E46: Emerging Market Investing with Rohit Khuller

This podcast is brought to you by Gensler Wealth. The information discussed today is meant to be general in nature and not tailored to your specific investing circumstances. This means that you should talk to your regular Gensler wealth advisor or your own advisor before acting on any information we discuss today. Nothing in this podcast is intended to be a solicitation and and past performance does not guarantee future returns. On today's podcast we take you outside the comfort zone of developed markets investing. So get comfortable with uncomfortability. Today on the unlimited podcast we speak with Rohit Kuller, Vice President and Partner at Letgo Brasso and Associates about emerging markets investing, the opportunity and the risks. Let's go. Welcome everybody to the Unlimited podcast. Latest episode here. Very pleased after I guess you know, we did a little bit of an investment topic last time with former my former professor from Ivy, Stephen Forrester, but that was sort of broad investing knowledge and advice and prior to that a few fun things over the summer. Today we are back with a very focused investment strategy oriented podcast and today we're going to talk about emerging markets investing, which may be new to some folks. Let me give a quick introduction as to what this is and then my guest will obviously dive much, much deeper. Emerging markets investing involves allocating capital to developing economies that are likely experiencing rapid growth and industrialization. Key examples include countries like India, China, Brazil, Mexico, the Philippines, et cetera. A few more, many more actually. And these markets typically offer higher potential returns due to their growth prospects, but come with arguably increased risks such as political instability and market volatility, although our guests will explain maybe how big or small those risks are. Really pleased to have Rohit Color, Vice president and partner at Letgo Brasso and Associates with us here. So hi Rohit, nice to see you.

Hi Brian.

So let me give a quick intro to you, the formal intro, and then you can share your background with everybody. So Rohit, as I say, works as a Vice president partner at Let Go Brasso and Associates, which is an independent investment manager managing approximately $18 billion of assets with offices in Montreal, Toronto and Calgary. In addition to his role as portfolio manager, he's a member of the firm's investment council and that oversees portfolio strategy and risk management for all the company's assets. And he's the lead portfolio manager responsible for the firm's emerging markets equity investments. So that's what we're going to dive into in great detail today. Prior to joining Letko Brasso, Rohit's career in various industries such as automotive, aerospace and banking in several countries enabled him to deepen his knowledge in different fields. And he successfully completed the general management program from Harvard Business Business School, my alma mater. He has an MBA from McGill, a Bachelor's in engineering from Delhi College, and is a CFA charter holder as well. So big, big bio. We'll put that in the show notes there. But Rohit, again, thank you very much for taking the time when you're not sort of traveling around the world here, visiting companies. Appreciate it.

It's my pleasure to be here, Brian.

You know, I've given the formal, I guess background, Rohit, but you know, to manage an emerging markets fund, see the world and know the world. You obviously have a story of how you became, you know, sitting here with me talking about emerging markets. Can you give a little bit of background, you know, where are you from and what, what was growing up like and how did you eventually become the lead PM on an emerging market strategy in Montreal, Canada?

Yeah, sure. So I'll tell you a little bit about how this journey started and perhaps even evolved. So I was born and raised in India in New Delhi, India. Did my high schooling at Army Public School New Delhi and went on to complete my undergraduate studies from Delhi College of Engineering. I worked for about two years after, after my undergrad at a subsidiary company of United Technologies. The company was called Carrier Air Conditioning, which is quite popular here in North America as well. But after a few years I got bored of my job selling split duct table air conditioners and I came to Canada for my graduate studies at McGill University's business school. And just after graduating with an MBA in finance in 1998, I accepted an offer with Peter Letku and Daniel Brosso to help them responsibly grow their clients capital. So back in 1998 the firm managed about $2 billion and today we manage about $18 billion. So it's been an incredible journey at the firm, at least for me for the last 26 years.

Amazing. So you've been there for as you say, 20 plus years. 26 years. How did it evolve to launching an emerging markets fund? Cause that wasn't, they weren't managing emerging market when you got there. And how did you sort of get into the lead portfolio manager role?

