This week, we took a trip to Kuala Lumpur to listen to Dato Seri’ Cheah Cheng Hye, the co-founder, and Chairman of Value Partners Group Limited. The talk was organised by Star Media Group, one of the mainstream media company in Malaysia. Value Partners Group is currently the largest domestic fund manager in Hong Kong and managed more than US$14.0 billion. The company is listed in the mainboard of Hong Kong Exchange and has a market capitalisation of about HK$14.0 billion.
However, many do not know that Cheah Cheng Hye was a Malaysian and one of the few rag-to-riches stories in the fund management industry. Cheah was born in Penang in 1954 and started out as a newspaper folder for The Star newspaper. He moved on to be a journalist. It was a career that spanned 17 years. Then, he switched into the equity fund management business at the age of 36. He left his job to start an asset management company with partner Yeh V-Nee. That went on to become one of the largest fund management company in Hong Kong, placing Cheah the best China fund manager as voted by Citywire in 2015.
Over the talk, he shared about his career and his investment philosophy. As a fan of his work and value investing, we hung on to every word he said. If you have missed this insightful talk, here are 5 key takeaways you must know.
A Great Investor and A Great Fund Manager
Being a great investor is hard, we need to spend a lot of time and effort to be good at what we do. However, if we assumed that we would be a great fund manager for others just because we are good investors, that could be a grave mistake. Cheah mentioned that being a great investor is just like being a great cook. And just because you are good at cooking, does not mean you can run a restaurant. According to him, besides being good at investing, some other qualities you would need to run a successful fund management companies includes:
- Be a driven entrepreneur
- Be a good fund raiser
- Be a good business operator
- Be a good motivator for your team
Yet above all things, to Cheah, the most important thing is to have the right character as a person. He would much rather hire someone with a good character with no investment skills than a person with good investment skill but a bad character.
Some of the qualities he looks for in a person is:
- Be a learner, always strive to know more. In fact, Cheah even changed his official signature to the word “Learn” to remind himself to never stop learning.
- Be humble and not have an ego. He coined the term be a “stupid-smart”. This means that we should always see ourselves as “stupid” and try to find out more from others. In that way, we will learn more things and be smart. If we are constantly seeing ourselves as “smart”, we might not learn anything. That, in turn, would only make us stupid.
When we can make an investment in the stock market, we should stop and ask ourselves one question. Why is the counterparty selling to us? Does he (or she) know something that we do not? By questioning, we might be able to see the investment in more angles and give us a clearer picture.
On The Next Crisis
Cheah thinks there will be another crisis. It might be in the next 5 years, it might be in 10-year time. He felt that the next crisis would most likely happen in North America or Europe. This is due to the political instability in the region, resulting in the high of more populist government. That might, in turn, create unsound short term economic policies, creating a financial crisis in the future.
Given that most Asian countries still have high saving rates and are seeing fundamental growth, we might not be as affected compared to the former regions.
On The Fund Management Industry
Cheah sees the liberalisation of the Chinese economy as inevitable. Due to the high saving rate of the Chinese, there need to be a channel for these funds to flow to. Therefore, as the market opens, the opportunity for the fund management industry is huge. Cheah sees it as the “Golden opportunity” of the future.
However, he understands that the current fee structure of the industry might need to be reduced to remain competitive in the future. Therefore, Value Partners are already seeing experimenting with robo-advisors and other forms of automation for the industry. He described it aptly by saying that in the past, a good fund manager is like a master tailor. However, in the future, we should not be training more master tailors, we need to be able to build a garment factory and automate much of the process.
Cheah has a good way of engaging with the audience and sharing key concepts with simple analogies. Great talk, great investor, great learning experience.