Monsoon Flagship Has Best Month Ever

Nov 5 2007 | 10:30am ET

Monsoon Capital’s flagship India Inflection Fund ended October with a bang, recording its biggest gains since it launched almost three years ago. The $1.2 billion hedge fund returned an estimated 21.9% last month, bringing its year-to-date return to 65.6%. By contrast, the BSE Mid Cap Index—which covers the Bombay Stock Exchange in Mumbai, India—is up 57.6% year-to-date.

The fund invests in the Indian small- to mid-cap space through a private equity-like process, with up to 10% of assets invested in p.e. deals and 30% are in private investment in public equity transactions. Its performance was driven by strong price performance in its top holdings, according to managing director Gautam Prakash. “In fact, five of our top 10 names were each up over 20% for the month,” Prakash wrote in his latest investor letter.

For example, a textile concern in the fund’s portfolio saw revenues grow by 120%, tripling its profits from a year ago. “These results stunned analysts given the strong headwinds (rupee appreciation and intense competition by lower cost countries) faced by the garment textiles industry,” Prakash wrote. “In fact, most competitors, including those backed by some other private equity and hedge funds, reported weak numbers: Gokaldas Exports reported a 50% drop in profits while Celebrity Fashions reported revenue growth of only 30% and negative profits.”

The firm recently reopened the flagship offering in an effort to garner an additional US$200 million in assets, after which it will again close its doors to new investors.

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