ICICI Prudential AMC, Shamit Chokshi's differing outlook positions for Emerging Markets

In the aftermath of a crisis, financial institutions had to renew their strategies and accelerate digitalization and ESG initiatives. With new and reinforced client demands and priorities emerging, we speak with Shamit Chokshi, Head - Offshore Fund Investments - International Business at ICICI Prudential AMC who explains how leaders are moving quick to digitally support the traditional human elements of the client life cycle.

Successfully navigating a world of heightened macro volatility requires specialist knowledge and as a speaker at this year’s Fixed Income and FX Leaders Summit Asia, Shamit attests this as the only major conclave for EM fixed income and a great way to network, meet and learn from buy side and asset owners.

A seasoned professional himself, Shamit has set up and advised several public market strategies across Asia (including Japan), US and Europe, raised assets from leading global investors and crafted profitable asset management partnerships with large financial groups in his 15+ year career across various firms in the industry. With unique experiences and perspectives from the investing world, he tells us his approach to emerging market debt, strategic asset allocation and credit risks to understand the prospects for the future.

Can you introduce yourself and your background? 

My name is Shamit Chokshi and I’m responsible for ICICI Prudential Asset Management’s offshore advisory (International Business), leading a team that advises foreign institutional investments in Indian equity, fixed income markets. In recent years, I’ve also been selecting global investment strategies and managers for providing access to onshore investors from India and implementing ESG practices at the firm. Previously I worked at Reliance-Nippon Life Asset Management in Mumbai and Nippon Life Insurance / Nissay in Tokyo, leading the strategic global asset management partnerships.

As we enter the post-pandemic world, dotted by geo-political tensions, what is your view on the industry and how finance professionals can navigate it?

The new world brings technology and core investing skills to the fore, hybrid work environments and emerging asset classes, new concepts in lending, and millennial friendly organisation structures which would impact our investing thought process, work cultures and the soft skills needed to engage with clients. While domain experts in asset classes will remain a dominant workforce, the ability to leverage technology, data and AI to navigate the client landscape requires a paradigm shift for many finance professionals leading client facing roles. I would still back the need for global work experiences and cross border interactions for a more fulfilling career in finance.

Is it better to be active or passive in emerging market debt?

Emerging markets universe contains many potential investment regions and each market is diverse with its own growth and risk profiles, especially under today's tricky investment environment of high inflation, geo political tensions and volatile commodity prices.

Active management helps optimizes emerging markets portfolio by backing deeper research for corporate credits within high potential markets, rather than simply getting broad market exposures through indexing. Execution risks and liquidity remain constraints in the credit space and indexing ideas can incur material impact costs.

I wouldn’t disregard the benefits of liquidity, easy execution and simplicity of indexing strategies in sovereign bond strategies of larger markets. Generally dynamic duration management across sovereign bonds may be a superior strategy than going down the credit curve and in less liquid corporate bonds, from a risk reward perspective. However, one needs to evaluate each market individually.

What are the starkest contrasts when it comes to the gap in the emerging market debt universe and how do you navigate these when it comes to asset allocation decisions?

While the weight of Indian equities in major EM based equity indices like the MSCI EM index is at all-time highs of ~14%, Indian debt barely has a presence in majorly tracked EM bond indices like the JP Morgan EM Bond Index or the Bloomberg EM Aggregate indices. Indian domestic LCY government bond market now stands at a size of over USD 1tn and a further ~USD 500bn in LCY corporate bond market, hence its absence from major EM bond indices is definitely an anomaly.

What are you expecting to see in the EM debt market in the next 12 months?

The divergent prospects within Emerging Markets makes it critical to deepen our focus on risk-reward, liquidity and currency aspects of each market. Global managers are better served by taking active positions in respective countries, sectors, and types of credit to ensure it provides true diversification in a rising rate environment in DMs. Recent news suggested India’s inclusion in the JP Morgan EM Bond indices and Bloomberg Global/EM Aggregate indices which may lead to a material reset in index compositions and resultant flows across EM markets.

How do you integrate ESG into your investment process?

Sustainability risks can materially affect a company’s financial performance and competitiveness. At ICICI Prudential, we incorporate ESG factors into the analysis of individual companies (including with regards to Sustainability Risk assessment), in the belief that ESG considerations are crucial in long-term investing and non-compliance can threaten the viability of the business and positive action can support its growth. Companies are reviewed based on ESG criteria which will differ from company to company but may include a company’s actions to reduce carbon emissions in its operational footprint, its policy around water usage and how it works to understand and mitigate its supply chain risks, as well as management incentives or board composition. Where we find concerns over the ESG practices of an issuer or its industry or market sector, this may impact our decision to whether to pursue a particular proposed investment opportunity or not.

Join Shamit on the 24th November, 9:50am to hear him on the Keynote Panel: Linking ESG to fixed income and currency markets – How can you incorporate environmental, social and governance factors into your investing strategies to achieve your ethical sustainable finance investing goals?

For more info download the agenda