A number of people can lay claim to the title of father of the emerging-markets movement, including veteran investor Mark Mobius, and Antoine van Agtmael who is credited with coining the term emerging markets. But the real midwife to the movement was David Gill, a capital markets pioneer and financial frontiersman whose recent passing marks the end of an era.
Mr. Gill died at his home in Maryland, US, on February 23. He was 93.
He was not only in at the birth of emerging markets, but was largely responsible for conceiving the idea that overly debt-dependent developing nations in Asia and elsewhere needed access to equity financing from domestic and foreign investors. Equally, advanced nations wanted access to investment opportunities in the developing world.
The millennial generation, as well as many pre-millennials, take for granted the existence of stock markets in emerging nations. In fact, they speak of these nations as emerging markets rather than economies. But when Mr. Gill came on the scene in the early 1970s, most Asian and other nations had only very rudimentary stock markets, if any. They lacked not only trading floors but also a stock trading tradition, not to mention the institutional and regulatory infrastructure without which markets are more akin to casinos. Mr. Gill and his colleagues at the International Finance Corporation (IFC), the private sector arm of the World Bank, had to create this infrastructure.
What stock markets did exist were, in the case of Asia, remnants of British colonial rule in Singapore and Malaysia, Dutch rule in the case of Indonesia, and American rule in the Philippines. They were dominated largely by trading of plantation and other commodity stocks, and by those of trading houses and shipping companies.
In his capacity as managing director of the IFC’s capital markets department, Mr. Gill and his colleagues worked through the 1970s and 1980s on clearing a way for the development of modern stock exchanges in emerging economies.
Mr. Gill was in some ways an unlikely candidate for the post he held for many years at the IFC. Canadian by birth but educated in England, including at Cambridge University, he volunteered at the age of 17 for the Royal Navy. After training as an observer in the Royal Navy’s Fleet Air Arm, he retired with the rank of lieutenant commander after 17 years of service.
He then joined investment banking firm Nesbitt Thomson and Company to work in Toronto, Montreal, and then New York. He was subsequently recruited by the almost legendary World Bank President Robert McNamara to establish the IFC’s new capital markets department.
During his 17 years as head of the department, the IFC invested in more than 85 financial institutions or operations in 41 developing countries. According to his obituary notice in the Washington Post, "under his leadership, the IFC helped jump-start the creation of emerging-markets investment funds that, despite scepticism, would become a now trillion-dollar industry".
Mr. Gill's combination of statesmanship and diplomacy enabled him to interact with different cultures in Asia and elsewhere and to spread the gospel of capital market development in countries where financial systems were almost entirely dominated by banks.
Although he was an "international bureaucrat" for much of his professional life, he liked to think of himself as an explorer of new financial frontiers. In his book Tales of a Financial Frontiersman, he described the "Wild West" character of many emerging markets that he helped to foster.
He once commented that for US fund managers in the 1970s, anything outside of their own home state was considered to be risky "foreign" territory. He and his colleagues needed to battle hard to gain acceptance of the need for investment in emerging markets. The fact that people such as Sir John Templeton came on board with the idea underscored their success.
"Although investors like stability and certainty, the truth is that neither stability nor certainty exists in financial markets and on the rare occasions that they do, no money is made," he noted in his book. Fortunes were duly made by many of those who accepted his "wild" ideas of investing beyond the relatively safe confines of mature markets.
Writing in the Far Eastern Economic Review, I once likened his efforts to reduce the over-reliance of many Asian and other developing countries on foreign debt by attracting more equity investment to that of legendary hero Parsifal’s pursuit of the Holy Grail. Mr. Gill was delighted with the analogy as it fitted his concept of how financiers should combine a sense of mission with making money.
According to Ernest Kepper, his fellow Canadian colleague at the IFC, “David was one of the few people in the World Bank who really cared about the inequality between the developed and developing worlds”, and he “stayed in the game and just kept going in spite of daily formidable obstacles and resistance [to reform]”.
Mr. Kepper, who himself helped modernise the banking systems in Indonesia and Egypt while also playing a key role in establishing stock exchanges and securities and exchange commissions in Iran and Brazil, said Mr. Gill was “the world’s financial Einstein who tried to put together a theory of good living [standards] for the underprivileged in the financial world”.
After leaving the IFC, Mr. Gill worked at Boston-based Batterymarch Financial Management with legendary investor Dean LeBaron in private equity investing in the former Soviet Union. He also served on investment company boards until his mid-80s, including the emerging-markets boards of Morgan Stanley Asset Management, the UK’s Commonwealth Development Corporation, and the InterAmerican Investment Corporation.