In this episode of the OppenheimerFunds World Financial Podcast, Heidi Heikenfeld, Portfolio Manager for the Oppenheimer Emerging Markets Innovators Fund, sat down for a wide-ranging discussion about emerging markets with hosts Brian Levitt and Greg Brown. As someone who travels extensively and conducts exhaustive research, Heidi addressed common misperceptions about emerging markets, talked about how they have evolved over the years as a destination for investors, and addressed the need to broaden the ranks of women in the investment industry as caretakers of clients’ assets.
Here are some highlights:
On some of the biggest opportunities in emerging markets today
In her view, investors commonly perceive emerging markets as significantly less developed. They believe those markets constitute one homogenous unit—a destination for the outsourcing of low-wage, low-skill labor, and for commodity production.
But emerging markets have evolved to become more heterogeneous and are now a source of innovation, entrepreneurs, and an increasingly skilled workforce. Heidi points out that she and her team prefer to identify opportunities stemming from this trend in such sectors as technology, health care and consumer goods.
The search for innovative companies leads the team to countries that aren’t necessarily rich in certain commodities, but that may offer exposure to the innovation occurring in them. In some emerging markets, for example, the number of biotech companies has increased by hundreds of percentage points.
On innovation throughout the supply chain
Heidi sees innovation as key to unlocking transformational business growth—but doesn’t believe it necessarily requires technology. Innovation may occur in any industry with the help of a unique or disruptive business model, competitive differentiation or game-changing product that satisfies an unmet need. Heidi’s team looks at small and mid-sized companies experiencing transformational growth through such innovation.
Of course, the team also sees technological innovation occurring in emerging markets. These markets are home to many manufacturers of components that are assembled in consumer goods—from electronic devices to electric motor vehicles. The team looks for opportunities to tap innovation taking place further up the supply chain.
In general, the team avoids state-owned enterprises, whose goals are typically not aligned with the small investor, and where innovation is less likely to occur.
On investing in non-exploitative companies
Heidi sees herself not just as an investor, but as a steward of capital who can help raise the living standards of populations of emerging economies. As she points out, to invest in emerging markets is to invest in their people.
Heidi and her team aim to identify non-exploitative companies whose businesses contribute to the betterment of emerging societies.
On women in the investment business
Heidi views her role as that of an ambassador of a minority gender in the investment-management industry. Specifically, she believes the industry needs more women in the ranks of portfolio management. These are the professionals making investment decisions that affect the financial future of many individuals, and the investment management industry should, in her view, be representative of the broad spectrum of society.
In her travels to emerging markets, Heidi tries to be a role model for women in the developing world who have professional aspirations.
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These views represent the opinions of the portfolio manager at OppenheimerFunds, Inc. and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the publication date, and are subject to change based on subsequent developments.
The mention of specific companies or sectors does not constitute a recommendation by any particular Fund or by OppenheimerFunds, Inc. Foreign investments may be volatile and involve additional expenses and special risks, including currency fluctuations, foreign taxes, regulatory and geopolitical risks. Emerging and developing market investments may be especially volatile. Small and mid-sized company stock is typically more volatile than that of larger company stock. It may take a substantial period of time to realize a gain on an investment in a small-sized or mid-sized company, if any gain is realized at all.