No, actually surprisingly to my surprise when I joined them, they were quite involved in the emerging markets since the time of inception. Oh, but, but the team was quite small at that time when they were managing $2 billion. When I joined them it was not about whether, you know, they had exposure to the emerging markets or not at that time, but, but it was more about, you know, how things have changed since then and what has not changed since then. You know, I, when I joined them in 1998, I basically came, you know, I joined them as a financial analyst with almost no experience managing capital, you know, investing capital. But over the years I looked at a few industries, started in the utility space, looked at technology, telephone companies, cable companies. But then in 2011, I was given the mandate to manage the emerging markets portfolio. It was a dedicated portfolio that we begin in 2011 focused entirely on emerging markets. And that portfolio has since grown to about $2 billion now.

Amazing. Maybe just spend a few minutes talking about Letgobras. So just to give listeners a sense of how your firm approaches investing in general, there's lots of different ways, you know, growth, investing, value investing, all these other things. What's your approach holistically as a firm? Just so we can put the lens on at a high level, then we'll dive into emerging markets.

Let me tell you a little bit about the firm. Letco Russell was founded back in 1987 by Peter Letku and Daniel Brosho, both of whom worked at CN Pension Fund before they founded the firm. The firm's investment philosophy back in 1987 was deeply embedded in doing bottom up fundamental work with a focus on discipline, valuation discipline, and repeatability in performance returns. And like I said, even though there have been many things that have changed at the firm, a lot of the process has become more institutionalized. And you know, now we are close to a hundred employees and when I joined them back in 1998, we were, I think, close to 20 employees. So a lot has changed since then. But one thing that hasn't changed is that passion for doing bottom up fundamental work with a lot of discipline and repeatability.

And so when you use the term bottom up, just to make sure listeners understand what that means, what's bottom up? Maybe describe that a little bit.

Sure. So, you know, you can, you can go about investing literally two ways. You know, you can either look at a country, a region, and you look at the growth rates, you know, and say you, you kind of go down from the top. So, okay, China is growing at, let's say, 3%, 4%, India is growing at double that rate. So focus on India. And from, from there you go on to the industries and then to the company. And then there's the other way where you could just look at what are the companies, how are they doing, you know, in different job geographic regions and different industries. And you, and you focus on fundamentals. You Know, you focus on trying to do fundamental work on these companies and then you kind of, you're more focused on stock selection. You start with stock selection, you know, and then you kind of come up all the way. But at the end of the day, the way your portfolio is allocated in different countries is just a snapshot of how you see the opportunities on a company basis rather than a country basis.

Right, right. So bottom up looking at fundamentals of individual companies as opposed to maybe top down looking at the macroeconomic picture of countries and sectors and that whole thing.

Exactly.

Okay, gotcha. So then you take Let go Brasso's bottom up stock picking or investing approach and you're applying it to emerging markets. So I, I gave a little bit of a definition of emerging markets, but you're the expert, not me. Can you just describe for listeners what's emerging markets investing, what are you investing and why are you investing in emerging markets? Or maybe we'll get a little bit into that shortly, you know, what's the opportunities. But yeah, let's, let's keep it simple. Maybe at the start, what's emerging markets investing? You know, if I didn't do a good enough job at the beginning explaining.

So emerging market investing is, is really about investing in faster growing economies, countries that are in their somewhat in their early stage of development. As a result, these countries are likely to see economic growth rates that will likely exceed the developed market growth rate, economic growth rates over the next 10, 20 years or so.

And developed markets means what like the US and Canada, us, Europe, Canada, Japan,

Australia, you know, these type of markets, normal countries, and sometimes these faster growth rates in the emerging markets can be as high as three to four times faster. So the problem in the EM investing really comes because of the significantly higher risk levels, be it political risk, currency risk and even company specific risk. So the challenge is really to find low risk investments that can give you an advantage of those higher economic growth rates that you're likely going to see in these emerging markets. And right now if you look at our portfolio again, we are a bottom up fundamentals focus investor. And for us, roughly 25% of our investments or 25% of our EM fund is in China, 20% is in India, 20% is in roughly 20% is in Brazil and another 13% is in Mexico. We don't say that we wish to be 25% invested in China or 20% in India. But, but because we do this bottom up fundamental work, we are able to spot a lot more opportunities in these two countries. And that Is that is why it ends up being what it is, 25% in China and 20% in India.

