His firms are his best investment

Veteran fund manager who was born in a kampung follows his mum's advice and saves to multiply his wealth.

Tue, Jan 05, 2010
The Sunday Times

By Lorna Tan

After having successfully helped three financial firms build their investment service businesses, Mr Tan Chong-Koay was offered a licence to set up his own fund management firm by the Malaysian regulator in 1993.

He gladly took the chance and, together with a few partners, set up Pheim Asset Management in Kuala Lumpur in 1994.

The following year, with his partners, he set up Pheim Asset Management (Asia) in Singapore after getting the necessary approval. Both firms took off almost immediately.

Pheim's flagship fund - the Asean Emerging Companies Growth Fund - has been ranked No.1 among Asean equity funds by credit rating firm Morningstar for many years. As of the end of November last year, the year-to-date return was 102.86 per cent versus the FTSE All World Asean Index of 65.74 per cent.

Mr Tan, who turns 60 today, cites the two firms that he co-founded as his best investments.

The veteran fund manager and entrepreneur obtained a business degree from Western Illinois University in 1973. Two years later, he got an MBA from the same university.

From 1976 to 1981, he worked at South East Asia Development Corporation as head of investment services. This was followed by stints in Arab-Malaysian Merchant Bank (now known as AmInvestment Bank), Singapore-based DG Bank-GZB (Asia) and John Govett (Asia), the three firms whose businesses he helped to build up before he set up Pheim.

Mr Tan, who is Malaysian and a Singapore permanent resident, is married to a Malaysian who works here, and they have two daughters, aged 31 and 23.

Q: Are you a spender or saver?

My mother used to say: 'You can't get poorer if you spend less than you earn. You obviously can't get richer if you spend more than you earn.' I am definitely a saver. When you save, you have funds with which to multiply your wealth. In my initial years of working, I was saving 20 per cent to 30 per cent of my income, and as my career stabilised, I was able to save more.

Q: How much do you charge to your credit cards every month?

I don't charge more than $3,000 a month. I use credit cards for convenience and try to settle promptly at the end of each month. I have seven cards or more, and I generally use two of them. I go to the ATM as and when I need cash. I always keep $500 handy.

Q: What financial planning have you done for yourself?

Most of my personal wealth is in my two fund management companies. Besides that, I park my money in savings, fixed deposits in various currencies (US dollar, Malaysian ringgit, Singdollar and Australian dollar) and properties. I put most of my personal disposable wealth in the money market and properties because I want to avoid conflict of interest since my two fund management companies invest in equities.

I follow two simple rules: First, save money to multiply wealth. I don't have expensive habits. Second, generate constant flows of income. You must strive to succeed either in your job or your own business. Do what you love, love what you do.

Q: Moneywise, what were your growing-up years like?

I was born in a kampung in Kedah which did not have running water or electricity. I was No.8 in a family of nine children. We lived in a five-bedroom shophouse. My father ran a grocery shop, and my mother was a housewife.

While we were not very poor, we were taught thrift from a young age. I had to help out in the shop when I was in primary school, but when I went to Penang for my secondary education, I went back to help only during school holidays.

When I went to university in Western Illinois in the United States, I was very disciplined and worked every spare hour as a student to save money.

Apart from the US$100 per month, which my fifth brother sent me for my first nine months there, I basically funded my own studies the whole time I was a student there. I worked in restaurants and dormitory canteens where I could get free meals.

Q: What property do you own?

In 1988, I bought a 3,200 sq ft penthouse in East Coast for $623,000 and sold it in 2007 for $1.8 million.

In 2004, I bought a 2,500 sq ft three-bedroom penthouse in East Coast for $1 million. In the same year, I bought another unit in the same development for $750,000. This one is 1,400 sq ft and is meant for my older daughter's future use. The monthly rent is more than $4,000. Both units have increased in value, and it should be around $800-$900 psf.

I also own a 2,200 sq ft three-bedroom condo in Kuala Lumpur, where I work once a week. I bought it about 15 years ago. I can't recall the price.

Q: How did you get interested in investing?

When I returned to Malaysia with my MBA in 1975, I took my father's advice to look into plantation and tin stocks, which he thought had good prospects. I decided to look for undervalued stocks to invest.

I made my first investment in vehicle retailer Inchcape. Although it was not a commodity stock, I thought it was oversold after the stock plunged following the loss of a car distribution franchise. I bought some shares at RM2 each. In the next few months, the stock recovered to more than RM3 per share. From then on, I decided I would make a living out of value investing.

Q: What is the most extravagant thing you have bought?

For 25 years, I wore a Swiss Rado watch. But in 2008, I bought a Tag Heuer for less than $3,000 for daily use. In the same year, I spoilt myself with a $8,000 IWC watch. but I wear that only on special occasions. Otherwise, I am pretty frugal.

Q: What is your retirement plan?

I don't intend to retire, but if for some reason I do stop working, I don't think I need more than $5,000 a month as I have an apartment each in Singapore and Malaysia, a car and a club membership, and I still have sufficient savings in my Central Provident Fund and Malaysia's equivalent, the Employee Provident Fund.

Q: Home is now...?

My penthouse in East Coast. I live here with my wife and younger daughter, who is a fourth-year medical student at the National University of Singapore. My older daughter, a certified financial analyst, is working in the United States.

Q: I drive...?

I drive a company car. It is a white Lexus 300E.

Q: My worst investment to date?

Among the local stocks Pheim lost money on is China firm Fibrechem Technologies, which is still under trading suspension. I also invested in electronic waste recycler Citiraya, which came under investigation and lost virtually most of its value. This happened a few years ago.

Q: My best investment to date?

I love the fund management business. The two companies I co-founded are my best personal investments to date, and that is where most of my personal wealth is. Currently, I own 45 per cent of the Malaysian firm and 66.5 per cent of the Singapore one. I invested RM1 million in the Malaysian firm and $200,000 in the latter. As of September last year, the total shareholder funds of the two firms have grown to RM26 million (S$10.7 million) and $8.13 million, respectively. As of end November last year, Pheim's combined assets under management amounted to US$1.44 billion (S$2 billion).

This article was first published in The Straits Times.