Hedge Fund Awards 2015

Hedge Fund Awards 2015 www.acquisition-intl.com 58 Top Performing UCITS Fund We caught up with David Robinson, Managing Principal and Portfolio Manager at Prodigy Capital Partners, to hear how the Prodigy Asia & Emerging Markets Fund is generating superior returns by investing in business opportunities in the developing world The Prodigy Asia & Emerging Markets Fund, managed by London-based fund management boutique, Prodigy Capital Partners, is an emerging markets focused stock opportunities fund. Within the fund’s universe are several companies that are based in developed markets, but whose business activities are concentrated on the developing world. “The stock selection process uses a value approach, first determining the intrinsic value of the business in worst and best case scenarios, and then assessing the cash generating ability of the business,” says David Robinson, Managing Principal and Portfolio Manager at Prodigy Capital Partners. “Our portfolio is primarily comprised of companies which have strong and sustainable positions in the markets in which they operate,” he says. “We typically seek to invest in companies which generate free cash flow yields of 5%-10% with dividend yields exceeding 4%, and which trade below book value adjusted for goodwill and other accounting dis- tortions. We also do detailed due diligence on management and, where appropriate majority shareholders to ensure that they are honest and apply the highest standards of governance to minority shareholders. The investment approach is very long-term, with holding periods of years. Minimising trading friction and investing only in high conviction positions has proved highly effective in generating superior returns.” The fund can invest in any stock listed in the emerging markets, or whose underlying business is emerging markets-focused, Robinson says. “We tend to be driven by bottom up stock selection. However, a significant portion of the portfolio is invested in Hong Kong- and London-listed com- panies which have significant exposure to China. We have several stocks listed in developed markets, especially Japan, the UK and the United States, that are focused on the business opportunities in the developing world – for example Corning Glass, which dominates the global market for high specification glass, and whose largest source of revenue are the manufacturers of smartphones in China and elsewhere in Asia.” The principals of Prodigy Capital Partners have investment research experience that goes back to the 1980s, and this is invaluable for avoiding pitfalls and enhancing judgement, says Robinson. “We have also learned to eschew some of the more beguiling of the investment techniques which falsely promise to enhance investment returns. Good example of approaches we have rejected are technical analysis which appeals to some innate, value destructive human biases including oversimplification of the immense complexity of market behaviour, and the popular ‘growth’ investment style which suffers from its emphasis on predictions about the future which are inherently uncertain and inaccu- rate. As Warren Buffett once said, those who debate the merits of growth versus value do not understand investment. “We have also learned that the work of analysing companies is long and often tedious. It’s not the glamorous business people outside the industry believe it to be. Rather it is about the consistent and honest application of a few core precepts – and lots of detailed work on the notes to accounts, the background and past behaviour of management and the deep trends affecting the industries in which they operate. We are, above all, con- scious of our own fallibility and the complexity of markets’ dynamics.” The Prodigy Asia & Emerging Markets Fund has been named Top Per- forming UCITS Fund in the Hedge Fund Awards. Asked why he thinks the fund has been successful in the Awards, Robinson says, “Truthfully, we are flattered, but it may relate to the integrity and consistency of our process. It has not always been easy but our renewed commitment to a rigorous, value-orientated stock selection process has worked well. We have also tried to ensure we keep our investors well informed and to ensure our communications are the best of breed.” Looking to the future, Robinson says Prodigy will continue to develop its research capabilities and will also ensure that its platform business (the In- dependent UCITS Platform, which has been named Best European UCITS Platform in the Hedge Fund Awards) attracts high quality managers and develops new, value added capabilities – for example in marketing. “We see a growing tendency for higher regulatory standards in the EU,” he says. “The key challenge is to ensure these challenges do not add to costs or divert managers’ attention away from their investment work. A platform approach can help to do this by creating economies of scale and efficiency by pooling resources required to meet regulatory require- ments. This is especially the case for smaller managers.” n Name: David Robinson Email: [email protected] Web Address: www.prodigycapital.net Address: Suite 3A, 17-20 Iron- monger Lane, London EC2V 8EP Telephone: +44 20 7495 2219 Fact File Top Performing UCITS Fund Prodigy Asia & Emerging Markets Fund