My Cup of Tea, Rashmi Gupta
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Rashmi Gupta
Senior Emerging Markets Portfolio Manager
J.P. Morgan Private Bank
Rashmi, welcome. We’re thrilled to have you with us in London for a week, as you are normally based in New York. When you're in the United Kingdom, what is your afternoon tea preference?
English breakfast, milk and sugar, pumpkin scones, and raspberry jam.
Nice choices! When you’re not in the office, where can I find you?
I’ll be out with friends in NYC or travelling in faraway places. My last trip was to the Swiss Alps. My next will be to Mexico.
How did you end up becoming an Emerging Markets Portfolio Manager?
Ever since I studied geopolitics in high school, I’ve had an interest in international markets, economics and world history. When I entered university, I learnt more about finance and knew that being a Portfolio Manager would allow me to explore my interests and implement my convictions.
What are some of the main differences between emerging markets (EM) and developed markets (DM)?
Things are changing in a dramatic way. In my view, political risk is falling or stabilising in a number of emerging markets. Even though they’ve experienced some shock elections in the past year, transitions of power have been largely peaceful. Governments are also taking steps to address income inequality and inclusivity. Emerging Market assets have already ‘priced in’ a significant amount of risk premium, but I think that’s overdone – especially when you compare it with progress made on economic reforms, election handovers and the creation of stronger central banks.
As for developed markets, I think the opposite rings true. They’re not pricing in enough risk premium. There’s a lot of rising political instability, driven by polarised electorates and income inequality. If I look at threats to rule of law, concerns about peaceful transfers of power or checks and balances on leadership, these countries are – rather ironically – starting to resemble the EM nations they labelled as ‘risky’ in the past.
On the flipside, we see a number of emerging markets making great steps in a positive direction. Fiscal debt concerns used to be more of an EM problem. Now, if we look at debt to GDP metrics, DM countries are the ones that stand out in terms of how much liability they have recently incurred. Many EM countries have been forced to be more fiscally prudent as they learn to be mindful of the risks of inflation and currency weakness.
When I think of what truly defines an emerging market, I associate the characterization with per capita GDP, which is often much lower than DM countries. There’s also growth rate – which is often much higher than DM countries, given that they are earlier in their development – as well as currency risk and trading accessibility.
What trends do you see in emerging markets? To what extent are they comparable with the ones we’re observing in developed markets?
One of the biggest movements I see is the increased use of technology and digitisation, which lifts people and their economies to higher standards of living, promoting growth.
Empirically, we know that those living and working in emerging markets are among the fastest adopters and creators of technology. India has used technology to make sure every person in the country has a digital ID, so they can be included in everything from food subsidies to generalised banking. That system has helped the government create efficiencies in their budgets, allowing them to free up capital that they can now invest in infrastructural projects like high-speed rail. We’ve also seen the rise of companies like Taiwan Semiconductor, who supply integral chips to industry giants like Nvidia and Apple. They’re creating high-quality jobs all around the world.
Outside of China, many emerging markets have young populations, and the size of their workforce is growing. That’s creating a whole new group of consumers and innovators. Developed markets, on the other hand, are struggling to adapt to the needs of their aging populations. I see technology improving productivity in these countries, but that doesn’t mean the added value is being used to lift people out of poverty, or improve long-term living standards.
It is sometimes said that women are the biggest emerging market of all. How does that resonate with you?
Across emerging markets, I do believe that women are at the heart of inclusion. They’re also key drivers of wealth and consumption.
There is a perception that investing in EM is risky. What’s your opinion?
A lot of risk is priced in, but there are huge opportunities for potential returns. Not enough risk is priced into U.S. markets. For example, the breadth of stocks driving returns is narrow, and political risk is not yet reflected.
After more than two decades in finance, what advice would you give to your younger self?
Read voraciously. Work in another country to gain different perspectives and meet different people. Lean into your personal brand, and don’t let fear drive your decision making.
Greater good is something that comes up in most of my interviews – what does it mean to you?
In order to have an impact beyond my day job, I serve on the board of WaterAid in America. I’m also part of the national council for the World Wildlife Fund.
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