East Capital Says Its $3.4 Billion Deal Is Just the Beginning
East Capital Says Its $3.4 Billion Deal Is Just the Beginning
(Bloomberg) -- East Capital Group, a Swedish asset manager that specializes in emerging markets, is looking for more takeover targets after buying a $3.4 billion manager in its local market.
The Monyx Asset Management AB purchase, which was closed this month, reflects a consolidation trend in the industry as smaller managers struggle, according to East Capital Chairman Peter Elam Hakansson, who oversees about 5 billion euros ($5.6 billion) in assets.
“The transformation of the fund market has only started and will pick up pace," Elam Hakansson said in an interview. “Especially in continental Europe, there is a group of capital managers that are too small to make it on their own in the long term."
Elam Hakansson says that “the acquisitions we are doing now are based on the fact that we see that there are quite a few companies in the industry that don’t have an optimal size, and that are struggling to handle the regulatory changes.”
East Capital’s strategy is to focus on domestic trends in the frontier and emerging markets it targets for investment. In the case of Russia, in which the firm’s been investing for over two decades, that means focusing more on growing household demand rather than commodities prices.
Most investors “saw Russia as a cheap raw materials exporter,” but “we saw 143 million people wanting to change their lives, and started investing in the next step -- mobile phone companies, breweries, property producers etc,” Elam Hakansson said.
By 2010, East Capital was in China. It also turned to Kenya, Nigeria and Bangladesh, as part of a strategy to target places “where consumption in relation to GDP is very low,” Elam Hakansson said.
He also says China is much more than a trade story, from an investment perspective.
“Trade tensions affect Chinese shares,” Elam Hakansson said. “At the same time there’s this other trend where much more capital in the world started looking at Chinese domestic shares after the MSCI A share inclusion.”
Only about 20% of China’s stock index is exposed to exports, which means there are good investment opportunities there when times are volatile, he said.
To contact the reporters on this story: Hanna Hoikkala in Stockholm at hhoikkala@bloomberg.net;Niclas Rolander in Stockholm at nrolander@bloomberg.net
To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Tasneem Hanfi Brögger, Jonas Bergman
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