It has been a busy couple of years for Jerome Booth since he retired from Ashmore Investment Management, the emerging market-focused asset manager that he co-founded.
He has since appeared in the Sunday Times rich list and established private office New Sparta, which has taken positions in a range of companies, including CBC Insurance and Icon Film Distribution.
The private office is now embarking on a new course of action, with the launch of an asset management arm. Booth has brought former senior International Monetary Fund official and ex-Ashmore colleague Ousmène Mandeng on board, among others, to establish New Sparta Asset Management.
‘The asset management company is an obvious thing for me to do because I have done it before. I have had a lot of people ask me when I was going to do it again,’ Booth explains.
‘People will think I’m competing with Ashmore but I’m not. If I had been quiet, people would have jumped to conclusions so I decided to make an announcement and dispel rumours.’
Booth will chair the new venture, while Mandeng has been appointed head of research and development. Joining them is Sunday Telegraph columnist Liam Halligan and Chris Raeder as general counsel, formerly of Ashmore and ANZ Banking Group.
Investing in emerging markets, the group will initially focus on renewable and conventional energy projects in Africa and has plans to build power plants on the continent.
While initially focusing on building the funds business New Sparta has private client permissions and is open to offering this type of investment service in the future, having received interest from potential private clients.
‘I could easily see private bank clients investing with me. We are currently talking to private banks about some investments with them,’ says Booth.
‘In the industry, we are seeing greater institutionalisation. We have seen it in the US and we are now seeing this more in Europe. We are not particularly large ourselves though so we get to be very hands on. I am a self-made man which makes a difference to other family offices. What is interesting is the growth of this sector. We are seeing more consolidation as people are realising it makes more sense to team up.’
With discussions under way to work on investment projects with private banks, alongside the recent hire of a managing director to oversee distribution efforts, deal flow is already picking up. Nevertheless, Booth does not want a tsunami of capital and would prefer to start things off in a calm fashion.
‘We don’t want to raise larger funds than we can deploy. I don’t want to raise a huge amount of money and then just sit in cash for ages,’ he says.
‘I would much rather have a modest start and go from there. This is because I don’t want to make as much money as possible – I’ve made my money and I could have just learned how to play golf instead but that is not the point. This is about filling a gap and trying to do something that needs doing.’
When Booth told former colleague Mandeng about his plans for the new venture, he did not need to be asked twice.
‘I worked with Jerome for a few years at Ashmore and it was a great experience,’ says Mandeng. ‘For me it is the bigger picture. It is not just asset management, but it is a great opportunity to branch out and grow with the company.
‘Clearly there is greater momentum now, which is exciting from a timing perspective. There is a greater interest in Africa generally so we are seeing more investment there. Africa is becoming increasingly important for the global economy.’
Mandeng has been tasked with researching investment opportunities for New Sparta.
The pair note that other firms are looking into similar projects, but they hope the expertise within New Sparta’s development team will give them an edge.
‘The biggest constraint is actually finding good projects,’ explains Mandeng. ‘Therefore we need to engage at an early stage to build a platform necessary to be able to feed the fund in first place. That is the biggest obstacle in Africa, there is not a strong enough pipeline of projects. That is the opportunity for us.’
While talk of backing power plants in sub-Saharan Africa may sound slightly niche to some, Booth says this sort of investment is much needed in today’s markets. He argues there is a growing conformity and a lack of risk appetite among today’s investors.
‘I think it is good that family offices are getting more attention, as they are generally better at asset allocation,’ says Booth.
‘However, you look elsewhere and people are not being rewarded for the risk they take on. For me, the pension fund industry is the biggest example of investors being herded.’
This motivation is central to the philosophy of New Sparta. On a subject close to his heart, Booth believes emerging markets do not receive adequate representation in clients’ portfolios because an overly negative view has dominated.
‘There is massive distortion in asset allocation. This is the result of marketing efforts which have skewed flows. If someone bugs a pension fund long enough saying, “X is an asset class”, then eventually the fund will agree it is,’ says Booth.
Attracted by the demographic trends and growth opportunities within emerging markets, Booth suggests that investors misinterpret the risks associated with emerging markets.
‘People need to realise there is risk in everything and too many people assume sterling is no risk. Once you start looking at the world from a different perspective, you start seeing these big biases.’
This is very important for Mandeng and Booth, who step back and look at emerging markets in a different light.
While emerging markets lay at the heart of volatility this summer, the pair are concerned that headlines have made investors focus too much on short-term losses and not on long-term gains.
‘People get worried and want to know how things will fit into their certain boxes. Because a lot of thinking is put into separate silos, most interesting conversations happen when you can break out of that a bit and start seeing the bigger picture. Emerging markets present a huge range of investment opportunities,’ says Mandeng.
Booth adds: ‘The idea that emerging markets are always by definition riskier by their developed counterparts is simply nonsense. The idea that the volatility you observe in an asset class is the only way to measure risk doesn’t work.’