There's no better way to discover the world than by hitting the road. Ruchir Sharma, head of emerging markets and global strategy for Morgan Stanley's Investment Management business, knows this all too well.
Sharma spends at least a week out of every month touring the globe, visiting countries to get an in-person read on their fundamentals. He'll travel mostly by car—in India, where he visits often, he's been known to log 1,000 miles over the course of a five-day visit—meeting everyone from locals to politicians, central bankers, CEOs and investors. When he can, he'll even pause to take in a movie because, he says, they lend great insight into a country's social fabric. His approach may be unusual, but it's one built on decades of careful economic observation.
Sharma's career started in India more than 20 years ago. He was 17, writing for India's biggest financial newspaper, The Economic Times, and considering pursuing a Ph.D. in economics when Morgan Stanley Investment Management founder Barton Biggs stumbled on his writings. “I'm sure Barton thought, 'Who's this kid writing on this kind of stuff?'" recalls Sharma. "And that's how I got hired at Morgan Stanley in 1996."
It was baptism by fire after that. Sharma joined the firm in Mumbai as an analyst and soon found himself covering the 1997 Asian financial crisis, which gripped most of East Asia and sparked fears of worldwide financial contagion.
Today, Sharma manages more than $20 billion in assets as of March 31, 2016, and resides in New York when he isn't traveling. He culled insights from his travels and compiled them into his first book, Breakout Nations: In Pursuit of the Next Economic Miracles. Published in 2012, he argued that emerging economies, namely Brazil, Russia, India and China (BRICs), shouldn't be lumped under one blanket expectation of growth. Rather, to determine which would excel, each should be studied on its own merits.
A 2011 trip to Brazil affirmed his belief in a country-by-country approach. Brazil was exceptionally hot, but when he arrived, he was surprised at what he found. “The hype for the BRIC economies was unreal," Sharma says. “It was extremely expensive in Brazil, and there were shortages of everything. Commodity prices were high, and I thought they couldn't stay that way. They didn't, and here we are five years later with the exact opposite thoughts on Brazil."
It's this outside-the-herd thinking that has earned Sharma a number of industry accolades, including being named to Bloomberg Markets' 2015 list of the 50 Most Influential people.
In 2012, Sharma's thinking on the BRICs was quite provocative, but taking a well-researched position has been baked into Investment Management's approach since the beginning.
Sharma has pooled his emerging-markets insight into what he calls the 10 indicators to gauge a country’s future prospects. They're laid out in his new book, The Rise and Fall of Nations: Forces of Change in the Post-Crisis World, which is full of information on how to potentially separate the nations on their way out from those poised to rise.
One rule is the so-called kiss of debt. Says Sharma: "We're living in a low-growth world that's racked up $50 trillion in debt since the 2008 financial crisis, so watch out if a country has rapidly increased its debt." China, for example, warrants caution; the country's debt load is growing twice as fast as its economy. Ultimately, though, Sharma and his team use data to inform the impressions they pick up in the field. “The access we have to historical data is much better than it was 20 years ago," he says.
Sharma's money is on countries that maintain good balance sheets and have strong leaders. India, Bangladesh, the Philippines and Sri Lanka are just a few Asian countries that Sharma says are on the upswing. In Africa, look to Kenya and Ethiopia; in Latin America, Argentina and Peru.
These days, it seems uncommon for someone to work for the same company for 20-plus years, but Sharma says even though Morgan Stanley is a large firm, there's still a culture of free-thinking.
“Our job over time is to beat the market," Sharma says. “How do you do that? Not by chasing it, but being ahead of the next big trend. That's why original thinking is important. If you're going to run with the herd, you're likely to never beat it."
The Rise and Fall of Nations: Forces of Change in the Post-Crisis World is out June 7, 2016.
For more information, visit Morgan Stanley Investment Management.