So you're talking about China, which is always in the news with some controversy. You're talking about India. We're recording this right now with a lot of news with what's going on with Trudeau and his announcements about India. These undoubtedly sound like higher growth countries. But as you say, you used the word, and I would echo it, these could be risky. What's the risk level of investing in these types of countries and how do you mitigate that? And ultimately, is it worth the risk? Most investors, I think, and the reason why we're doing this podcast is because I think most investors are invested in developed countries. And frankly, most of our listeners are probably invested in Canada and the US probably mostly in the US which has been on a tear, the s and P500 for, you know, aside from 2022 with a blip, it's been on a tear for years. So how do you manage the risk in emerging markets and why is it worth the risk given the types of countries that you've mentioned?

So, no doubt these are riskier markets in general, but because we are able to spot plenty of lower risk investments within these countries, for example, investments in clean water and sewage service suppliers, renewable electricity providers, in airports, in ports, in the railway sector, we are able to spot a lot of ideas in these sectors and even healthcare and modern distribution. So these themes like clean drinking water, sewage services, renewable power, health care, these are likely to be stable growers over the next 10, 20 years. In most of these emerging markets, the question is, can you manage the currency and other risks? And we have been able to do that very effectively for more than 35 years. And later on, I can even get into our track record and you know, how effectively we invested the client's capital within this asset class.

Okay, so. All right, so you. What you're essentially saying is, you know, there's certainly a case for investing in emerging markets. There may be in particular a case today for investing in emerging markets relative to some developed markets. Can you just more maybe broadly then explain to our listeners what's the emerging markets opportunity right now? What are the sort of key points of opportunity of investing in emerging markets?

So emerging markets are quite large and significant. So if you look at the MSCI EM Index, it has about 1500 companies in it. And you know what, frankly speaking, the vast majority, perhaps 1200-1300 companies in the index don't even meet our investment criteria. But really, we are Actually starting with a lot bigger universe than 1500 companies in the emerging markets. We actually start with a much Wider universe of 6000 EM companies. And we don't restrict ourselves to those 1500 companies in the index. And the idea here is to get to a portfolio of 50 to 60 top ideas in these emerging markets. So the first aspect is that these emerging markets are quite large and sizable. The second aspect is that these emerging markets are on a structural path to growth. They are secularly growing. And if you put these emerging markets, all these emerging markets together, they account for almost 60% of the global GDP. And approximately 3/4 of the total global growth is likely to come from these emerging markets over the next few years. So these are not our estimates. These are IMF numbers, you know, you can World Bank IMF numbers. So emerging markets are also in a sweet spot as far as the growth is concerned. And this is all structural growth. And you can make a case that, okay, what if the developed markets are going to slow down and so on and so forth, but really the growth may slow down in the emerging markets as well. But if you just look at the long term case of that secular growth, that gives us a lot of confidence, right? And then emerging markets hold a wealth of opportunity. The need to supply clean water. 70% of China's river water systems are polluted. More than 50% of India's river water is polluted. There will be a lot of investment that will be required to clean up this water resource and supply fresh water in these countries. These are large population, you know, you're looking at large population bases. Similarly, the sewage systems, they need to be upgraded in these emerging markets. So for example, just look at Brazil. They need more investment now on the sewage side than what they need on the water supply side. They've made huge strides in universalization, in universalizing their tap water supply over the last 10, 20 years. But they largely ignored their sewage system upgrade, you know, upgrading their sewage systems. So looking forward the next 10, 20 years in Brazil is going to be a lot about upgrading these sewage systems. This is just one example. You look at the need in the airports business, there's a huge opportunity on growing airport capacity, improving the runaways, improving the building infrastructure for these airports. Similarly, there's a lot of investments that will be required in upgrading the port infrastructure, in the rail infrastructure, in India, in China, in Brazil, in Mexico. You look at healthcare for example. Universalization and quality are likely to be multi year opportunities in these large emerging markets. And as the income and employment levels go up in these emerging markets, people will likely spend more on quality, high quality healthcare. I could probably do this for hours, you know, just giving you an idea about the kind of needs and opportunities that exist in the emerging markets.

