Cover Story: A maverick in the asset management industry

TheEdge Wed, Jun 08, 2022 11:30am - 2 months View Original


Ng Zhu Hann wears many hats. He is a lawyer and successful investment blogger writing under the pen name of Tradeview. He is also the author of Once Upon a Time in Bursa: The ­MONEY Equation, which won the MPH Best of 2021 Business Reading Award recently.

He is also the founder and CEO of Tradeview Capital Sdn Bhd, a boutique asset management firm that just obtained its licence in March from the Securities Commission Malaysia (SC). 

According to Ng, only about 10 such firms have been set up locally since the SC started issuing boutique asset management firm licences seven years ago.

A licensed boutique asset management firm can accept a maximum of 50 clients — who meet the sophisticated investor criteria under the SC’s guidelines — and manage up to RM750 million in assets under management (AUM). 

What is the unique value proposition Tradeview Capital is offering to investors and the capital market? Ng tells Wealth at his office in Wisma Ehsan Bina in Kuchai Lama, KL, the firm’s speciality lies in investing in micro-, small- and mid-cap companies with a market capitalisation of under RM50 million, RM100 million and RM500 million respectively. 

Many of these companies are not on the radar of research houses and institutional investors due to their smaller market size and low liquidity. Tradeview Capital’s aim is to uncover these gems and invest in them over the long term — ­typically three to five years — until they show results and are recognised by the market. 

“These are companies that big asset management firms and institutional investors can’t invest in, simply because their fund sizes are too huge. There are also concerns from investors about the liquidity of these companies. In our case, our fund size is small and we invest in them over the long term,” says Ng.

As a strategy, the firm intends to acquire 5% to 10% of specific micro- and small-cap counters and get a seat on their board of directors. The director appointed by Tradeview would then play an active role in unlocking the value of these companies.

The shares of these companies can be bought in various ways, including from the open market, private placements or through direct business transactions, Ng explains. 

He says the firm has, as a start, identified a potential target for such an investment strategy. “It is a company on the Main Market, listed for over 20 years. Its share price has fallen more than 80% from its peak. But it is still a very reputable company and a contract manufacturer in the FMCG (fast-moving consumer goods) industry with multinational corporations as its clients. 

“The fall in its share price is due largely to the overall business environment. For example, as labour costs locally get higher, it operates with lower margins. However, the company has very good assets in Penang and the Klang Valley, and a clean balance sheet. 

“Its share price has fallen to a point that [the company] has become valuable to us, and the next thing is for us to take a position in the company, mutually agreed by us and the majority shareholders and key management. 

“The company has very good assets that have not been revalued [and fully utilised] for many years. Where we can come in to add value is to help sell those assets to, say, a real estate investment trust (REIT), and lease them back from the REIT. We can then plough in the capital we get from the REIT for business expansion, building new facilities or venturing into new businesses. We can monetise these legacy assets.”

Ng says such an investment approach is akin to activists investing in the US, where investors buy a large number of a company’s shares to gain influence and pressure its management to make changes to its businesses. The relationship between both parties — the activist investors and the majority shareholders and key management of the target company — could turn hostile when there are major disagreements. 

“However, we don’t follow the aggressive style of the US. We do things based on muafakat or consensus. We will ensure that the interests of both parties are aligned before taking a position in the target company,” says Ng. 

Based on the firm’s research, there are about 60 to 70 smaller-sized companies like this in the market for such a strategy to be deployed, he adds. 

Such an investment approach is beneficial to the capital market as these micro- and small-cap companies with a long history and good potential can continue to grow, says Ng. “Based on news reports and our research, more than 60 companies out of the 973 companies listed on Bursa Malaysia are now being controlled by syndicates, which is quite tragic. 

“Hence, our value proposition is that we come in to facilitate and improve the performance of these smaller-sized companies, and to preserve and grow their values.”

Overall, Ng says Tradeview Capital’s private mandate is to invest up to 40% of its portfolio in micro- and small-cap companies, while the rest will be invested in mid- and large-cap counters locally and globally. The firm’s portfolio is Malaysian-centric as he believes local knowledge is a deciding factor in its outperformance. 

As at May 9, Tradeview Capital had an AUM of RM50 million, which it is looking to increase to RM300 million over the next five years. 

The minimum investment amount for its private mandate is RM500,000. However, investors are advised to put in RM1 million so that they won’t have a lock-up period for the money committed to Tradeview Capital, says Ng.

The firm also imposes a 2% sales charge on its investors and a 20% performance fee on the profit above the 7% high-water mark of its net asset value. 

Ng says Tradeview Capital is planning to launch two wholesale funds in the third quarter of this year with a lower minimum investment amount for individual investors to access. Its ESG Impact Fund will allow investors to ride on the growing environmental, social and governance trend while its private equity for public market fund would deploy 10% of investors’ money into micro- and small-cap companies to unlock their values over the long term. 

An arduous journey into the investing world

Ng is not resting on his laurels. The next few years will be crucial as the firm executes its investment strategy to deliver good returns to its investors. 

Success is critical for Ng, as it has not been an easy journey. He obtained a law degree from the London School of Economics and Political Science (LSE), but law is not his big love. Instead, he had always wanted to become a research analyst and fund manager. While practising law for about five years, he attended about a dozen interviews with investment banks, private equity outfits and consulting firms in Singapore and Malaysia. He failed to get into any of them. 

