The 2008 financial tsunami left American institutional investors battered and bruised. But reflective actions vis-à-vis emerging market asset classes may have underscored a more serious fault in their overall strategic thinking. In every key emerging market to include India, China and Brazil the overwhelming approach for US institutions was the same ‘Get out fast, and damn the consequences’! This strategy began in October of last year and in many asset classes like real estate it continues today. US money center banks unwound their most lucrative equity holdings to recapitalize their balance sheets and countless asset managers simply used the crisis to exit markets they never fully understood. Many of these institutions jumped into overheated markets at the height of their bubbles willing to pay obscene valuations only to exit once the bubble collapsed. What may in fact be at play is a need for immediate gratification on behalf of both investors and asset managers. The US investor has moved to an era of quarterly returns and IRR only to sacrifice long term strategic planning that would ultimately drive higher and more stable returns. This approach is a distinct departure from their European and Asian counterparts which have invested heavily in developing a long term presence and knowledge base in emerging markets. The results are obvious today as China pushes towards a GDP of 8% and the evidence of decoupling can be seen in growing inter-Asia trade with the economies of Singapore and South Korea now moving out of recession. Unfortunately many US institutions are simply not in a position to capture the returns that these markets will drive in the coming years as they have not committed themselves to a long term presence in those markets and to developing the knowledge base required to succeed in those markets. Yes US investors have retrenched while the rest of the world advances!

The Conrad Group’s William Nobrega speaks to Bloomberg about China investments