But that's good. Yeah, that's very good. I was reviewing some of your material and I did see some links out to some of the references you just mentioned before. And I think it's the IMF website maybe that you were mentioning. And I went there and I, and they actually have a map of the world and you could click do you want to see the developing markets, the emerging markets, both, whatever it is and when you actually click and just look at the developing markets, there's six countries or something and, and so the map is, you know, a little bit colored, obviously some big countries and then you click the emerging markets and take off the developed markets and almost the entire world lights up. You know, it's, it highlighted to me this sort of diversification, maybe benefits and you know, people investing in the U.S. you know, especially if you're following the S&P 500, you're invested in six or seven very large companies. That's about 30 plus percent of your portfolio right there. And then you've got a mix of the other 493 that you know, for the last little bit haven't been generating huge amount of return relative to those big guys. But this to me highlights like a diversification component for a portfolio. Is that, is that a fair statement?

Absolutely it is. If you look at the MSCI world. So 70% of the MSCI world is represented by US stocks, right? And 31% of the US stocks are a group of the, you know, those, those seven companies you, you, you'd mentioned the magnificent seven. So if you own the MSCI World etf, which by the way is a very popular ETF these days, the fact is that you're putting a lot of eggs in a single basket. So there's a clear kicks of overexposure to the U.S. stock markets, the U.S. equity markets. And if you want a diversified global portfolio and a more longer term investment strategy without sacrificing the earnings growth, then you ought to consider a higher allocation to emerging markets in your global portfolio. So the world is clearly under allocating to emerging markets today. You know, EM, like I said, is it's almost 60% of global GDP but accounts for only 9% of global equity portfolios and allocation to EM accounts for only 9% of global Equity portfolios. You know, that allocation for us as a firm for our clients is 17%. So we have been allocating 17% to our global portfolios because we are thinking longer term and because, and it's also because our EM returns have been higher than the Canadian Market index returns for the last 10 years and also for the last 35 years since inception.

Right. Well that's impressive. So speaking of, I mean returns and differentials between markets, maybe talk about the valuation difference right now we keep mentioning the MAG7 or the US markets or whatever, but what's valuation levels in the US versus emerging markets right now? Where do they sit?

So EM versus developed market valuation differentials are quite large. And let me give you a few examples. If you look At S&P 500, it trades at about 21 times forward earnings. And if you look at the MSCI World we talked about, which is 70% US, that's trading at 18 times earnings. And if you look at MSCI EM index, this index is trading at only 13 times price to earnings ratio as opposed to 21 times. For the S&P 500, this index is yielding 2.8%. But if one were to take a look at our EM portfolio, our EM portfolio trades at less than 10 times earnings and yields almost 5%. So yes, there are differentials and these differentials are quite large and somewhat because of higher risk in the emerging markets as well. You know, we already touched upon political risk, but there are other risks like higher inflation, higher interest rates in the emerging markets. So you've got to deal with the currency risk, the currency depreciation. Then you know, there are governance risks as well. And some of these risks like governance and company specific risk can be mitigated or can be diversified away. And there are other types of risk that can't be mitigated. But again, the key is to unlock the high earnings growth in the emerging markets and marry it to lower risk or standard deviation in your portfolios. So key is to find companies or investments that are trading at reasonable valuation, somewhere in between 10, 10, 12, 10 to 15 times earnings in the emerging markets. But focus on companies that are likely to grow their top line, their bottom line by, by 12 to 15% CAGR over the next several years and hopefully see an expansion to those multiples. Well, we don't count on multiple expansion in our investment thesis. But you know what, it's an added bonus. If the multiples expand, they give you a little bit more of a talk in your performance.

Okay, so thanks for giving us a little bit of color on the opportunity here. I think we're going to dive into a little bit more, maybe some examples of, you know, some of the holdings you have. But before we do that, let's now so you, you're the, the key, the lead portfolio manager on the strategy. I know you have a couple co portfolio managers and then you have your team. Would love to understand how you're set up and how you approach emerging markets equities. And I'll tell you from my experience, you know, we, we interview and we meet with a lot of managers across Canada and around the world. But I would say in particular in Canada, what I have found, and this was true even when I set up the international fund at Glesk and Jeff, you know, 15 plus years ago, typically in Canada, the international or emerging market team is 1pm, maybe 2pm meaning portfolio manager. And that person is tasked with knowing every company around the world, every country, every industry, every sector. And it really is like in my view, a herculean task. You have a different approach, spoiler alert, which is, you know, why we're spending a lot of time with you guys these days. Can you just explain how your team is set up to cover the world and maybe a little bit different than what I've just described that I often see. Not exclusively, but often see.

