Frontier investor Mohammed Hanif: bored by 'normal' markets

Every time Mohammed Hanif finds himself in Heathrow Terminal 3, he steadies his eyes on the floor outside WH Smith. Nearly four decades ago, the high-risk investor, who now heads a company managing $200m on the "frontier" of emerging markets, spent the night there together with his three young siblings and mother, after they found themselves penniless and abandoned on arrival from Pakistan.

"That night we grew up pretty quickly," says the 47-year-old, describing his mother as a "very brave woman", who wanted to secure a better education for her children.

It worked. After that difficult episode and then frequently going hungry on London council estates, today Mr Hanif owns a house in the south of France, an F-type Jaguar and a half-share of a Spitfire.

The turnround is thanks to falling for the "pure energy" and "intellectual curiosity" involved in trading and high-risk investments, and more recently focusing on Africa and the Middle East, which he deemed "the only real growth story". He says: "There was a gap in the market that nobody was serving."

Insparo Asset Management is the London-based investment company Mr Hanif started seven years ago with $125m funding, originally owned equally by ICAP founder Michael Spencer, Canepa, a US investment advisory firm, and Mr Hanif. His team roots out some of the most far-flung equities, currencies and bonds going, from Angola to Mongolia. Since its launch in June 2008, Insparo's Frontier Markets Opportunities Fund - a fixed income fund - has delivered a net return of 62 per cent.

"It's definitely a specialist area but our investors understand that," says Mr Hanif, who relishes the excitement of untapped markets. Recently he took himself off for an investment fact-finding mission to shelled-out Mogadishu, capital of Somalia, where jihadis regularly launch suicide attacks 24 years after civil war broke out. "[Developed markets] would bore me so much. I wouldn't be able to sleep at night. I'd [feel that] my money's not working hard enough for me."

While he says most investors would rely on such a fund for only a partial allocation of their money, Mr Hanif devotes 100 per cent. Two years ago, he bought out Mr Spencer, and now he, along with his management team and staff, owns 52 per cent of the company, which manages money raised from private offices and institutions. The remainder is with Canepa.

Mr Hanif's interest in the emerging market comes in part thanks to his years as a child in Pakistan. Although he was born in London, his parents returned to Pakistan when he was eight. Over the next two years, he spent time in a village of mud houses with no running water or electricity, where he used burnt cow dung for fuel, drank buffalo milk and procured a pet goat.

"I had lived in this [chaotic] country and I had seen that it works and you can make money. There is opportunity, there is a market. It had a big influence. After experiencing that chaos, a normal market is a little bit boring."

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"The problem was, he just trusted everybody too much," says Mr Hanif, adding that even family members had regularly let them down.

That makes judgment of risk - something the placid, slow-speaking Mr Hanif says he "can see happen in slow motion" - central to his project.

"When people say these are the riskiest places, I just think, I find it quite easy to assess and understand the risk here because nothing's disguised," he says. "It's pure, it's raw, it is what it is. You know what you're going in for and you know what the animal instincts are."

That has led to some seemingly contrary positions. At times when others have withdrawn money from frontier markets in a hurry, Mr Hanif has tended to boost his holdings.

His "two top trades" are ones others avoided. He put $25m into twice-distressed debt in war-torn Ivory Coast, and $30m into a bond everyone else believed would default in Dubai. Both delivered windfalls.

"Risk sentiment was extremely negative but we had a deeper understanding . . . If you can do the level of research you need to get comfortable then it's obvious it's worth it," he says.

This marks a huge change from his early years. After the family's arrival at Heathrow, the children were parcelled out among different schools and later lived on Thamesmead, London's notoriously violent council estate plagued by the National Front in the 1980s.

"As soon as you finished school you used to run as fast as you could otherwise you'd get the shit kicked out of you," says Mr Hanif, who says the violence was so bad they would leave at weekends.

"You'd come back and you'd have 'Pakis out' sprayed on the door and dog shit thrown through the letterbox, and we'd spend the next two hours cleaning that up."

Mr Hanif, who worked on his father's building site between O-level exams, finally got his break when he won a scholarship to the private Latymer Upper School and later a place to read medicine at Queen's College, Oxford.

"The anger burns in you as a fire . . . It sets you on a path to prove and fulfil your potential," says Mr Hanif. Today he sponsors village girls in Pakistan to have an education - two have made it to university in the UK.

Mr Hanif waived his place at Oxford to follow his passion for business, instead reading economics at City University, London - "my father didn't speak to me for a year" - then became an accountant and eventually a trader.

"It was just like opening the doors to a stadium and you're Lionel Messi walking on to the Bernabeu and it's the Champions League final," says Mr Hanif of the first time he walked on to a trading floor. "There was just this noise and this energy."

In 2008, just as he was negotiating the shareholdings for Insparo, a squash injury paralysed him from the waist down. Surgery returned his mobility but he still cannot feel parts of one leg, so he "religiously" hits the gym to help his rehabilitation - meaning he is in the office at 5.15am and the gym by 6am.

He reflects that he should have started Insparo earlier. "I had spotted the opportunity and maybe took too long to go for it by myself."

For him, the frisson of pace, risk and the unknown has never dimmed. Today he regularly flies his Spitfire. "Money to me was about being able to make choices," he declares.

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