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Dalton Investments’ Return, AUM, and Holdings

Nina Zdinjak

Exactly 30 years ago, Steve Persky, James Rosenwald, and Gifford Combs joined together to form Dalton Investments, a Santa Monica – based hedge fund. What made these three businessmen join together as a team was a serious investment experience in Asia and a vision of an investment management firm with a main focus on the Asian stock market. In 1999, they all believed that this was a perfect time to launch Asian-oriented hedge fund because Asia was going through post financial crisis period, which they found attractive in terms of investment opportunities. Dalton Investments is owned by its founders, who all have enough confidence in the fund’s investment philosophy to invest large amounts of money in it.

The fund’s investments are value-oriented and they include global distressed debt, global hedged equity, Japan equity long-only, Japan equity long-short, and emerging market debt. Aside from its main office in Santa Monica, Dalton Investments has additional ones in San Francisco and Tokyo. According to a few sources, the fund has around $3.8 billion in assets under management, out of which 92% are Asian and emerging markets equities. Gifford Combs is the fund’s Managing Director in charge of global hedged equities. Before Dalton Investment, he honed his investment acumen at Pacific Financial Research. Gifford Combs earned M.Phil degree, with distinction, in Economics and Politics from Cambridge University and an AB degree magna cum laude, from Harvard College. James Rosenwald, manager of the Dalton Asia Fund, previously worked as an external portfolio manager for Soros Fund Management. He earned a Masters of Business Administration from New York University and a Bachelor of Arts degree from Vassar College. James Rosenwald is an adjunct professor of business at Stern Business School (New York University).

Gifford Combs - Dalton Investments

Ever since the inception through the last couple of years, Dalton Investments had some pretty good track record. For example, its flagship fund, Dalton Global Opportunity brought back 15.7% annually since its inception in 1999 through 2003. Its Dalton High Yield Opportunities Fund brought back an impressive 21.64% in 2013, followed by a strong 15.85% in 2014. Although it returned less in the next year, it remained to deliver positive results. In 2015 it generated a return of 9.26%, in 2016 it brought back 4.88%, in 2017 it delivered 4.40%, while last year through October it gained 8.18%. Its total return amounted to 210.39% for a compound annual return of 14.56%, and its worst drawdown was 3.36.

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At the end of the third quarter of 2018, Dalton Investments’ equity portfolio was valued at $213.46 million, after the fund has added three new positions and dumped three companies. The most valuable long position in the fund’s portfolio on September 30, was the one in Turquoise Hill Resources Ltd (NYSE:TRQ). This is a Canadian mineral exploration company with a market cap of $3.32 billion. For the third quarter, ended on September 30, the company reported revenue of $246.54 million, versus revenue of $246.94 million for the corresponding quarter of 2017. It also reported EPS of $0.03 for Q3 2018, which remained the same as in the third quarter of 2017. At the end of the third quarter 2018, there were 18 smart money investors from our database long Turquoise Hill Resources, same as in one quarter earlier. Over the past 12 months, the company’s stock lost -47.78%, and at the moment of writing, it is trading at $1.65. Among the fund’s top 15 stock picks at the end of the third quarter of 2018 was also Berkshire Hathaway Inc. Class B (NYSE:BRK.B), which was one of the 30 Most Popular Stocks Among Hedge Funds in Q3 of 2018. The fund had invested in the company around $4.94 million, obtaining  23,056 shares outstanding.

On the next page, you can find more details about other Q3 holdings and portfolio changes Dalton Investments had made.

The second most valuable position in Dalton Investment’s portfolio at the end of Q3 2018, was the one in Genpact Limited (NYSE:G). It included 750,619 shares, with a value of $22.98 million. The biggest new stake the fund made during the third quarter was in Cheniere Energy, Inc. (NYSEAMERICAN:LNG), an energy company that mainly provides liquefied natural gas-related services. The company has a market cap of $16.83 billion, and over the past six months, its stock gained 2.37%, currently trading at $65.52. For the three months ended September 30, 2018, Cheniere Energy reported revenues of $1.82 billion, compared to $1.40 billion for the third quarter of 2017. There were 42 hedge funds long the stock at the end of Q3 2018, up by one from the second quarter of 2018.

Dalton Investments initiated the second biggest stake during the third quarter in China Biologic Products Holdings Inc (NASDAQ:CBPO), a large fully integrated plasma-based biopharmaceutical company in China, with a market cap of $3.14 billion. The fund acquired 54,551 China Biologic’s shares outstanding, which were worth $4.36 million. The third new position the fund established in BEST Inc (NYSE:BSTI), a Smart Supply Chain company based in Hangzhou, China. Dalton Investments purchased 152,900 BEST’s shares that were valued $905,000.

The biggest position the fund decided to drop during Q3 2018, was the one in Cheniere Energy Partners LP (NYSEAMERICAN:CQP), and it counted 425,038 shares outstanding with a value of $13.37 million. Dalton Investments also said goodbye to its position in Exela Technologies, Inc. (NASDAQCM:XELA), which included 179,800 shares that were worth $854,000.

Disclosure: None

This article was originally published at Insider Monkey.