Yes, of course, Brian. We believe we are quite different from some other Canadian or global money managers in the way we are organized. Our team of 22 investment professionals is organized by global sector. Each analyst usually follows one sector or a few related sectors. Because they specialize in just one area, it is easier for them to understand the cost structure of all the companies in detail and then figure out how the different trends may favor some other companies, some companies over others. We like our analysts to have some experience in the sector they end up covering. For example, if you look at Ivan, who's our healthcare analyst, initially he worked as a pharmacist. If you look at Terry, who covers retail, he worked at A and P, which is Metro Stores. Now Sankalp, who covers financial, he worked at State bank of India. Mila, who covers metal and mining industry, graduated from Moscow State Mining University. Charmaine, who covers industrial, worked at Panasonic before. So, you know, we built this team. I built this team with diversity in mind. Seven of the 22 team members were born and raised in the emerging markets. And almost all of us have graduate degrees along with CFA designations. So we are a highly experienced team. And if you look at the average experience on the team, it's about 25 years, 15 years being at LBA and another eight years being before LBA. So what we do as a team, our investment philosophy is to figure out what is an ideal LBA holding. A company that has a sustainable competitive advantage, has transparent and strong earnings growth prospects and it has a reasonable valuation. Our end goal is to construct a portfolio of 50 such ideal LBA holdings. A portfolio that can drive our clients, that can give our clients an asymmetric risk to reward profile. A portfolio of such ideal LBA holding ends up driving the long term alpha for our clients. So that's really what we are trying to achieve as a team.

Okay, great. I appreciate all the color there. And so what, what that means is just to clarify is when you say you got 22 team members, they all have global coverage of a particular industry or sector. They are looking at the entire world when they're looking at a telecommunications or financials or metal and mining and therefore they're traveling the world and really going deep into their specific area of expertise. It doesn't sound like anyone. Again, don't let me explain it for you, but it doesn't sound like you have generalists that are covering the world very specific expertise that is covering their own specific industries and sectors.

Exactly. Spot on.

Okay, perfect. So we talked about the opportunity in emerging markets, we talked about how the team is structured, talked a little bit about risks already. Can you just give us a little bit of color then? And again, don't want to go too deep into the economic and political world, but maybe on some of the major countries, I should say that you mentioned, you said you invest in India, China, Brazil and Mexico would be your top four. Give our listeners like literally 30 seconds to a minute on each of those countries. Assume we don't know anything about what's going on over there. You know what's happening in those four major countries. Why are, again, I guess tie it down to why are they good investment opportunities or targets. But I'm sure you'll say this could go on for four hours if you want to deep dive into everything. So just trying to hit the highlights of those four top countries. I know you invest in a bunch of others, but the four top ones that you focus on.

Sure. So let's start with India. We expect the Indian economy to do very well over the next 10, 20 years. We think India can grow at 6 to 7% KEGR over the next 10, 20 years. And this should provide a strong macro platform to a vast majority of Indian companies to grow at outsized rates in terms of earnings and cash flows. But if one were to look at how these companies or you know, the, in the Indian index was valued. The Indian index stock index is now trading at 21 times next year's earnings. So the next year being, you know, their fiscal year ends in March. So March 2026, you know, so, so it's not cheap by, by any yardstick. So it appears that the Indian stock markets are somewhat priced to perfection. That said, one can still find tens of ideas, if not hundreds of companies in India that will likely double in price five years from now. But the key to success in India we believe is likely going to be stock selection rather than an index or an ETF based approach. So that's a little bit about India. And if you look at China, for example, you know, China is just too big to ignore. It's the second largest economy now. Last year their GDP was approximately $18 trillion. That's trillion, not billion. So this is a country that's approaching $20 trillion in GDP and growing at 3 to 4% CAGR over the next several years. So what we like about China is that it has a lot of dynamism. The country has a very large industrial base and when I say industrial base, I mean a tooling base. So you just asked Tim Cook, who's the CEO of Apple, why he went to China in the first place to manufacture his phones. And he will tell you it was because of the tooling base in China. They were able to, you know, build a tool for their phones or for a change in their phones very quickly. That was the main reason they went to China. In addition to this, you know, we find there's a lot of depth and breadth of opportunities in the country. You know, so for example, just look at their electric vehicle or battery building activity in China. You look at robo robotaxis for example. You know, there are several, several hundred robo taxis already operating in, in the country. We think China is, is quite strategic. It's, it's a very dynamic marketplace for, you know, these, these different industries. And when it comes to other markets like Brazil and Mexico, even though the growth, the macro growth may not be that high, but because we can spot a lot of interesting ideas, we can spot a lot of stable companies within the renewable power space, especially hydro in Brazil, you know, we can spot healthcare clinic investments, we can spot a lot of airport, sport, highways opportunities over there. So the investment case has more focus on industry slash company growth than macro focused.

