Firm & Strategy Overview:
Eastern Point Capital Management (EPCM) is a global emerging and frontier market equity manager. The firm was founded in April 2013 and the Fund (Eastern Point Emerging Markets Fund, L.P.) was launched in October 2013. Ethan Spencer, Founder and PM, spent the previous 9+ years in the Boston University Investment Office and at Cambridge Associates. Schooner Capital (a Boston-based single family office) provided a multi-year commitment into both the fund and the operating company at launch, and the firms’ current AUM is ~$50mm.
Eastern Point invest in emerging (EM) and frontier (FM) markets globally with the objective of generating long-term returns that are superior to the MSCI Emerging Markets Index on both absolute and risk-adjusted bases. The strategy is primarily executed through investing in long-only fundamental equity managers that are located in the emerging markets and invest in a “local” fashion, resulting in portfolio of off-the-run small and mid-cap ideas.
While dozens of funds offer global emerging markets exposure, most such funds are based in developed markets and invest predominately in the large index constituents. Eastern Point believes that being “on-the-ground” and managing a limited amount of assets provides their managers with a discernible edge over their global active EM competitors. Implementing the strategy requires extensive travel to EM regions, both to source and to monitor investments. The team thus travels regularly to Asia, Africa, Eastern Europe and Latin America to source new ideas and meet with their managers.
Investment Philosophy:
Eastern Point sources fundamental, bottom-up, long-biased equity managers. It is their belief that using locally based managers with reasonable AUM provides a better exposure to the emerging markets growth story, as these firms typically invest in local businesses tied to domestic consumption and middle-class growth. Having a reasonably sized asset base is key to successfully investing in these markets as many of the best opportunities remain small. In addition, local emerging markets managers have numerous other advantages versus global competitors, including a deep cultural understanding that can equate to better information, local networks which can lead to better access to management and key players, and language skills which provide more nuanced information.
Overall, managers that are based in the country/region where they invest have a discernible edge in sourcing, researching, and monitoring underlying portfolio companies when compared to managers with broad global mandates. Further, investing locally enables Eastern Point to obtain a more pure exposure to the internal economies of rapidly growing emerging markets and as a result they may own few, if any, core index constituents. As such, performance will deviate materially from the index at times; and Eastern Point is comfortable with periods of short-term underperformance to generate outstanding long-term returns.
All of Eastern Point’s managers perform deep proprietary research, typically with a long-term buy and hold value approach. Eastern Point believes that fundamental bottom-up due diligence is one of the few areas where talented portfolio managers and analysts can generate a repeatable and sustainable edge – and just as importantly, it is an area where they can identify that edge. They do not invest in businesses, firms, and funds that they do not understand. All underlying managers typically have straightforward and comprehensible businesses and approaches to investing.
Eastern Point invests first and foremost in people, not firms. The approach balances qualitative with quantitative factors, viewing quantitative analysis as a valuable component, rather than a substitute for, qualitative assessment. By talking with the primary decision makers, they strive to learn how those managers approach investing, manage risk, and build a business, as well as what motivates them to succeed. Managers must be honest, ethical, and trustworthy. That matters above all.
Executive Bios:
Ethan Spencer is the founder and Portfolio Manager of Eastern Point Capital Management. He has worked in the investment business focusing on manager due diligence and multi-manager portfolios since 2001. From 2008-2013, Mr. Spencer was a Director in the Investment Office at Boston University, primarily overseeing public equity and hedge fund investments. Previously he worked at Cambridge Associates as a Senior Research Consultant in the Hedge Fund Research Group from 2005 through 2008. Prior to Cambridge Associates, he worked at Credit Suisse in both New York and Boston. Mr. Spencer holds a BA from Colby College (1994) and an MBA from Cornell University’s Johnson Graduate School of Management (2001).
Dan Guttell is a Director at Eastern Point Capital Management. He joined the firm in 2013 having spent the past two years working with Battery Global Advisors (BGA), a multi-family office established to manage the assets of current and former partners of Battery Ventures. At BGA, Mr. Guttell was responsible for identifying, evaluating, and monitoring alternative asset managers. Prior to Battery, Mr. Guttell was a Senior Hedge Fund Research Associate at Cambridge Associates, where he was employed from 2006 through 2010. Mr. Guttell holds a BA in Economics from Trinity College (2006) and an MBA from MIT’s Sloan School of Management (2012).
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