For many years, Montpelier invested in the Emerging Markets Debt markets consistently competing with the likes of PIMCO, Ashmore and GMO for top performance rankings. From inception in 1992 up to 2006, we achieved compounded annual returns of some 25.3% for our investors. In 2002/2003 we became more involved in Emerging Markets Equity Special Situations and focused increasingly our investments in this sector. Some of the companies we invested in had many of the characteristics of distressed companies, situations where we had bought the company's debt at a deep discount. Our strategy toward distressed debt investment generally revolved around analyzing the company, particularly its debt situation but from an equity perspective as often the “debt solution” required, for a company’s survival, an element of debt to equity conversion in order to obtain sustainable debt levels going forward. Through this process we developed further our equity analytical skills. The universe of equities we focused on grew just as the number of highly indebted (or distressed) companies decreased as many completed their debt restructurings and refocused their business strategies. As the credit cycle has continued to improve over the past 5 years with commensurately fewer Distressed Debt opportunities arising, we stopped taking subscriptions into our debt funds at the end of 2002 and in 2004 we began returning capital to our investors in those funds. By 2006 we had liquidated our 4 debt funds and returned over US$550 million to the funds' investors. During the same period, we managed an EM Equities segregated portfolio, refining our investing skills and strategy.

On the back of further opportunities we saw, we launched in May 2006 an EM Equity Special Situations Fund (US$310 million) to augment the monies in the segregated accounts dedicated to the same strategy. In April 2007, a second funding round increased the size of our Fund to some US$700 million and brought total assets dedicated to Montpelier’s strategy to over US$1 billion.

Montpelier's strategy is firstly built from and developed upon our strong EM sovereign analytical skills as we focus our efforts on countries that we believe will experience fundamental improvements based upon legal, political and economic reform. My colleague David Chapman and I have been investing in the EM sovereign and corporate debt markets since the mid 1980's. Secondly, we focus on companies in those selected countries and sectors which stand to benefit the most from the reforms and where maximum benefit can be captured. We invest in a mix of growth and value companies, some with debt “issues” whilst others are just well positioned to benefit from the changes we have identified.

Our strategy involves a time consuming process and there are constraints to the number of companies that we can evaluate, invest in, and constantly monitor & review. We spend a considerable amount of time with company management, understanding their business and vision and then spending more time understanding the industry and corroborating whether "the vision" can be fulfilled. We want to be very comfortable onwhere the company will be positioned in 2 to 3 years time. Our ideal portfolio will be investments in around 20 companies, with the size of the holdings being quite large. We often take significant percentage stakes in companies and have previously sat on company boards. The size of one position (a listed Polish telecoms company) was significant enough that I became the chairman for 3 years. During this turnaround period, management was changed and strategy became more focused, leading the company to become attractive enough to be effectively taken over. We are not afraid to roll up our sleeves and get involved.

Montpelier’s team is made up of 7 investment professionals that include Chinese, Spanish and Arabic speakers. Four staff members have been with the company for over 8 years.

We remain very bullish on prospects of investing opportunistically in Emerging Markets. We believe the markets favour those that have a clear vision, do the extra legwork, have a broad experience base and a little bit of patience.