, and our 0:14:42.720 --> 0:14:45.280 mission is really simple. All we do is focus on 0:14:45.360 --> 0:14:47.760 investment management. We want to focus on the well being 0:14:47.760 --> 0:14:50.680 of our clients, our portfolio investments in their communities, and 0:14:50.720 --> 0:14:53.080 our team members. That's it. And that's hard to do 0:14:53.400 --> 0:14:56.400 at a big, big shop on on Wall Street. Um. 0:14:56.440 --> 0:14:59.320 You know, obviously, eat what you kill. I wanted a meritocracy, 0:15:00.160 --> 0:15:02.800 and Wall Street is quite frankly anything but a meritocracy 0:15:02.840 --> 0:15:05.520 because of all the politics and what have you. Um. 0:15:05.560 --> 0:15:08.040 I remember the day I made up my mind to 0:15:08.080 --> 0:15:11.440 start Grammarcy was at the end of the ninety seven 0:15:11.480 --> 0:15:14.920 bonus year early. Now go back to Lehman. They almost 0:15:15.000 --> 0:15:18.800 blew up in Mexico. We were basically I went to 0:15:18.800 --> 0:15:21.960 work there right after that. We had had no aspirations 0:15:22.000 --> 0:15:25.600 for p l in n very little aspirations. Is like, 0:15:25.640 --> 0:15:28.080 just don't lose money, right, that was emerging market debt 0:15:28.160 --> 0:15:30.080 for for for Lehman, and so what is it just 0:15:30.120 --> 0:15:34.400 a service for the banks that and and don't take 0:15:34.400 --> 0:15:36.520 a lot of risk and make a lot of money supposedly, right. 0:15:37.040 --> 0:15:40.320 And so I go into ninety seven. My book, the 0:15:40.360 --> 0:15:43.200 restruction book has a five million dollar what do you 0:15:43.240 --> 0:15:45.880 call it? Budget? Then they raised it to ten, then 0:15:45.880 --> 0:15:47.760 they raised it to thirty, and then they raised it 0:15:47.800 --> 0:15:51.120 to forty. So I walked into my bonus discussion in 0:15:51.200 --> 0:15:56.800 January February and it starts with, well, we almost made it, right. 0:15:56.840 --> 0:15:58.760 So they were trying to trying to basically say, since 0:15:58.800 --> 0:16:00.800 you didn't get to the forty, you know you shouldn't 0:16:00.800 --> 0:16:03.560 expect to get paid very well. So I said, well, 0:16:03.560 --> 0:16:06.360 we'll wait a minute, just stop right here, this conversation 0:16:06.440 --> 0:16:08.120 is over. I'll come back tomorrow. You put a different 0:16:08.200 --> 0:16:09.960 number on the piece of paper, and that was the 0:16:10.000 --> 0:16:11.720 moment that I said I wanted to start the firm. 0:16:11.800 --> 0:16:14.480 And you know, we're purely there for our clients, and 0:16:14.480 --> 0:16:16.720 if our clients do well, we do well, and that's 0:16:16.720 --> 0:16:20.920 all that matters. I have heard variations of that precise story. 0:16:20.920 --> 0:16:25.840 I've experienced that precise story over and over again. Sometimes 0:16:25.920 --> 0:16:32.160 the short sightedness of upper management on Wall Street is shocking. Um, 0:16:32.280 --> 0:16:36.360 you just see all of these super profitable firms with 0:16:36.520 --> 0:16:44.680 the most successful traders. I am genuinely shocked when people say, yeah, 0:16:44.920 --> 0:16:47.160 then that's just not it's just not worth it. I'll 0:16:47.200 --> 0:16:49.280 tell you another story. I remember when I when I 0:16:49.360 --> 0:16:52.520 left Mary Lynch so fed started raising rates ninety four. 0:16:52.840 --> 0:16:59.000 We've got the the tequila crisis in Mexico and I 0:16:59.120 --> 0:17:02.320 resigned and my boss has Venezuelan and the big boss 0:17:02.360 --> 0:17:04.720 is Cuban, and the Venice one was like, well, you 0:17:04.720 --> 0:17:06.720 gotta go talk to the to the Cuban. And so 0:17:06.760 --> 0:17:08.760 they start talking in Spanish in front of me, and 0:17:08.800 --> 0:17:12.000 they go, you bi lingual and bilingual. But they didn't 0:17:11.720 --> 0:17:14.040 don't know that I speak a little Turkish to it 0:17:14.080 --> 0:17:15.840 out of my wife. My wife's Turkish as well. But 0:17:16.520 --> 0:17:18.080 so I go upstairs and meet with the big boss 0:17:18.080 --> 0:17:20.280 and they start chatting in Spanish and they go, you know, 0:17:20.320 --> 0:17:22.440 you told me that there were no other jobs out 0:17:22.440 --> 0:17:24.880 there that we didn't have to pay these guys, right, 0:17:24.960 --> 0:17:26.439 So then he turns to me, he goes, Robert, you 0:17:26.440 --> 0:17:28.359 know what can I tell you? And I answered him 0:17:28.359 --> 0:17:30.280 back in Spanish, I said, I just heard everything. Thank 0:17:30.320 --> 0:17:33.639 you very much. By the way, how can you do 0:17:33.760 --> 0:17:37.320 emerging market debt? I mean, I know everybody everywhere more 0:17:37.440 --> 0:17:41.000 or less speaks English, but isn't it an enormous advantage 0:17:41.040 --> 0:17:43.960 to be able to speak in the local language. Absolutely? 