LONDON A little known Mauritius-based hedge fund more than tripled its investors' cash in 2014 through bets on small and mid-cap stocks in India, becoming the top global performer in a year when its average peer produced single-digit returns.
Last year's bull market in India, fuelled by the election of Prime Minister Narendra Modi, lifted the Sensex by 27 percent in dollar terms.
The $25 million Passage to India Opportunity Fund, managed by Ralph Kruger, gained 225 percent, three times more than the second-best performing hedge fund in the world, research firm Preqin said in a report on Thursday based on analysis of over 17,200 hedge funds managing more than $3 trillion in all.
By comparison, hedge funds on average gained 4 percent last year, while India-focused funds returned 39 percent, data from industry tracker Eurekahedge showed.
Kruger, an American who started the fund in 2008, told Reuters in an interview on Friday that his concentrated stock picks among India's thousands of small and mid-cap companies paid off as investors turned their focus on them after a strong rally in large-cap stocks last year.
India's 30-stock Sensex index reclaimed its pre-crisis high in October 2013, when the S&P BSE Small Cap Index .BSESC and Mid Cap Index .BSEMC traded nearly 60 percent and 40 percent below their peaks. Kruger said the anomaly was not justified as the smaller companies were increasing revenues and earnings.
"Sure enough, it closed," he said.
After reclaiming fresh highs in 2013, the Sensex index rose 32 percent by the end of 2014. The small-cap index rallied 93 percent, while the mid-caps gained 76 percent.
While Kruger would not disclose all of his top bets, he said a speciality chemical company which he still owns was the biggest contributor to returns.
Plastic packaging products manufacturer Mold-Tek Packaging Ltd (MOLT.BO), which rose more than 500 percent last year, and which he has held for more than three years, was also still in his portfolio, he added.
Another top-performing stock in 2014, but one which he had sold out of after holding it for more than six years, was plumbing system manufacturer Astral Poly Technik Ltd (ASPT.NS), which rose nearly 140 percent last year.
(Reporting by Nishant Kumar; Editing by Simon Jessop/Mark Heinrich)