Got it. Any commentary on U.S. president? I was thinking about this U.S. presidential elections and what this means for some of those markets. Maybe Mexico in particular, as, you know, trading partner to the US Right there, depending on who's the president. Do you think about that in your analysis or is that more again, top down versus bottom up?

Well, we do have a macro layer to our strategy, but we really don't think about these things, who gets elected and how things will change because we are generally thinking 10 years out, 20 years out, even though we are planning for the next few years. But we have an eye on the next 10 years, 20 years. It's more of a marathon for us than 100 meters or 800 meter race. You know, when you're driving on the highway, you, you want to be focused on what's near term, but then you also want the headlights to go as far as possible to, to get an idea about where the big bumps are or where the dead ends are. And you know, where the lights are, you know, where the crossings might be. So, so that's the idea. So that is why we are not focusing too much on who's going to win the US election race. Is it going to be Harris, is it going to be Trump, how the policies are going to, you know, change. Let's, let's not get into, you know, things that are.

Yeah, okay, no, got it. Makes sense. Maybe one or two final questions here. You know, you talked about many different countries that you look at that you invest in. You talk about managing some, some risks, one of which being currency risks. You've got lots of different currencies going on in your strategy. How do you think about and manage the currency and currency risk for the overall portfolio?

You know, that's a very good question. And if you look at currency hedging, for example, a lot of people ask us, do you hedge your currency exposure or not? And we don't because it's both expensive and complex to hedge EM currencies. But what we do very well is we do a lot of currency, PPP parity work, purchasing power parity work in house, you know, our team of 22 analysts, we have two in house economists who try to figure out this, this parity. And they do a lot of macro work. And there's a macro overlay to our fundamental work we are doing on earnings growth, cash flow growth and so on. But we are looking at trends in inflation, in money supply, the debt levels, how they are changing the current account deficits. And then we are trying to develop a view on the expected depreciation rates in the EM underlying currencies that we are invested in. And accordingly, we inflate our threshold returns numbers that we require in Canadian dollars. So for example, our typical target is 15% return for our clients in Canadian dollars. And if we expect the Brazilian real to depreciate by 2% a year or the Indian rupee to depreciate by 2% or 3% a year, then accordingly this threshold number of 15% is adjusted to about 17 to 18% for these different currencies.

Okay, makes sense. I got it. Second last question. So just pick one company in your entire portfolio just to get. We've talked a lot at the high level and how you find companies and your organization and how you approach it and currency and you talked a little bit about some of the types of companies you have. But can we, can you just give us an example of one might be your largest company or something that you're most excited about today and just explain why. Is this a perfect candidate for your emerging markets fund?

