Saltlight Capital, an asset management firm, published its fourth-quarter 2021 investor letter – a copy of which can be downloaded here. The SaltLight SNN Worldwide Flexible Fund A1 class returned +4.96% during the fourth quarter of 2021 and since inception, the A1 class has returned 18.69%. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022.
Saltlight Capital, in its Q4 2021 investor letter, mentioned Tencent Music Entertainment Group (NYSE:TME) and discussed its stance on the firm. Founded in 2016, Tencent Music Entertainment Group (NYSE:TME) is a Shenzhen, China-based online music entertainment platform with a $8.5 billion market capitalization, and is currently spearheaded by its CEO, Zhu Liang. Tencent Music Entertainment Group (NYSE:TME) delivered a -26.13% return since the beginning of the year, while its 12-month returns are down by -83.37%. The stock closed at $5.06 per share on March 18, 2022.
Here is what Saltlight Capital has to say about Tencent Music Entertainment Group (NYSE:TME) in its Q4 2021 investor letter:
“Marketplaces must overcome the two-sided problem from Cold Start (zero buyers and sellers) to the Allee Threshold by generating liquidity. There is strong inertia in the early stages that requires offsetting momentum. Energy and capital are the only controllable tools and then luck and timing play a role too.
There are countless ways to generate liquidity on platforms but in marketplaces, the first goal is to get a buyer to try the app/website. The succeeding goals are to buy…and then buy again and again.
Retention loops (product reviews, next purchase discounts etc) take the buyer on a journey from ‘trier’ to ‘habitual buyer’. At all stages, friction should be culled to lessen churn and preserve the lifetime value of the user.
Buyer acquisition
Buyer acquisition relies on a funnel. The predominant (and most expensive) method is to advertise on typical platforms. Alternatively, there are more capital-efficient methods used by some platforms where they leverage their existing user bases or make a deal to use another platform.
Use other networks: In China, Tencent (a portfolio company) made investments in early-stage platforms and offered preferential access to its social media network for the privilege. This gave the startup access to hundreds of millions of potential Chinese customers at a low acquisition cost.”
Our calculations show that Tencent Music Entertainment Group (NYSE:TME) failed to obtain a mark on our list of the 30 Most Popular Stocks Among Hedge Funds. Tencent Music Entertainment Group (NYSE:TME) delivered a -19.68% return in the past 3 months. You can find other letters from hedge funds and prominent investors on our hedge fund investor letters 2021 Q4 page.
Disclosure: None. This article is originally published at Insider Monkey.
