Weekly Market Commentary 5-16-2011

Learning How to See Part II

Tim Phillips – CEO, Phillips and Company

Weekly Market Commentary 5-16-11

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While many professionals in my industry spend hours analyzing data points looking for trends and searching online for industry reports, I prefer an additional tool: hitting the road and meeting with investment decision makers.

I don’t believe you can quite replace a personal relationship and insight with a spreadsheet alone.

Last week I promised to give you a couple of insights into where I am seeing investment dollars flow.

First would be the CIVETS. Not the animal, but a sub segment of the emerging markets. CIVETS is an acronym for: Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa. The grouping was introduced by the Economist and the main investment thesis is that while these countries are geographically dispersed, they have important similarities:

  • Sizeable, young populations
  • Diversified economies not excessively reliant on commodities
  • Reasonably sophisticated financial systems

Here’s how they look by the numbers:

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While Robert Ward (Global Financing Director for The Economist Intelligence Unit) coined the term in late 2009, Standard and Poor’s just developed an index to track this particular group last month. In my opinion and based on my meetings with investment decision makers, Standard & Poor’s new benchmark is a strong indication that institutions wanted a good benchmark to measure performance against.

The second major area I’m seeing investment dollars flow into is global infrastructure:

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Above is a chart from the 2011 Preqin Global Infrastructure Report (ISBN: 978-1-907012-36-5) showing a 225% increase on aggregate capital raised from 2009 to 2010, and just 22% less than what was raised in 2008. Preqin also noted that in January this year, a record 122 unlisted infrastructure funds were on the road targeting $85.5 billion in investor commitments.

In the long run, the Canadian Imperial Bank of Commerce (CIBC) World Market estimates that $35 trillion dollars will be spent on infrastructure in the next 20 years. Below is a table that highlights some of the projected infrastructure spending for 2009 through 2015 broken down by country:

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Like everything in my business nothing is certain and much of what we do is based upon a blend of analytics and probabilities. That's why Leonardo Da Vinci was correct when he said "Sapre Vedere” – know how to see.

Please send all comments or questions to tphillips@phillipsandco.com

Tim Phillips – CEO, Phillips and Company