Former Banker Launches Maiden Hedge Fund

Jan 23 2009 | 2:03am ET

San Diego-based Pacific Rock Capital has launched its first equity long/short hedge fund, focusing on small- and mid-cap stocks.

Pacific Rock Partners’ portfolio will hold approximately 15 to 20 positions with a typical holding period of between six to 18 months, according to a fund presentation. Its portfolio will be predominately net long and up to 10% to 20% net short.  Also, as much as 10% of the portfolio may be earmarked for private investments in public equity put into a side-pocket account.

“Our investment thesis is to find companies, predominantly in the small-to-mid-cap space where we can have significant access to management teams with good balance sheets and defensible businesses that have the ability to put up accelerating earnings per share at reasonable valuations,” said Christopher Donnelly, managing director.

The fund debuted in November with $4 million in assets and is down 3.11 % in its first two months of trading.

According to Donnelly, the fund is currently focusing on consumer-related names in food service and retail, as well as some technology names on the long side, given the discounted valuations in the market. On the short side, its focus over the past quarter has been in the financials, “however we believe at this point most of downside has been captured,” he said.

Donnelly added the macro environment is extremely difficult right now and the C-level executives that he talks to on a daily basis don’t have “visibility past tomorrow, let alone three to six months from now.”

Prior to founding Pacific Rock, Donnelly was a senior analyst at investment bank HC International/Monarch Capital.


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