Cube Capital is a global alternatives investment firm which employs 49 people and manages approximately $1.3 billion. The company is based in London, but it also has offices in Beijing, Shanghai, Hong Kong, Kiev and Moscow and its offerings include multi-manager hedge funds, single-strategy hedge funds and real estate funds. Due to its ambition to extend its activities to other frontier markets, Cube Capital, last week launched the Cube Asia Frontier Fund (CAFF), which will invest in inefficient frontier markets where the economic environment provides strong opportunities for distressed investments, business development and financial growth.
The Cube Asia Frontier Fund was launched in Myanmar (formerly Burma), Vietnam and Mongolia, as these Asian countries provide huge potential for growth due to their liberalisation, political changes, lack of fully developed markets and favourable regional demographics. In order to take advantage of this economic environment and avoid the traditional problems associated with single country frontier funds, CAFF will be providing investors with a diversified multi-country exposure. The multi-country approach also means that the fund will be less vulnerable to sudden policy reversals or other events in any of the target markets. In order to reduce the risk CAFF will invest no more than 50 per cent in each country and no more than 25 per cent in every real estate deal. And when it comes to numbers, the fund capacity is set to be $150 million while the targeted investment period is between 24 and 36 months and the realisation period is 60 months thereafter.
!m(/uploads/story/104/thumbs/pic1_inline.png)A main part of the risk management process of CAFF will also be the alignment of interests and partnership with local companies through co-investment. The market risk will also be mitigated through the use of self-liquidating structures, such as convertible debt and warrants, the company stated. Where possible Cube Capital will use offshore structures, or other foreign investment channels where foreign exchange is approved. The Chief Investment Officer of CAFF, Tom Holland, announced that Cube Capital will be working in partnership with local companies in each of the countries it is targeting. In Myanmar, for example, Cube will be working with Serge Pun and Associates (SPA), an arm of Singapore-listed Yoma Strategic Holdings (YOMAR), which until recently has been one of the few ways for western investors to access Myanmar’s market.
In a commentary regarding the launch of CAFF, Mr Holland said: “Our philosophy is to seek uncrowded investment opportunities, and we are confident that exploiting these still insufficiently explored markets will generate attractive returns. It will also make us one of the first entrants into nascent real estate investment markets such as Myanmar. We are looking forward to soon closing one of our first deals.” In the future, CAFF’s activities may even be extended to other frontier markets, when the company deems the circumstances to be adequately advantageous, further stated the Cube Capital representative.