Institutional Investor's Alpha Magazine - February 2008 - (Page 39)

Interview Cheah Cheng Hye The Master of Values By Henry Scott Stokes A generation ago, a young MalaysianChinese journalist joined the staff of The Far Eastern Economic Review. His editor, Anthony Rowley, remembers Cheah Cheng Hye as “a very self-effacing and pleasant young man.” Today, Cheah is a hedge fund pioneer in China, the dutiful young employee of the early 1980s long since supplanted by an entrepreneurial ﬁnancier and value investor who relishes his nickname — the Warren Buffett of Asia. Cheah, 53, got where he is by learning an important fact early on: Wherever two mighty forces converge, there is money to be made. In this case, the forces are China and the hedge fund industry. But Cheah recalls how he had friends ten or 15 years ago who were every bit as aware as he was of the looming opportunities but were perfectly content running profitable investment boutiques in Hong Kong. Somehow they weren’t quite as motivated to seize the day. Being a native speaker gave Cheah an advantage over most Westerners, and his habit of doing extensive on-site research put him on the inside well ahead of the competition. Thus the ground was laid for the growth of his hedge fund management ﬁrm, Value Partners, even in the shadow of the mighty Western banks that once dominated Hong Kong. A research-intensive operation that specializes in scouring mainland China for overlooked opportunities, Value Partners had $7.2 billion in assets under management as of September 2007, the most recent available data. In November the ﬁrm joined a short but growing list of publicly traded hedge funds when it did an IPO on the Hong Kong Stock Exchange, netting $373 million to buy out some minority shareholders. Among its biggest is Ping An Insurance, the second-largest life insurer in China, which has a 9 percent stake. (Cheah is Value Partners’ biggest shareholder, owning 36 percent of the company.) Cheah spends a tremendous amount of time in the ﬁeld on the prowl for underrated companies. The comparisons with the Oracle of Omaha notwithstanding, Cheah has his Cheah Cheng Hye, own approach, scooting up back alleys and a co-founder and leader exploring factory yards of Hong Kong–based in the world’s biggest emerging market. Value Partners, specializes “That is his philosophy, to ﬁnd underin ﬁnding undiscovered valued stocks,” says bargains in China. Joseph Leung, an analyst at the Hong Kong off ice of JPMorgan Securities in Hong Kong, who notes also that Cheah is a contrarian, buying equity when no one is looking, selling when others buy. Cheah left journalism in 1989 to take a research job at Morgan Grenfell, the venerable Hong Kong bank now known as Deutsche Morgan Grenfell. In 1993, he cofounded Value Partners with Yeh V-Nee, 48, the scion of a wealthy Hong Kong family. At its inception, Value Partners was a small operation that Cheah viewed mostly as a hobby. Cheah and Yeh launched their ﬁrst fund, the Value Partners Classic Fund, with $5.6 million, and for most of the 1990s employed no more than 15 people — today they have 75. FEBRUARY 2008 • INSTITUTIONAL INVESTOR’S ALPHA • 39

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - February 2008

Institutional Investor's Alpha Magazine - February 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Alternative Perspective The Good Guys: A Simple Plan Cover Story: Energy and Commodities: Fueling Opportunity Regulation: Energy Trading: The Brawl on the Hill Interview: Master of Values Regulation: Hedge Fund Registration: Way Out West Research Center: Top Hedge Fund Analysts Alpha Bytes: Rocket Man Unhedged: Commentary: Structured for Success

Institutional Investor's Alpha Magazine - February 2008

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