Podcast: Investors Know What Not to Do in Emerging Markets. They Keep Doing It Anyway.

Robert Koenigsberger, who began his career in the 1980s when emerging markets were largely a collection of defaulted bank loans, founded Gramercy, the emerging markets alternatives firm, in 1998, the year Russia devalued its currency and forced the restructuring of its debt. That background shapes his view of today's markets. In a podcast conversation, he argues that developed markets are now facing the kind of uncertainty and volatility once reserved for emerging markets, citing wars in the Middle East and Ukraine, fragile global alliances, and rising inflation, debt, and interest rates as drivers of the turmoil.

Koenigsberger characterized the last three decades as a period of "extraordinary peace" that translated into an environment "extraordinarily friendly to investors." In his view, the tools investors have come to rely on probably will not work well over the next 35 years. He and Mohamed El-Erian, chair of Gramercy, share the view that "our highest conviction is you can't have conviction." The author notes this is not a reassuring message, but argues it clarifies what institutional investors must do: prepare for persistent volatility and construct portfolios designed to use it rather than be knocked off course by it.

The piece uses emerging markets as an object lesson in how institutions handle uncertainty poorly. According to the author, investors have repeatedly allowed risk management techniques, asset allocation rules, benchmarks, and governance policies to constrain them from acting flexibly and opportunistically at precisely the moments when such action matters most. The podcast is available on Spotify, Apple Podcasts, and other platforms.