Nick Rohatyn – Emerging Markets Multi-Asset Investing at TRG (EP.482)

Episode Summary

Executive Summary: Nick Roatin argues emerging markets are misserved by single-asset, benchmark-driven, country-specific investing. He makes the case for a horizontal, multi-asset, globally scaled platform that can combine public and private strategies, manage currency risk, and flex across cycles. His life story and JPMorgan career shaped a conviction that diversification, local knowledge, and acquisitions are essential to build a durable EM firm.

Main Topics: Formative background and career path: Roatin traces his international family history, bilingual upbringing, and early banking career to explain his instinct for global investing and combining doing well with doing good. Building emerging markets at JPMorgan: He describes pioneering swaps, moving to Japan, and later growing JPMorgan's EM business into a global franchise, learning that opportunity exists where others are not. Why emerging markets need a horizontal, multi-asset approach: He argues EM should not be organized by single asset class or single country; instead investors should allocate across equities, FX, local debt, hard currency debt, and private strategies. Flaws in EM benchmarks and monoline investing: Roatin criticizes equity and bond indices for concentration, distorted duration, and currency mismatches, saying benchmark-agnostic or smart-beta approaches are superior. Diversification, risk management, and currency expertise: He emphasizes scenario analysis over standard deviation, and says FX capabilities are critical because currency liquidity often remains available even when other assets become illiquid. Scaling through acquisitions and GP restructuring: Roatin explains how TRG grew by buying or replacing managers, integrating teams under one platform, and using scale to overcome the fragmentation of EM private markets. Current opportunity set and future ambition: He sees an inflection point driven by fading U.S. exceptionalism and renewed interest in EM, with special opportunity in Latin America and in building a large multi-asset EM platform.

Key Arguments: Emerging markets are poorly served by mono-asset, single-country, or sub-regional funds because deal flow and market depth do not support them, leading to bad deployment and weak outcomes. The key to EM investing is understanding the interplay between global forces and country-specific cycles; which dominates changes over time. Benchmark-based investing in EM can be misleading because indices are concentrated, uneven in duration, and often ignore currency effects. A benchmark-agnostic, smart-beta approach can improve Sharpe ratios by systematically using broader tools such as swaps, forwards, and currency overlays. Diversification across asset classes, regions, styles, and fundraising methods is necessary for survival in volatile EM markets. Currency management is one of the most important risk tools in EM because FX markets are usually the most liquid instrument even during crises. Scale matters: post-crisis capital increasingly flowed to large managers, making acquisitions a more effective growth path than purely organic expansion. The long-term goal is to build a global EM platform that can answer the allocator’s full question: how much to invest, where, in what asset class, style, and with whom. Private markets in EM are fragmented and under-scaled because the developed-market private equity model does not translate well to EM realities. Latin America is especially attractive because it combines strategic importance, resource depth, nearshoring, and a manageable number of meaningful markets.

Data Points: TRG assets under management: $7 billion - Roatin Group manages this across public and private markets. Years at JPMorgan leading EM business: 20 years - He spent roughly two decades building JPMorgan's emerging markets business. Initial EM team size at JPMorgan: 8 people - The business began as a very small group in 1988. JPMorgan EM team size by 1995: 600 people in 15 countries - Roatin scaled the EM franchise globally. Japan stint duration: 4 years - He was originally sent for three months but stayed much longer. People managed in Japan: 50 people at age 28 - He was running a sizable team early in his career. Morgan Mexico loan exchange volume: $800 million per year - The early loan-swapping market in emerging markets was still nascent. TRG first fund launch date: March 2003 - The Global Opportunity Fund was the inaugural fund. TRG fund count by 2008: 5 funds - The platform expanded after the first fund launch. TRG assets under management by 2008: $3 billion - Growth came from multiple strategies across public and private markets. Post-crisis hedge fund allocation share: 95% to funds with more than $5 billion - He cited this to show why scale became essential after the financial crisis. Private EM business acquired from Citi: $4.3 billion under management - The CVCI acquisition transformed TRG into a global private equity firm. India infrastructure acquisition size: $800 million in assets - A later JPMorgan team acquisition was absorbed under TRG's platform. Ethos Capital Partners size: $1.6 billion - This Africa business was eventually unwound after growth proved difficult. Current firm headcount: 85-90 people - TRG's staffing level at the time of the interview. Investment professionals share: About half - Roughly half of the firm is investment staff. Institutional investor base: About 250 investors - TRG works with a broad institutional client base. EM equity index concentration: Korea, China, India, Brazil = 70%+ - He used this to illustrate equity benchmark concentration. EM equity index concentration repeated later: 72% of the index in four countries - A second concentration example used in the discussion. Private EM capital concentration in Asia/China: 90% of Asia private money to China; 81% overall to one country - He argued capital flows were dangerously concentrated for years. Crisis-era EM hedge fund returns: Minus 5 to 6 on average - He noted hedge funds did not lose much in 2008 but still had structural issues. Acreage of TRG acquisitions: Around 10 or 11 total - Most were partnerships, acquisitions, or GP transitions. Acquisitions still in the business: 7 - Seven of the transactions remained part of the platform in some form. Travel cadence: 10 days per month - Roatin travels frequently to manage and source opportunities globally. Cycling volume: 100 to 200 miles per week - His main hobby and a reflection of discipline and balance.

Pivotal Quotes: "This issue of single asset class stuff really prevails." — Nick Roatin: He introduces his critique of how emerging markets are commonly structured and sold to investors. "And that is a terrible way to invest in emerging markets." — Nick Roatin: He explains why mono-asset, single-country, or sub-regional funds fail in EM. "The only thing I ever really loved was emerging markets is the simple truth." — Nick Roatin: He describes why he left JPMorgan's broader leadership path to return to EM investing.

Implications: For allocators, EM should be treated as a flexible, cross-asset opportunity set, not a silo. Managers that combine scale, local expertise, FX capability, and diversification may outperform and survive. The industry’s future likely belongs to integrated platforms, not niche monoline shops.