Pangolin Investment Management has recruited transport analyst Mohshin Aziz to spearhead the launch of its second fund - The Pangolin Aviation Recovery Fund. Aziz, who spent the past decade as transport analyst with Maybank-Kim Eng in Kuala Lumpur and six years before that as head of Investor Relations at Air Asia, will join the Pangolin team in Singapore later this month.
This is Pangolin’s first new fund in 16 years and marks a departure from its usual focus. Principal James Hay, speaking to Airline Economics editor Victoria Tozer-Pennington, said that although he had never owned an airline stock, he has full faith in Aziz’s ability to pick who will be the winners in this market, who he describes as having an “encyclopaedic knowledge” of the aviation industry and whose past calls have been accurate.
In a letter to investors, Hay said: “Much of the industry is on its back, despite unprecedented levels of government support. Amidst the carnage, there will be survivors and big winners. Some markets will recover ahead of others. Chinese domestic travel is already at 80% of pre-Covid levels.”
The Cayman entity fund will be global in its reach and invest in listed securities in any company connected to air transportation, including: airlines, airports, aircraft manufacturers, service companies. There will be both a management and performance fee for the fund, since the emphasis is on its performance rather than size. The goal is for the fund to launch on December 1.
Hay states that the fund will be picking companies based on the strength of their fundamentals and “survivability” – in other words those that have adequate liquidity to see the through the crisis but also those with the right business model for the changing operating environment.
Although Hay historically has shied away from cyclical industries like aviation, he sees real value in buying into the market today and betting on the recovery over a longer period. Although the fund will have the ability to short in the future, initially the focus will be on building the recovery fund. Hay is confident that the travel industry will return: “Living in Malaysia, with its low incidence of Covid, has convinced me that the world will return to normal, not a “new-normal”. As we all did following 9-11, we’ll learn to live with airport inconveniences in order to fly again.”