Discovery Capital Investment has launched its Discovery Hispanic Index, an equal-dollar weighted index of the 28 publicly traded Hispanic companies in the U.S. The firm also intends to roll out a “global Hispanic” long-biased hedge fund in the third quarter, investing in the equity and debt of Hispanic companies based in the U.S., Latin America, Spain and Portugal, said Jay Garcia, managing partner. Discovery defines Hispanic companies as having at least 51% Hispanic ownership and/or at least 25% of their revenue coming from the Hispanic market.
The firm has sent reports on its index to pension funds and asset managers to raise awareness of the potential of Hispanic companies to outperform the broader equity market. “We’re trying to market this as a new asset class,” said Gerardo Soto, partner. Discovery is also creating a unit investment trust to facilitate passive investment in its index.
Garcia wants to raise $20 million for the hedge fund. The firm will manage money for friends and family until it has a one-year track record, and will then start marketing to institutional investors. Garcia has already talked to a large California public plan, which requires him to have a one-year track record. He sees an opportunity with pension plans in California in particular because such a high percentage of the state’s population is Hispanic. Fees will be 1.5% and 20%.
The Discovery team has been running its hedge fund strategy as a paper portfolio since June 28, 2005 and as of June 27, 2006 it had returned 41.53%. This compares to 33.89% for the MSCI Emerging Market Latin America Index, 15.82% for Spain’s IBEX 35 Index and 7.09% for the Russell 2000.
The Discovery team first launched a Hispanic index in November 2003 when they worked for investment bank Samuel A. Ramirez & Co. Discovery spun out of Ramirez & Co. on Feb. 15 to enable its professionals to focus purely on Hispanic indices, Soto said.