Darby Rounds Out Team

With the addition of two more ex-ING Barings staffers to managing director, Peter Geraghty's team, Washington, D.C.-based Darby Overseas Investments is ready to launch two new funds dedicated to emerging markets debt, both sovereign and corporate issuance.

John Yonemoto, formerly co-head of emerging markets proprietary trading at ING Barings and Gerrit Tames, who served both as vice chairman of ING Bank and as a member of ING Group's executive board, have joined Geraghty himself a former member of ING Barings' emerging markets business at Darby. Along with Paul Taylor, who came to Darby from Credit Lyonnais, where he headed the emerging markets structured products group, the team will man the Darby Emerging High Yield Fund (HYR 01/11/99) and the Darby Emerging Markets Income Fund, both of which will be launched this month.

The Emerging High Yield Fund will focus on the corporate side of developing economies of the world.

Despite the turmoil the emerging debt markets have been through, most recently in the past few weeks, Darby remains bullish on the asset class, Geraghty said. There are a lot of opportunities to avail of, he said and investors institutions as well as individuals have an appetite for emerging markets risk, because of the substantial yield it offers.

However, in light of the series of debacles the asset class has experienced, most people are, understandably, still afraid of committing themselves wholeheartedly to emerging markets debt, Geraghty said. To get them back in, it is necessary to have both "A solid product and a solid team," he said.

"I basically wanted to reconstitute the same group I had at ING," Geraghty said, referring to the recent hires at Darby. "A lot of people have had their issues with emerging markets, and we feel that it's very important to have people with a high level of emerging markets experience to bring them back to the table."

Like the Emerging High Yield Fund, which will invest in both emerging markets debt and U.S. and European high yield as a smaller play, the Emerging Markets Income Fund will also be a global product, dedicated to emerging markets sovereign assets. However, as its name suggests, the fund will have an income-oriented approach, as opposed to the Emerging High Yield Fund's total-returns mandate, Geraghty said. The fund will look at opportunities in developing economies across the globe on a selective basis, he said, evaluating each credit for its strength and weaknesses.

"Obviously, the last few weeks have been bad for the emerging markets," he said. "You have to be pretty careful about where you go, but we still feel that you have to look at emerging markets on a global basis."

At the top of the list are countries such as Poland and the Philippines, Geraghty said, countries that have managed to come out of the spate of financial crises relatively unscathed. These countries have been through the mill before, he said, and have the mechanisms necessary to withstand crises more than many other emerging economies.

However, there are also opportunities to be had in countries that got the worst of the crisis and are now on the road to recovery, Geraghty said. "We're big believers in the after story," he said, citing the examples of South Korea and Thailand, two countries that have come a long way since the devastation they suffered in the aftermath of the Asian crisis.

Because of each team member's expertise in different areas of the emerging markets universe, the funds will be able to take advantage of all opportunities, Geraghty said. Yonemoto, for instance has covered Asia in the past, while both Tammes and Taylor have significant experience covering Europe. A couple of months ago, Darby also hired Americo DaCorte, former head of emerging markets proprietary trading at ING Barings. He will be in charge of scouting out opportunities in Latin America, Geraghty said.

Darby Overseas is a private investment firm, founded in 1994 by former U.S. Treasury Secretary Nicholas F. Brady. Richard Frank, former World Bank managing director and CFO of the International Financial Corporation joined Darby as managing partner in 1997. - Savita Iyer