Sure. You know the largest company is Manila Water in the fund today and it's the largest holding at 4 and a half percent weight in the portfolio. And what the company does is that it supplies fresh water and sewage services to the population in eastern zone of Manila. It is the largest publicly traded water supplier and sewage business in Philippines. And if you look at the growth in revenues and earnings over the next few years, we think that the business is capable of growing closer to 15% in both revenues and earnings over the next few years. And the business is trading at 6 times earnings and has a dividend yield of about 5%. So that's the largest holding. And I'll give you maybe perhaps another flavor of some, some other type of investment. You know recently we invested in HDFC Bank. This is the largest private sector bank in India and it has one of the lowest non performing loan ratios in the entire banking industry in India. We've been having, we've been meeting management at HDFC bank for the last, I don't know, maybe 15, 20 years. And we stayed away from, from the bank over this time period because it was really price to perfection. A lot of times when we met them they were trading at 30, 35 times earnings, 5 times book, even closer to 5 times book. But recently an opportunity presented itself and, and, and we, we pounced on it. And the reason we did that was, you know this was one of the most liquid banks, one of the best managements, banking managements in India, the, you know, one of the lowest non performing loan ratios like I mentioned before but the market was recently concerned about their funding mix. They thought that their funding mix would go up because the, the bank merged with the HDFC Limited, which was largely a mortgage institution. Mortgage lending institution. And HDFC Limited, which was the parent company, was, was really, their deposit base was really wholesale deposits, which was at a much higher interest rate. So their funding mix went up as a merged entity. So the, so the market accordingly, you know, pulled down the price quite a bit. So this opportunity came up and, and we, we had a call with the management. In fact, we met the management also just recently. And my analyst was able to figure out that about 3,000 of their branches were less than five years old, and they had a total base of about 8,000 8,500 branches. So about 35% of their bank branches were very young. They were less than five years old. And as a result, they were highly inefficient. Like if you look at one of their branches that was open for 10 years or more than 10 years, that would be three times more efficient than a branch that would be open for less than five years. It'll be getting more business, more customers at a much lower funding rate. So we figured out that as these branches, these 3,000 branches mature, they'll be in a position to get their funding mix back down to their historical level. So that was the story over there. So as these branches mature and become more efficient, the bank will be able to crank out better profit margins and, you know, earnings growth going forward. So we were able to buy the business at less than 15 times forward earnings.

Good. Well, hopefully those earnings increase as you, as you predict there. Okay, so last question. We always ask our guests, and I didn't give you any warning of this. Our theme here. And you've, you've been to our offices. We've met in person with your team. I've been to your offices as well, by the way, as you know, which, which was a great visit a number of weeks back. But our theme over here is unlimited. The podcast is called Unlimited. Our tagline is your wealth unlimited. Because we are an independent firm, we look at a whole variety of investment and other options for clients. We help clients with whatever they need. On the financial side, we're not limited by sort of any. By anything really. And so I always ask our guests last question. You know, you're doing what you're doing now, but the world is unlimited. You know, you, you could do anything else you want in the entire world if you weren't sitting here talking to me as the lead PM of the Emerging markets fund that, you know, let go Grosso, what else might you be doing with your life or doing right now if you know, all the choices are unlimited and you can do anything?

Brian, I'm completely blanked out because I have no clue what I would be doing if not this, what I'm doing. You know, I have so much of passion. It. It feels as if I was born to do something like this. So, I don't know, you have to excuse me on this one, but. But I would imagine I would probably be an athlete if I were to just, you know, take a shot at it.

What, what sport? What's your sport of choice?

Well, I was, I was, you know, okay, at badminton or, you know, even field hockey, volleyball, a few games over there. I played in high school, you know, and I was at my undergrad, doing my undergrad too, but, but really, you know, I. I feel, a lot of times I feel that I was. I was born for just one purpose. And especially, you know, my. My life completely changed when I came to McGill to do my graduate studies in finance. You know, I came across these professors and they were really world class professors. It was just a, you know, as if a lightning bolt hit me and, and my complete perspective changed and I said, no, finances is what I want to do and I want to get investments. And since that day, there's been no looking back.

Well, that's good. That's a good way to look back on your life with no looking back. So I love it. Well, listen, thank you very much, Rohit. Really appreciate your time and explaining what emerging markets investing is and what you do over there. So thank you very much and appreciate it very much. We'll talk to you soon.

Always a pleasure.

All right, take care.

The Unlimited podcast is hosted and produced by Brian Ginsler and is edited and mixed by myself, David McMillan. This podcast is not to be taken as investment advice. If you like what you heard, don't forget to rate the podcast and follow us on Social medianslerwealth. Thanks for listening and see you next time.

Sa.