Shari Berenbach, Executive Director, Calvert Social Investment Foundation

Gil Crawford, General Manager, MicroVest Capital Management

Peter Johnson, Partner, Developing World Markets

Leslie Kautz, Founder and Principal, Angeles Investment Advisors, LLC

David Sand, President and CEO, Access Capital Strategies LLC

Moderator:

Betsy Zeidman, Director, Milken Institute Center for Emerging Domestic Markets

Summary:

Emerging markets represent tremendous opportunities for institutional investors. Emerging markets — rapidly growing ethnic minority communities in the United States, and the billions of low-income people around the world — are the "diamonds in the rough" that the experts on this panel recognize as opportunities and translate into valuable and attractive products for the investment community. Panelists debunked myths surrounding investment in low-income, emerging markets by citing high return rates and recent trends by institutional investors.

Panelists discussed specific methods for attracting institutional investors. David Sand, offers bond market level returns to demonstrate to institutional investors that emerging market investments can fit "comfortably within asset allocations." Sand and Shari Berenbach both emphasized financial engineering to generate return on investment as well as a social impact. Sand pointed out the need to both "speak the financial language," as well as spread the word to the investment community, since many are afraid of being the only investors on board.

There is a silver lining, as certain investors may be willing to forgo some economic return in exchange for some quantifiable social improvement. However, according to Leslie Kautz, institutions are often slow with decisions. Institutional investors also need to decide how to classify these investments to increase public awareness. Institutional investors require detailed reporting and daily pricing from companies before they are willing to invest. Berenbach noted that increasing the number of products, or the supply of instruments for investors, will increase interest among the institutional investment community.

International investors face additional risks. According to Gil Crawford, "many didn′t believe it was possible to lend to the poor in emerging markets." Volatile exchange markets make international investing increasingly risky. Peter Johnson cited promising trends in institutional investment that allow for the scaling back of using government money to invest in international microfinance institutions. Johnson explained that microfinance institutions are less risky than commercial banks because they serve such a high number of clients. MicroVest and Calvert both operate without any government support, which should lead to more scalable operations in the future.

At the end of the discussion, Crawford warned, "You can′t redline five billion people for very long." Indeed, financing low-income, emerging markets will bring needed capital to new entrepreneurs around the world. According to the panelists, there are certain challenges to widespread investment in emerging markets. Despite these challenges, panelists were optimistic that both investors and entrepreneurs would see increasing opportunities for mutually beneficial relationships in the near future. And this time, society will also reap rewards.

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