EInvestors are talking a lot about emerging markets and how to make money in those markets now that most of them are in a recession or suffering from a high inflation rate. Jim Dondero the CEO of Highland Capital Management is one of those investors. Highland Capital, under his guidance, has more than $28 billion assets under management, and a number of those assets are taking a beating in Brazil, Canada, Russia and South Africa.
The typical investment vehicles have stalled in those countries and Dondero and other investors are looking for alternative investments. Alternative investments is one of James Dondero’s specialties. His company has more liquid alternative investments around the world than any other hedge fund company. Dondero is the king of alternative investments and he thinks he has found another vehicle that can pick up the slack created by the weak assets in the primary emerging markets.
Dondero and other investors are looking at Vietnam, Thailand, the Philippines and Cambodia because those countries have real estate investments that can offer investors major financial returns. Real estate investments in those countries can outperform other investment because those markets are wide open, and ready to be part of the emerging market boom. A boom, according to Dondero, that has lost a little of its return power at this point. There is unprecedented growth in those countries thanks to more manufacturing, and more exports. The growth pattern in those countries is expected to continue for at least the next five years, so investors like Dondero are focusing on properties in those countries.
Some investors think there are risks involved with buying property in those countries, and Dondero agrees with them. Even though those countries have government stability now, there is no guarantee that stability will be in place a year or two from now. The other risk is their big neighbor, China. Even though the Chinese have invested in Vietnam, Thailand, Cambodia and the Philippines there is no guarantee that the current Chinese economic issue will not hurt investment properties in those countries.
Most investors like Dondero believe that China needs those countries in order to execute their new economic plan. That plan is based on consumer consumption rather than manufacturing and exporting. But no one is sure what the Chinese will do, and that includes the Chinese.
But investors that are willing to take risks are convinced that investment properties in those low emerging markets are good assets. One of the main reasons is low prices. Dondero says low prices are the main ingredient in successful investments. Investors that are willing to take the risk and buy low usually get big returns.
Mr. Dondero is prepared to expand the company’s investments in Asia, even though the 2016 economic forecast is weak. The IMF and the World Bank say Asian economic growth is in the hands of the Chinese, and that concerns investors. If China has another meltdown before their new plan takes shape, investments in Asia and in the rest of the world will be worth a lot less.