Ex-Cambridge Batsman's Fund Scores With Mid-Caps, Turns to Techby
TT Long-Short Focus hedge fund gains 27%, fifth in top 25 list
London manager targeting technological change in 2016
Hedge fund manager Vikram Kumar invests like he played cricket, staying patient for the right balls to bat to build long innings.
Kumar, a former batsman at Cambridge University, stuck by his investments at the TT Long-Short Focus Fund that lost money in 2014. The next year, his $420 million fund bounced back to return about 27 percent, the fifth best performer in Bloomberg’s global ranking of the top 25 hedge funds with between $250 million and $1 billion in assets.
Kumar’s success came during a tumultuous year for hedge funds that saw one of the titans of Europe -- billionaire Michael Platt -- give up managing outside money to focus on his own and his staff’s investments. Kumar, who specializes in mid-cap stocks, won with multi-year bets on Dutch navigation software maker TomTom NV and Spanish wind-turbine producer Gamesa Corp. Tecnologica SA.
"A lot of the names that made a lot of money last year are the same names that we held throughout 2014 when people did not want to own mid-cap equities," Kumar, a 35-year-old fund manager at London-based TT International, said in an interview.
This year, his fund is focusing its investments on consumer, technology, media and telecom companies that are being affected by technological transformation. He’s bearish on industrials because he sees excess capacity, driven by an economic slowdown in emerging markets and a decline in commodities prices.
"We are playing in a period of almost unprecedented structural change driven by technology," said Kumar. "There are plenty of companies we have in both our long and short book that are either beneficiaries or suffer from big, structural change in the way we all behave and consume."
Kumar’s fund lost 3.5 percent in January as concern over China’s slowing growth continued to roil markets. His bets against Vallourec SA, Arcadis NV and Seadrill Ltd. -- all of which dropped more than 33 percent -- helped soften the blow.
Kumar, whose family emigrated from East Africa to the U.K. in the 1960s, played for the Cambridge Blues cricket team from 2000 and 2003. He was a No. 3 batsman and wicket keeper while studying history.
“Cricket is a great analogy for investing," he said. "It’s underpinned by confidence in your technique and judgment of which opportunity to take the right risk in. And of course you have to leave behind the plays and misses to focus on the next ball with a clear mind."
Kumar joined TT International in 2008 from UBS Group AG, where he was a director of equity sales for European small and mid-cap stocks. He initially co-managed the TT Mid-Cap Long-Short Europe Fund before starting the TT Long-Short Focus Fund in 2013 to take concentrated bets on companies with a market capitalization of 1 billion euros ($1.1 billion) to 10 billion euros. Kumar typically buys and holds 20 to 25 stocks and sticks to his main bets for up to three years, with a willingness to ride volatile markets.
His fund’s assets more than doubled last year despite investors’ reluctance to give money to smaller hedge funds. Globally, clients allocated a net $37 billion in 2015 to hedge funds managing more than $1 billion, with the rest of the industry getting only $6.5 billion, the lowest in three years, according to data from Hedge Fund Research Inc.
Kumar’s fund plans to stop accepting cash from new investors after hitting $500 million, probably in the first quarter, and close to all new money at $1 billion.
Kumar’s fund benefited from a 110 percent rise in TomTom shares last year. He had been shorting the shares but became bullish in 2013 after deciding its mapping technology had more value than the market recognized and that it could become a takeover target. TomTom is down 34 percent this year.
"The market undervalues the intellectual property in their mapping technology, which we consider a very valuable asset going forward, particularly in the automotive space," Kumar said.
The fund has held Danish jeweler Pandora A/S since July 2013, benefiting from a 364 percent surge in its share price with reinvested dividends through the end of 2015. Kumar also stuck with Gamesa because of its improved cash generation and growth in the international wind turbine market. Its shares jumped 110 percent last year.
Kumar’s long-running short bet on Abengoa SA, the Spanish renewable-energy company fighting to avoid bankruptcy, also paid off. Its shares collapsed 80 percent last year. Abengoa is a "financial engineering exercise with burning cash and with a working capital hole that has now come home to roost," Kumar said. A spokeswoman for Abengoa declined to comment.
"We have the ability to short during such times to defend capital within reasonable means while keeping the long-term value on our concentrated long book of core holdings," Kumar said.
Bloomberg’s rankings of the top-performing hedge funds are based on funds’ net returns for 2015. Because hedge-fund returns can be difficult to obtain, our lists are not all-inclusive. In addition, some of the numbers were difficult to verify. Unless the information came from Bloomberg data or the hedge-fund firm itself, we tried to verify it with other sources, including investors and other fund databases. All returns are for full-year 2015; fund assets are the latest available. Onshore and offshore assets were combined for a number of funds, while figures for other funds were only for the larger or better-performing class of the fund.