Morningstar - Q2 2022 - 64

Investors
Different Worlds
With varied backgrounds, Pzena Emerging
Markets Value's trio of managers find
common ground: deep value.
UNDISCOVERED MANAGER
Gregg Wolper
The trio of portfolio managers who run Pzena
Emerging Markets Value PZIEX grew up in three
different countries and majored in three different
subjects at three different universities. But as
college students and young professionals,
they shared one thing in common: They had no
plans to become investment managers.
Caroline Cai, who traveled to the United States
from China to attend Bryn Mawr College,
did major in economics and mathematics. But she
points out that at this liberal arts college,
her economics courses focused more on broad
macroeconomic topics than on finance, accounting,
or investing. Meanwhile, at Dartmouth College,
Allison Fisch majored in psychology, with a minor
in drama. And while studying at the Indian
Institute of Technology in Kanpur, Rakesh Bordia
focused his attention on engineering and
computer science.
All three, though, were curious to learn about
the world-and about business in particular.
That led to a second commonality: All headed to
management consulting firms before landing
in the investment field (with Bordia first getting
an MBA and spending time as a software
engineer). For Fisch and Cai, the destination was
McKinsey, though they were in different offices
and didn't know one another at the time.
Bordia's consulting experience came at Booz Allen.
The field of management consulting has received
its share of criticism over the years. But this
64
Morningstar Q2 2022
trio say their time at McKinsey and Booz Allen
boosted their knowledge base and provided a solid
foundation for their future endeavors. " Consulting
allows you to learn how businesses work,
how they're run, how people think, " says Bordia.
Fisch puts it in straightforward terms:
" Consulting is a great way to learn about a lot
of different things. "
As they gained experience as consultants, the
research began to take a back seat to people
management and building relationships, which all
three found much less compelling. Though
there wasn't necessarily a straight line for
all three, between 2001 and 2008 they all ended
up at New York City-based Pzena Investment
Management and have served as analysts and
portfolio managers there since.
The Right Match
Bordia says that once he realized investment
management was his true passion, he
looked for a firm that fulfilled three criteria: It must
have a value-investing focus; adhere to a
long-term perspective; and be willing to hire
former management consultants. Bordia included
the value requirement because at some
point he had realized that he'd been a value
investor since his initial stock-buying forays
as an MBA student.
Cai learned value investing at AllianceBernstein,
where she started her investing career as
an equity analyst. Fisch also leaned toward value,
coming at it from an angle framed by her
major in psychology. " You could argue that the
entire value-investing cycle is a psychological
phenomenon, " she says. After all, value investors
aim to capitalize on market gyrations between
optimism and fear-cycles that are especially
prevalent in emerging markets.
Pzena has just one investment style-deep value.
Founded by Richard Pzena in 1995, the firm
began offering U.S. strategies in 1996 and global
strategies in 2004. Soon after, Pzena launched
its emerging-markets strategy as an internal
vehicle in 2008, Fisch and Cai, who had both been
serving as research analysts, became its
managers, along with Pzena co-CIO John Goetz.
(Goetz stepped off the fund in January 2022.)
Separate accounts for outside clients were created
a couple of years later, and in 2014, Pzena
Emerging Markets Value was launched as a public
mutual fund. Bordia contributed to the strategy
as a senior analyst, then joined Fisch and Cai
as a comanager in April 2015.
Fisch and Cai relish the amount of diverse
companies and cultures they encounter in this
investment arena, adding that the travel involved
provides variety. Cai notes that she feels a
personal connection to emerging markets because
she grew up in China and still has family
there. At times, this background provides an
advantage. One benefit: " I don't need a translator
in China, " she says with a laugh.
Bordia says it's critical to have a flexible mindset
when looking at emerging markets. In the
United States, he says, a company typically has a
process that functions essentially the same way
regardless of who's carrying it out, while in India,
where he grew up, " processes are only words
on paper-in the end, it's the people who matter. "
That said, Cai emphasizes that even though an
emerging-markets investor must have a
mindset that's more " open to different things in
different parts of the world, " the factors these
managers look for when assessing an
emerging-markets company are very similar to
those they want to see in a company based
in a developed market.
Diving Deep for Value
In Pzena's version of value investing, the managers
divide their investment universe into quintiles
based on valuation and only consider buying
https://www.morningstar.com/authors/13/gregg-wolper https://www.morningstar.com/funds/xnas/pziex/quote https://www.morningstar.com/funds/xnas/pziex/quote
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