Introduction
Venture capital, private equity, investment banking, fund management are some examples of jargon that is commonly used among students pursuing business courses but their actual operations and inner workings may be rather obscure. As such, FLY: Malaysia seeks to shed some light on these with an exclusive interview with Mr Ng Zhu Hann and his team from Tradeview Capital, a boutique fund management company licensed by the Securities Commission (SC) Malaysia. Mr Hann assumes many roles; apart from being the founder and Chief Operating Officer (CEO) of Tradeview, he also writes for various local news agencies and authored the investing bestseller “Once Upon a Time in Bursa: The MONEY Equation”. Interestingly, he used to run a law firm and obtained his degree in law studies from the London School of Economics (LSE). “What made me so interested in the capital and financial market was that I was in the heart of the European financial hub amid the 2008/09 Global Financial Crisis. It propelled me to delve deeper into understanding the causes and dynamics. I found that maybe I should study finance and economics rather than law, but it was too late to regret,” said Mr Hann.
The eventual inception of Tradeview Capital was a blend of struggle and hardships. “I tried my very best to switch my career path to get into financial institutions and research houses, but I was being rejected because I don’t have a finance-related degree. They were basically worried that I could not count.” Hann added. Elaborating further on the capital market licensing in the country, he pointed out that there are three-tier licences, with venture capital being the lowest tier, followed by private equity, and fund management. Venture capital typically invests in start-ups, whilst private equity targets established companies that are near their listing stage (Hopper, 2023). Both licences only allow 20% of the clients’ funds to be invested in public equities. Tradeview Capital is essentially a fund management company, which means it could further deploy its funds to various regulated capital markets products such as commodities and bonds.
With the title “Boutique Fund Management Company”, Tradeview distinguishes itself from conventional full-fledged funds by only onboarding sophisticated investors as specified by the SC.
According to the latest guidelines, eligible sophisticated investors include (SC Malaysia, 2024):
- accredited investors such as licensed financial institutions,
- high net-worth entities that have assets exceeding RM 10 million under their management,
- high net-worth individuals with net personal assets exceeding RM 3 million, relevant educational backgrounds, membership in organisations such as Chartered Financial Analyst (CFA) and five consecutive years of working experience in a capital market intermediary.
Deciphering the fund management industry
A common question that students frequently ask is whether the theoretical models learnt in lectures apply to real-life scenarios. “The short answer is yes, those financial valuation methods, including ‘discounted cash flows’, ‘price to earnings’, jointly form the basis of the quantitative aspect of analysing a security,” answered Mr Hann. “Of course, one must further apply the knowledge that they learnt in university to decipher evolving global and local conditions which may or may not have happened before,” he added. To excel in the industry, one must also possess a qualitative skill set and a breadth of knowledge in analysing different industries, business models, relevant markets and more!. “A good fund manager must also have the ability to critically read people. You need to assess the management of the company and cross-check it with the numbers and prospects obtained from their financial reports.”
When being asked about the day-to-day operations of a fund management company, Mr. Hann answered that there are two parts: investing and finding clients. “If you don’t have clients, you don’t have money, then you have nothing to invest, and the firm ceases to exist,” he said. As such, ample branding, marketing, and relationship-building is needed to find clients whose values align with the investment philosophy of a fund management firm, and gain their trust. “On the investing part, we do a lot of research, covering companies and macro news to come up with new investment ideas to generate alpha.” The term alpha is a finance jargon which refers to the excess returns earned by an actively managed fund. In other words, astute fund managers distinguish themselves from passive investment strategies that track the performance of the broad market by generating alpha to offer superior investment returns to their clients to compensate for extra fund handling charges. “The focuses of our portfolio managers are segregated by sectors and each has their own niches to explore based on global and local trends, as well as any big news movements like the previously announced New Industrial Master Plan (NIMP) 2020 and the National Energy Transition Roadmap (NETR). They will need to think about potential sectors, and eventually, companies that are poised to benefit them. This must also be accompanied by a visit to the company, plant, or management to see how things actually turn out.”
