Singapore-based Pacific Ocean Capital has launched the Asia Telecom Fund, a long/short equity fund that seeks capital appreciation by using leading-edge proprietary research developed from
Singapore-based Pacific Ocean Capital has launched the Asia Telecom Fund, a long/short equity fund that seeks capital appreciation by using leading-edge proprietary research developed from years of industry experience in the region.
Effective shorting enabled the fund to achieve a positive return of 1.4 per cent in January, its first month of operation. The fund may invest in various asset classes within the telecoms sector but focuses primarily on publicly-listed equity.
According to Pacific Ocean Capital, the fund offers a unique combination of access to specialised industry knowledge with a large and growing investment universe that currently exceeds USD2trn in market capitalisation.
‘In the 15 years I have worked in the emerging market telecom industry, I feel that the sector in Asia has the best financial prospects I have ever seen,’ says the firm’s chief investment officer, Tom Fuller.
‘Underlying earnings are strong due to the massive increase in mobile phones throughout the region, leverage is very low, free cash flow generation is high and many companies have shareholder-oriented management that is returning cash to investors.
‘These positive characteristics differentiate the industry from other investment opportunities in normal times and stand out even more in times of economic distress. They make the telecoms sector a highly defensive investment opportunity that is poised to outperform.’
The fund will focus its long positions on companies that are best positioned in the high-growth markets of developing Asia, where the number of mobile users is projected to double in the next five years to more than two billion. Additional long positions may include companies in developed Asian economies that are producing high levels of cash flow without dependence on export products or relative currency values.
Specialised sector funds such as the Asia Telecom Fund are still unique in the region. Says chief operating officer Thomas Husted: ‘Over the past few years a number of interesting trends have emerged in the global hedge fund business.
‘Investors are increasingly seeking investment specialists and Asia exposure. The Asia Telecom Fund is well positioned with these trends and, unlike some niche funds, can easily scale in line with its investment universe to accommodate many investors.’
A central thesis of the fund is that sector and geographic specialists provide additional alpha return for investors. Says Fuller: ‘Our regional telecoms experience is a critical advantage in constructing a portfolio that focuses on identifying price/value discrepancies and taking either long or short positions accordingly.’
Ram Trust Services, a professional investment management firm based in the US and owned and managed by John Higgins and Bob Monks, is the anchor investor in the Asia Telecom Fund and a minority owner of Pacific Ocean Capital.
The fund is a Cayman Islands master/feeder structure offering separate vehicles for US and non-US investors. The minimum investment is USD1m, and subscription is available monthly with quarterly redemption. There is an annual management charge of 2 per cent and a performance fee of 20 per cent with high water mark.
Fuller has 15 years of emerging markets telecoms banking experience during a 20-year professional career that began as an analyst at Goldman Sachs. He was most recently Asia regional head of telecoms portfolio management for Citigroup, with sole industry responsibility for a multi-billion dollar portfolio.
Husted has eight years of banking experience with Citigroup throughout Asia and with Bank Danamon, an Indonesian subsidiary of the Singapore government investment corporation Temasek Holdings, where his most recent position was head of corporate finance.
