Schulze Global selects frontier markets that are poised for high growth and then applies its unique investment approach to take advantage of that growth.
Within the frontier, Schulze Global focuses in particular on frontier markets that it considers undervalued – because the global investment community either overestimates the risks related to the market, or under-appreciates the market’s growth potential — creating a kind of “perception arbitrage” opportunity. The scarcity of capital in these markets means Schulze Global is able to source attractive deals on favorable terms, while at the same time making a valuable contribution to the market’s development.
Schulze Global aims to assemble a portfolio of countries that represent all key regions of the frontier. For each key region of the frontier, Schulze Global selects the one market that demonstrates the potential to become the “stand-out market” for their particular region. Schulze Global’s market selection process is based on many factors, but is driven in particular by the following considerations:
• Over a 10-year period, will the market outperform its regional peers in respect of macroeconomic indicators and political stability?
• Relative to market’s expected performance, do assets in the country remain attractively priced?
To engage markets suitably, Schulze Global applies four core, related tenets: (1) country specialization, (2) rigorous financial analysis and data collection, (3) hands-on portfolio management, and (4) knowledge-sharing.
In the frontier, business is still done the old-fashioned way – through highly personalized and sustained relationships. In addition, each frontier market presents unique considerations in terms of business culture, level of development, and regulations.
Schulze Global thus believes firmly in building out a local investment team within each market where the deploys capital. The in-country teams can be large — up to 10 people — and consist largely of full-fledged investment professionals. The firm’s professionals boast strong backgrounds with top international private equity firms, investment banks, or management consultancies, and also have deep relationships in the markets to which they have been assigned. These in-country deal teams focus on finding and vetting deals, as well as monitoring investments once they are made.
Schulze Global’s intense focus on developing a comprehensive understanding of the markets where it operates, and building and maintaining personal relationships on the ground in these markets through its in-country teams, has allowed the firm to enjoy strong proprietary deal flow, reduced deal risks, and superior deal terms.
Schulze Global’s local presence has given it the ability to collect and triangulate a wide range of vital data through numerous channels. Schulze Global has demonstrated the ability to conduct extensive due diligence work with its own resources, which is all the more vital given the lack of any real international service providers in many of the markets where Schulze Global operates, as well as the absence of reliable records and databases.
The firm’s in-country investment professionals then work hand-in-hand with Schulze Global’s seasoned leadership in Singapore to analyze data, build comprehensive financial models, and negotiate optimal deal structures — thereby leveraging both the local input and global know-how of the firm.
Portfolio company oversight is a challenge in any market, but especially across the frontier. Proper reporting standards, while becoming more prevalent, are not widespread, and sufficient oversight and influence over a portfolio company is nearly impossible to achieve remotely. Schulze Global’s local presence allows the firm to work face-to-face with portfolio companies on a daily basis, continually monitoring the pulse of the businesses’ activities, employees, assets, products, and customers.
At the same time, the firm’s in-country teams are able to roll up their sleeves and achieve an unparalleled level of operational engagement with the firm’s portfolio companies. Schulze Global’s investment professionals not only provide strategic guidance through board seats but also have taken lead roles in a wide range of operational areas, including marketing and branding initiatives, implementing new distribution channels, HR recruitment, and overhauling technology systems.
The firm’s global platform is able to support in-country deal professionals in a variety of important ways.
By ensuring robust knowledge-sharing across all of its offices, Schulze Global is able to transpose successful deal structures from one market to another. The firm’s commitment to knowledge-sharing also enables in-country deal teams to gain access to valuable information on different industries and benefit from valuable lessons learned from past transactions. The firm’s global platform also provides in-country deal teams access to world-class service providers, including legal counsel for deals, specialized consultancies for due diligence and operational deep-dives on portfolio companies. Schulze Global also supports its deal teams by consolidating some financial analysis functions as well as accounting, reporting, and compliance — thereby allowing its investment teams to focus fully on negotiating and managing good deals.