Answering the question about the ideal candidate for possible job openings, Tradeview looks for individuals with a passion for capital markets, those who possess the ongoing passion and capacity to learn and not be complacent. The exact discipline or degree is usually a secondary consideration, as expertise in different fields like engineering or science may allow individuals to interpret the performance and technologies of technical sectors or companies like semiconductors, as compared to business majors.
It is also quite interesting to learn that the bulk of the time spent by the CEO of a fund management firm is on client acquisition. When posed with the question of how Tradeview balances yielding a good return for its clients ,while maintaining a long-term investing approach and keeping clients who expect to see short-term gains, Mr. Hann attributed the boutique firm’s success to the composition of clients. Mr. Hann admitted that it is not easy to run a long-term fund if clients don’t share the same long-term investment horizon as Tradeview. Therefore, it is important that Mr. Hann explain the vision of the firm’s flagship fund: Tradeview Sustainability Fund, at the outset of its client’s investment journey with Tradeview Capital.
Investment Ideologies and advice to young investors
“Contrary to popular belief, sometimes the best decision is not to invest. Young investors like you all may think that with all the knowledge you have, you will know what stock to buy, and you will get rich. However, in the fund management industry, I prioritise risk management. That is, one must learn how to not lose money before learning how to earn money. If you make an analysis and come to a point that you decide not to buy a stock of a company, this may be the best decision you have ever made for yourself and your clients,” adds Mr. Hann. The investment decision of Tradeview adheres to three principles, that is to invest in securities that have a reasonable margin of safety, grounded through detailed fundamental analysis, and commitment to a long-term horizon. “Time is our best friend. We use a long enough time horizon to normalise fluctuations, allowing the mean reversion of undervalued securities and the company to have meaningful growth,” explained Mr. Hann. “One thing I asked my team is: Do you want to become a high-risk and high-returns fund or be a fund that everyone’s gonna remember and park their money in due to its well-established reputation in being safe in preserving wealth? Luckily, everyone agrees to be the latter.”
Expounding on his stance towards the booming cryptocurrency industry, Mr Hann commented: “I prefer to call them crypto-speculators instead of investors, and I know many young people have made a fortune out of it. But I believe there must eventually be a use case for crypto if the market is to continue to exist or grow larger. If there is still no use case and the market continues to boom, one thing I can say is that crypto is based on the belief of shunning the fiat currency system, and is used to evade taxes as well as syphon money.”
In advising young investors, Mr. Hann first acknowledges the impatience of young investors,eager to see results quickly, which may be propelled by peer pressure. “It is totally fine, as I also made the same mistakes when I started investing. The most important thing is that the young investor, at some point in time, must realise what strategies suit them best and they must have the discipline to correct their mistakes and change their mindset accordingly,” Mr. Hann added. Young investors should do their own homework diligently, instead of relying on rumours when executing investment decisions.
Prospects about the Malaysian economy
In terms of the projections of the Malaysian economy, Mr. Hann believes that Malaysia’s unique proposition in the semiconductor, palm oil sector, utility sector, food security and agriculture sector will be the main drivers of Malaysia’s economy in the foreseeable future. “Advancements in technologies will always be the forerunner of economic growth and the semiconductor sector will be on an upward trajectory due to increased demand, and the auxiliary sectors that provide services to the semiconductor value chain are the ones that Malaysia could use to differentiate itself from its neighbouring countries,” says Mr Hann. Seeking stability of the supply chains in the context of intensified geopolitical rivalry, foreign players have reinstated their renewed focus on the leading and pivotal status of Malaysia as a powerhouse in the global semiconductor value chain, a role the nation has been assuming since 1972.
Malaysia is fast becoming an attractive investment destination for data centres, riding on the waves of cloud computing and artificial intelligence, with favourable sites in Selangor, Johor, Penang, Kedah, and Sarawak (Malaysian Investment Development Authority, 2023). Putting the local data centre industry into perspective, besides the relative abundance of land and resources, what appeals to foreign investors is the robust and superior infrastructure, continuous support from local utility players to upgrade the existing infrastructure, as well as the nation’s commitments to green energy and environmental, social, and governance (ESG) goals (The Edge Malaysia, 2024). “You may also look out for the utility sector, renewable energy included as well, as you need water and stable electricity connection to run data centres and other related digital infrastructure,” adds Mr. Hann.
