P.A.W. Capital has made its name with its tech-heavy flagship strategy, but the success of one of its managers, Annie Erner, has the firm thinking retail. The Greenwich, Conn.-based firm’s new long/short Retail & Consumer Fund builds off Erner’s experience running the retail and consumer portion of the P.A.W. Partners and P.A.W. Offshore funds.
The flagship has some $450 million in assets, with 10% to 15% in consumer and retail. Erner, who formerly worked on the sell-side at SmithBarney and UBS, will continue to manage that portion of the flagship in addition to her new duties with the retail fund.
“She’s had a tremendous record with us inside our flagship fund,” Chief Operating Officer Michael Benenson said. “It just made sense to give her her own fund.”
The firm seeded the retail and consumer fund with $5 million, following Erner’s success over 15 months with an incubator fund. While sector indices tumbled, Erner’s incubator was up 14.6% gross, according to Benenson. “She had great divergence.”
The fund debuted on Sept. 1, rising 2% in its first month. It currently holds 40 positions, 20 long and 20 short, and charges fees of 1.5% for management and 20% for performance. Morgan Stanley is the prime broker. Benenson expects some outside assets to begin coming into the fund at the end of the month.
“There has been client interest,” he says, noting that a perception that the Federal Reserve may be done raising interest rates is a positive sign for the new fund. “Retail has outperformed the S&P every time the Fed has finished its rate-hike cycle.”
The retail and consumer fund is part of a wider strategy for P.A.W. “We have a somewhat contrarian view that sector funds are going to come back into vogue,” Benenson says. “We believe that when organizations get comfortable with a fund family” – P.A.W. has been around for 16 years – “they will be able to pick individual sectors.”
The firm launched a natural resources fund in January, and also manages a long-only small-cap vehicle. There are also plans for another sector offering next year, but Benenson says, “we’re not going to roll out a ton of them.” But, he adds, “if you can find a couple of these situations, if we do our job right and find money-makers, one day the little PAWs will be bigger than the big PAW.”