Search Google for material on Ashmore Investment Management and, for an organisation of its size and influence, you'll be presented with a disappointingly modest amount to browse. You will find hints that here is a very successful company, however. In October 2006, for example, Ashmore chief executive Mark Coombs was, in the words of British newspaper The Times, “catapulted into the ranks of the City's super-wealthy” when his company listed on the London Stock Exchange with a valuation of £1.36 billion (€1.72 billion; $2.67 billion) – valuing Coombs personally at £734 million in cash and shares.
The reason for the scarcity of archival references, and also the reason why Coombs would likely have been embarrassed by the focus on his sudden fortune, is that Ashmore is determinedly low-profile. Hence, it is only when the company issues a rare press release – as it did on 23 June this year – that brief glimpses of the firm's continuing progress avail themselves. Arguably typical of the firm's approach, the press release was strong on specifics, light on unnecessary detail. What it did reveal was that, just ten months after Ashmore closed its previous emerging markets-focused special situations fund on $1.3 billion, it was now launching a successor vehicle which, according to a statement from Coombs, “we would prefer … to be significantly larger”. The firm did not comment on newspaper reports that the aim is to double up at around $2.6 billion.
The need for the new fund is apparent from the speed with which the firm puts its capital to work. Its third fund, which closed on $1.4 billion in August 2006, was fully drawn down in 11 months. Fund IV, closed in October 2007, is, according to Ashmore head of research Jerome Booth, currently 70 percent drawn down. It's natural to ponder whether this rapid speed of deployment has a detrimental effect on returns. That does not appear to be the case. From the raising of its first fund in 1998 to the end of March this year, the firm posted an internal rate of return “in excess of 38 percent annualised, gross of fees” – and, bear in mind, the firm does not normally use leverage in its deals.
So what has been key to the firm's success? Booth says the firm's pure focus on emerging markets is an important ingredient. “This has often been cited as a positive signal by those we do business with,” he says. “It shows our relationships are long term and strategic, not just a fad of a few years.” For a firm that tends to keep itself to itself, it's notable that Booth is moved to make this comment. “Fad of a few years” is, after all, a cutting way of describing the building wave of private equity capital that has washed over Asia recently.
This brings us on to the second ingredient of success in Ashmore's view: good relationships. There's a lot of spin about the importance of building close personal relationships in Asian markets, but from relative newcomers it tends to have a hollow ring. Initially part of Grindlays, the British bank specialising in India, and then ANZ Bank, Booth points out that the Ashmore team's investments in emerging markets go back 20 years.
Booth gives his version of what relationship building is all about: “We're very constructive, we try to solve problems, and we spend ages doing due diligence with entrepreneurs. The end result is that entrepreneurs want us to do deals with them and we end up with more deals than we have time available to do them. When we go into a boardroom, we always seek to be constructive. We're not aggressive. That's not our style at all.” He cites “strong local relationships, which can take years to build up” as “the main barrier to entry for traditional private equity houses wanting to enter the emerging market space”.
Booth acknowledges that interest in emerging markets in Asia and elsewhere is bound to continue increasing, but suggests that many firms are about to experience a culture shock. “There's a big difference between raising funds and knowing what to do with them,” he points out. Ashmore is confident that it knows what to do with its swelling funds under management: just don't expect to hear that confidence being shouted from the rooftops.