Feeling optimistic about the palm oil sector, Mr. Hann commented: “I also believe that the local palm oil sector will continue to thrive as the local palm tree is one of the best crops with excellent yield per acre, making it superior compared to other oils like sunflower oil or olive oil. Eventually, the world will come to realise that succumbing to European or American lobbyists on promoting other edible oil may not be the viable option way forward for humanity”. Malaysia has introduced the Malaysian Sustainable Palm Oil (MSPO) certification, acknowledging the ESG trend in providing a credible measurement of sustainable and responsible practices. As of Jan 31st 2023, more than 97% of palm oil estates and 98% of palm oil mills have received the certification (Free Malaysia Today, 2024). Officials from Malaysia and Indonesia are also actively voicing against the European discrimination policies and trying to rectify the image of palm oil.
“Of course you will see the conventional sectors, such as construction and banking, to continue to grow, but they may not be the main engines of economic growth,” adds Mr. Hann.
Note about sustainability and ESG in Tradeview’s operations
Tradeview itself has a sustainability fund that aims to offer returns over the long term by investing in equities that place an emphasis on ESG practices and parameters. “Our uniqueness is that Tradeview is the only boutique fund that received the qualification of sustainable and responsible investing from the SC, and our ESG models allow us to screen and identify small-to-mid cap companies that are not within the radar of our larger-scale peers,” answers Mr. Hann. According to the fund’s prospectus, the fund manager would adopt both negative and positive screening to rule out and select companies. Companies are then internally rated by reference to the global standards, covering aspects such as environment regulations, compliances and operational exposures, energy and water consumption, employee health and safety, ESG policy and disclosure. The manager will also engage with the company’s management via private discussions, site visits, or proxy voting to drive desired outcomes. “The filing to be qualified as sustainable is tedious as it is hard to convince the regulators that our model works as there is no explicit consensus. We believe the trend is here to stay as investors nowadays and the future generations will be more conscious about ESG components when it comes to businesses, and hence we are in the forefront,” says Mr. Hann.
Wrap-up
FLY has delved into the topics of fund management, investment ideologies, and prospects for the Malaysian economy with Mr. Ng Zhu Hann. As Tradeview Capital continues to prioritise sustainability and ESG in its operations, it stands poised to make meaningful contributions to responsible investing and long-term value creation in the Malaysian market and beyond.
References
The Edge Malaysia. (2024, March 25). Data Centres: All eyes on Asia’s future ‘Digital Tiger.’ https://theedgemalaysia.com/node/705615
Free Malaysia Today. (2024, April 24). No evidence justifying criticism of Malaysian palm oil, says Johari. https://www.freemalaysiatoday.com/category/nation/2024/04/24/no-evidence-justifying-criticism-of-malaysian-palm-oil-says-johari/
Hopper, G. (2023, March 27). Private equity vs. venture capital: Which is right for your startup? Forbes. https://www.forbes.com/sites/forbesfinancecouncil/2023/03/21/private-equity-vs-venture-capital-which-is-right-for-your-startup/?sh=6fe4be9552e5
Malaysian Investment Development Authority. (2023, June 9). Rise of data centres in Malaysia. https://www.mida.gov.my/mida-news/rise-of-data-centres-in-malaysia/
Securities Commission Malaysia. (2024). Guidelines on Categories of Sophisticated Investors (SC-GL/1-2024). https://www.sc.com.my/api/documentms/download.ashx?id=0fa41de0-425c-4b60-a070-5f596fd2e0b4
Researcher(s) / Journalist(s): Yeoh Jia Xin, Tan Czyn Jien, Amandev Singh, Malcolm Wong
Reviewer(s): Yeoh Jia Xin, Maryam Nazir Chaudhary
Editor(s): Waywen Loh
Designer(s): Kang Yi Yao