0:17:44.080 --> 0:17:46.959 First of all, I mean a lot of places we go, UM, 0:17:47.080 --> 0:17:50.520 English isn't necessarily spoken well um, even at the most 0:17:50.560 --> 0:17:55.440 senior levels of government. So to be able to um speak, 0:17:56.040 --> 0:18:00.840 seek information, um persuade others in their language is is 0:18:00.920 --> 0:18:02.359 very helpful. And I'm not gonna say I do it 0:18:02.359 --> 0:18:04.320 as well in Spanish as I do in English, but 0:18:04.359 --> 0:18:07.800 that's very helpful to you know, Emerging markets is all 0:18:07.800 --> 0:18:10.840 about assessing people, right, So we have to think about 0:18:11.600 --> 0:18:13.680 credit risk like everybody else. But the end of the day, 0:18:13.720 --> 0:18:18.199 emerging markets risk is about credit culture people. How do 0:18:18.240 --> 0:18:21.440 they behave in times of durest in the past, predict 0:18:21.480 --> 0:18:24.679 how they're going to behave in the future. It's helpful 0:18:24.680 --> 0:18:27.320 to be able to assess that prediction in that in 0:18:27.359 --> 0:18:31.040 that language. So on the equity side, some people say 0:18:31.200 --> 0:18:34.280 you don't really need boots on the ground and emerging markets. 0:18:34.960 --> 0:18:37.119 I'm I don't know how true that is, but it 0:18:37.280 --> 0:18:40.919 really sounds like it's not true. On the debtor or 0:18:40.920 --> 0:18:44.840 credit side, especially a distress circumstance. Now, I mean boots 0:18:44.840 --> 0:18:48.440 on the ground is is essential, and I would say 0:18:48.480 --> 0:18:51.359 both internal boots and external boots. Right. So we have 0:18:51.359 --> 0:18:53.199 our own people, we have our own platforms. We have 0:18:53.280 --> 0:18:56.959 offices in Argentina and Turkey and Mexico and what have you. 0:18:57.480 --> 0:19:00.200 And those people are really important for sorcing. Do is 0:19:00.240 --> 0:19:03.240 doing due diligence on deals, doing due diligence on on people, 0:19:03.720 --> 0:19:06.520 you know? Quite frankly, Um, one of our biggest strengths 0:19:06.640 --> 0:19:08.560 is in in our on our website. It's it's all 0:19:08.600 --> 0:19:10.800 the relationships we've had for thirty five years with people 0:19:10.960 --> 0:19:15.160 in different countries that can give you good information on people, 0:19:15.400 --> 0:19:17.600 you know. I remember a story in Thailand a few 0:19:17.680 --> 0:19:20.080 years ago. We were getting ready to buy the debt 0:19:20.080 --> 0:19:22.320 of a country, of a company that had come out 0:19:22.359 --> 0:19:25.760 of debt restructuring. And you know, we are research guys 0:19:25.760 --> 0:19:27.600 did their work, the traders did the work. We like 0:19:27.720 --> 0:19:29.919 the value, we like the entry point. Well, then we 0:19:29.960 --> 0:19:32.359 went out to our network external lawyer who had sat 0:19:32.480 --> 0:19:36.160 in the debt restructuring conversations, and the lawyer says to me, Robert, 0:19:36.240 --> 0:19:38.080 before you invest, let me tell you what the debt 0:19:38.119 --> 0:19:41.480 restructuring looked like. It's great. So it was a patriarch, 0:19:41.560 --> 0:19:44.800 former military guy, had the discussions at his house, not 0:19:44.840 --> 0:19:48.760 a law firm. You were escorted into the conference room 0:19:48.800 --> 0:19:53.160 through three levels of security, and the gentleman starts the negotiations. 0:19:53.200 --> 0:19:55.919 He goes, um, let's have a toast. Here's to my 0:19:56.000 --> 0:19:59.040 wealth and to your health. You just have to have 0:19:59.119 --> 0:20:01.560 people on the ground to that's just that's just bad. Now. 0:20:02.240 --> 0:20:05.640 Is that a local custom or is that a subtle threat? What? 0:20:05.640 --> 0:20:07.560 What is that? I mean? I think it was. I 0:20:07.600 --> 0:20:09.320