A main reason for the rejections? Ng did not have a degree in finance. “In two interviews with a renowned investment bank and a top consultancy firm, I got through to the final round but was rejected. The partners were afraid that I might be poor with numbers as a law degree holder. 

“Do note that Charlie Munger, Warren Buffett’s long-time partner, is a lawyer by training. Tan Sri Quek Leng Chan, who owns a sprawling business empire including banks, is a qualified barrister,” he says. 

Much to his disappointment, Ng realised that it was not uncommon in Asia that investment banks and asset management firms tend to reject newcomers without a financial degree or professional certificates in finance. The industry remains a relatively close-knit circle even today.

“The capital market circle in Malaysia is particularly unforgiving when it comes to allowing industry outsiders to get a foot in. Overseas, you see investment bankers or fund managers coming from academic backgrounds like history, biology, physics or law. But locally, a financial qualification is a prerequisite and professional papers are almost a must, especially in this generation. It was a very difficult journey for me.” 

For all the failures he had gone through, Ng realised that he had to carve out his own path to become an analyst or fund manager. What he urgently needed was not only knowledge and experience, but also reputation and connections. 

So Ng left legal practice in 2015 to join Sunway Property as its manager of group strategy, corporate development and brands, communications and special initiatives. After more than two years, he became a director of Country Garden Group that developed Forest City in Johor Baru. Later, he launched his own law firm, Hann Partnership. 

It was not until March this year that Ng finally obtained approval from the SC to set up Tradeview Capital Sdn Bhd. He subsequently relinquished his management role at Hann Partnership to focus solely on running the boutique firm, in compliance with the SC’s rules and regulations. 

“It took me seven years to get to where I am today. I had the idea [of launching my own firm] in 2015 when the SC allowed the setting up of boutique asset management firms. My strategic move from the legal to corporate world was to help me set up my own shop one day,” says Ng.

One might ask why he is so adamant about being a fund manager when he has the chance to also do well in the legal and corporate worlds. Ng attributes it to the subprime mortgage crisis in 2008 that opened his eyes to the power of economics and the capital market.

As an undergraduate living in London, Ng witnessed how the crisis almost brought the global financial system to its knees as well as its enormous impact on nations and their people. 

“London is the capital market hub of the European Union. I saw how the global financial crisis affected every single thing around me. Teachers and students spoke heatedly about it, while job hunting and recruitment activities dried up. Students who were hired before graduation lost their jobs even before starting them, while big shots in the financial world like George Soros, Ben Bernanke and Alan Greenspan came to LSE to give talks. I attended all of them. That allowed me to see how economics and the capital market are intertwined with our daily lives.” 

Another thing Ng likes about the capital market and fund management is that they are merit-based. It offered someone from a humble background like Ng — a Petaling Jaya boy born to a middle-class family — a chance to succeed in a very competitive industry. 

“I personally feel that it gives people like me the best opportunity to do well. The market doesn’t care about who you are, what your religion or creed is. You’re a good fund manager when you deliver returns to your clients. It is extremely brutal, but also merit-driven.”

It was Ng’s passion in the capital market that made him start his own blog, Tradeview.my, in 2013. The online platform became the ideal space for him to express his views on the market and investment when he failed to secure a job in the investment world. 

Ng did not expect his online articles to help him garner a solid following — it’s several thousand today — and led him to the opportunity to publish a book. He hesitated at first when contacted by the book publisher AcePremier.com Sdn Bhd, but decided to give it a go. 

“I thought, who would buy a book written by a person with a pen name that most people don’t know. Then, I thought there must be some people who might appreciate honest, objective and independent content, regardless of my background. There might not be many of them, but they are there.” 

The decision was spot-on as the book, Once Upon a Time in Bursa: The MONEY Equation, was a success. “It lifted my profile substantially,” says Ng. 

A straight shooter 

The book also helped Ng establish his reputation as a straight shooter; he was not shy about pointing out the wrongs and questionable activities in the capital market. For instance, he told the story of “Mr Maserati”, a research analyst with a local investment bank who rose to prominence in 2016 when he initiated coverage on Vivocom International Holdings Bhd (now VinVest Capital Holdings Bhd), a penny stock company providing telecommunications engineering services. 

According to the book, the research analyst painted an extremely rosy picture of the company in his initiation report, mentioning that it had secured over RM2 billion worth in its order book and would become a force to be reckoned with.

“Eventually, the SC and the investment bank intervened when a research report showing the company’s quarterly results mistakenly went public two days prior to the official result announcement. The SC commenced investigation; the research analyst was relieved of his duties and eventually let go. 

“So how did ‘Mr Maserati’ obtain his nickname? In the midst of his coverage of Vivocom, he showed up for work one fine day in his new Maserati.” 

Now that Ng is the CEO of Tradeview, will he continue to speak his mind and stay true to himself? 

“To be frank, it was a big jump from being an anonymous blogger to a newspaper columnist [at Nanyang Siang Pau and StarBiz]. And from a columnist to the founder of a regulated entity, it becomes even harder. I will definitely toe the line in terms of what I’m allowed to do within the ambit of the law. 

“However, the messaging and narrative that I give out to the public and my readers will always be the same. For instance, I hope people think of the stock market not as individual stock pickers, but as individuals investing in the businesses of the companies. Don’t hope for durian runtuh [quick money]. And if I see unscrupulous things in the market that require warning, I will still highlight them in my column,” says Ng.  

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