The alternatives sector is unique in that it’s largely defined by what it’s not. Accordingly, how you fit alternatives within your existing asset class structure will depend on relativity, and how the investments interact with the other asset classes according to Atchison’s Kev Toohey.
The private markets juggernaut is one that has also thrown up a wealth of data that other players can use to sharpen up due diligence when making their own investment decisions – especially in the growing secondaries market.
Ox Capital launch emerging markets fund
Ox Capital has officially launched its ‘Dynamic Emerging Markets Fund’ in September 2021. In association with Challenger-owned Fidante Partners, Dr Joseph Lai, who until recently managed the Platinum Asia Fund, and Doug Huey will combine to lead this specialist strategy.
The team has grown quickly to five staff since being founded, with Kate Goodwin and Siddarth Mehta recently joining, bringing a mix of entrepreneurial, operational and corporate finance experience to the team.
As has been Lai’s raison d’etre, the fund will be high-conviction, seeking to own 30 to 50 stocks diversified across countries, sectors and key themes. Ultimately, it is looking for undervalued, well-run companies outside of Japan and other key emerging markets.
The launch comes with a difficult backdrop for Asian investors, following high-profile regulatory pressure and more recently the problems with Evergrande. Ox seeks to look beyond these short-term issues, to tap-into the massive consumption and lifestyle habit changes occurring in the region.
Commenting on the launch, Dr Lai said the fund, and emerging markets as an asset class, represented a significant investment opportunity for global investors who tended to be structurally under-exposed to emerging markets.
“Over 70% of global growth and 60% of the world’s GDP comes from emerging markets, yet it accounts for just 13% of the MSCI ACWI Index,” says Lai. “I started Ox Capital Management with a mission to deliver stellar returns for our investors. I have had the privilege and responsibility to manage money for clients for over 17 years investing in emerging markets, and I believe now more than ever that emerging markets are unusually undervalued,” he says.
“OxCap’s investment approach is to identify the immense changes taking place in Asia and other key emerging markets and buy good businesses that are positioned to take advantage of rapid economic growth that will result from these changing dynamics,” adds lai.
Lachlan Maddock, of Investor Strategy News, recently covered the new boutique, with a few key highlights. First came the name, which for Lai, evokes “a sense of service”. Comparing it to Wall Street’s Charging Bull, the ox is a hard-working helper, and reliable to boot.
Central to Lai’s investment philosophy is identifying the “endurable, sustainable” themes that will drive global markets for decades to come. One theme from Lai’s Platinum years was the luxury tastes of Chinese consumers, but he’s now turned his attention to the internet, financials, and the emerging market domination of semiconductor and electric-vehicle battery supply chains as well. Once Lai and his colleagues have identified a good, under-appreciated theme, the rest is (relatively) simple.
Commenting on Chinese regulatory pressure, Lai says “this is nothing new, but in my opinion there is a greater conviction that they want to fix things that aren’t working. I would partly ascribe that to the geopolitical struggle with the US, the world’s most powerful country, which has worsened in the last few years. When they see something not going right, the force they’re using is stronger than before – but this has been ongoing.”
Lai says that China’s fintech giants are businesses “begging to be regulated.” Ant Financial doesn’t have the capital requirements of a bank but is running a loan book to rival China Merchants. Food delivery contractors are running red lights and getting in car accidents to meet delivery quotas for a pittance. Private education is sucking resources from the public sector through lucrative remuneration packages while offering substandard tutoring aimed at getting students to pass exams rather than actually teaching them.
“I don’t believe that the authorities in China are giving up on private enterprise… They’re pro-market in this area, not pro-business. A big Chinese oligopoly will not be able to extract the same level of economic rent as in advanced economies, but they will be encouraged to develop, and serve customers, and make a reasonable return. Private enterprises are providing the most employment and pushing the economy forward – not the state – so that will be allowed to continue.”
The fund has a 1 per cent management fee, $10,000 minimum investment and trades under the APIR code HOW6479AU.
