Leopard Capital to raise frontier markets PIPE fund
Leopard Capital Management is launching a long-only fund that will target PIPE deals in up to 12 frontier markets in Asia. It will invest in sectors perceived to drive frontier economies, including consumer products, financial services, infrastructure and telecom. Pharmaceuticals, agri-business and mining may also be targeted in certain countries.
The minimum investment for the Cayman-domiciled Leopard Asia Frontier Fund will be $100,000 and it will focus on larger and more liquid stocks, with earnings growth and valuation the key drivers for returns. It is likely to concentrate on geographies that are already of interest to the private equity firm, namely Bangladesh, Cambodia, Laos, Thailand, Haiti and Mongolia.
Leopard Capital currently operates the $34 million Leopard Cambodia Fund, which launched in 2008 as Cambodia's first ever private equity vehicle. It has since made 12 investments and achieved two exits. The private equity firm is also targeting $75 million for a dedicated Haiti fund.
"Asian frontier markets are still achieving rapid economic growth, and their stock markets tend to be driven more by domestic than international factors," said Thomas Hugger, manager of the new fund. "We start with a top down approach to weight individual countries, then cherry pick the best stocks in each, taking into account economic cycles, interest rate trends, exchange rates and market valuations. When a market starts to looks toppy, we go to zero weight and switch to cheaper ones."
Douglas Clayton, who founded Leopard Capital in 2007 and currently serves as CEO, added that investing in Asia's frontier markets is like investing in the region's emerging markets 10-20 years ago. He believes there is a wealth of valuation inefficiencies to explore because frontier markets are too small for global analysts to cover properly.
Speaking to AVCJ in February, Clayton also threw light on the factors that underpin the new fund's investment thesis. He said the key to convincing LPs that a frontier-focused vehicle is worth backing is identifying defensive sectors driven by demographics and domestic development. The graduation from subsistence living to basic discretionary consumption requires electricity, telecom, financial services and food products regardless of what happens on Wall Street.
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