LONDON (Reuters) - John Beckwith, whose Pacific Investments Group has launched a number of asset management firms since he co-founded it in 1994, has taken a stake in emerging markets focused hedge fund North of South Capital.
The tie-up marks Beckwith’s return to emerging markets after a roughly 7-year absence, and a period of several years where demand to invest in emerging markets has been in the doldrums.
The deal with London-based North of South, set up in 2004 by Matt Linsey and which runs around $100 million across two funds, is part of a plan by Pacific to expand its Pacific Asset Management arm into wholesale and institutional markets.
North of South says it takes its name from a book by Shiva Naipaul detailing the author’s journey through newly independent East Africa, in which he “encounters the idealism and the folly driving the countries to various policy extremes”.
Financial details of the deal and the full scope of the partnership were not disclosed, but rising operational costs and pressure on fees have made it tougher for smaller hedge funds to launch and survive, and some have sought to share the burden by joining a larger rival or a platform with multiple fund firms.
Pacific’s previous investments include Liontrust, Thames River Capital and River & Mercantile, which collectively now manage more than $20 billion in assets.
While emerging markets fell out of favor due to global growth concerns and falls in commodities prices, market gains in 2016 and 2017 have encouraged some investors to hunt for cheap assets, with both Ashmore and Aberdeen Asset Management reporting an improved sentiment.
“As investors, we are optimistic about the prospects for emerging markets equities,” Beckwith said in a statement.
Linsey, an investor in emerging markets for more than 25 years, uses analysis of equities, credit and commodities to pick out undervalued stocks which have scope to outperform.
Matthew Lamb, chief executive of Pacific Asset Management, said in the statement that despite growing demand to invest in markets using index-tracking funds, active managers in less efficient markets, such as Linsey, continue to outperform.
As well as its main offshore hedge fund, North of South also advises investments in the GAM Star North of South fund, which has outperformed global emerging markets, net of fees, by more than 4 percent a year over the last 5 years, it said.
Editing by Alexander Smith