India-focused hedge fund backed by Goldman exec hits $500 million in assets

HONG KONG Wed May 14, 2014 12:59pm IST

A broker monitors share prices while trading at a brokerage firm in Mumbai August 22, 2013. REUTERS/Danish Siddiqui/Files

A broker monitors share prices while trading at a brokerage firm in Mumbai August 22, 2013.

Credit: Reuters/Danish Siddiqui/Files

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HONG KONG (Reuters) - Steadview, an India-focused hedge fund seeded by Goldman Sachs (Asia) chairman Mark Schwartz, has made 12 times the returns of peers with bets on consumer and tech stocks, helping the fund grow its assets to $500 million in nearly five years.

Founded and managed by Hong Kong-based Ravi Mehta, a former Morgan Stanley (MS.N) banker, Steadview's success stands out among Indian hedge funds who have seen their collective assets plunge by more than 50 percent to $2.4 billion since the 2008 financial crisis, according to data from Eurekahedge.

Schwartz actually backed the fund after he had left Goldman in 2001. He returned as chairman of Goldman Sachs Asia Pacific in 2012, according to a statement from the bank.

Mehta, a former analyst at hedge fund Maverick Capital in New York, said the outcome of Indian general elections has no bearing on how he invests, but domestic consumption and capital expenditures by corporates may pick up if the next government gets a strong mandate as there is pent up demand in the economy.

"In order to ensure that growth structurally accelerates, reforms such as GST and the reform of labour laws are necessary to improve economic efficiency," Mehta, who started his fund with just $500,000 in July 2009, told Reuters.

The assets hit $500 million this week.

Indian shares have hit all-time highs for three consecutive trading sessions on optimism the opposition Bharatiya Janata Party led coalition could get a majority in the elections that ended this week. The results are due on Friday. [ID:nL3N0NZ1O9]

Mehta's fund has generated a 131 percent return since its launch, while the India share index .NSEI is up about 22 percent in dollar terms in the same period. India hedge funds as measured by the Eurekahedge have returned 11 percent.

India has become a dominant global player in software and drug exports, leveraging its vast pool of engineers that grows by 1.5 million every year. High-end manufacturing is going to be the next sector to achieve global competitiveness, Mehta said.

Motorcycle maker Eicher Motors Ltd (EICH.NS) is among the companies in which Mehta invested. Eicher's Royal Enfield motorcycles, a bike brand similar to Harley-Davidson, has 95 percent market share in that segment and over 40 percent return on capital, he said. It's joint venture with Volvo AB (VOLVb.ST) will be producing engines for Volvo's trucks, sourcing engines from India instead of Germany.

Mehta is also focused on manufacturers that are ramping up exports or reducing imported manufactured items. Kitchen appliances maker TTK Prestige Ltd (TTKL.NS) is one such company, which has cut down on imports from China.

"It's more cost-competitive for them to make a lot of these products on their own in India and to do import substitutions."

Jubilant FoodWorks Ltd (JUBI.NS), which operates the Domino's Pizza brand with rights for India, Sri Lanka, Bangladesh and Nepal, is another big exposure for Steadview.

India's "long-term story is unchanged and I think in many ways it is better than it was five or 10 years ago," he said, predicting India will be the best-performing major market over the next three to four decades by a meaningful margin.

(Reporting by Nishant Kumar; Editing by Matt Driskill)

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