Institutional Investor's Alpha Magazine - February 2008 - (Page 41)

Asia. But the actual application at the ground level is actually much less than the media would have one believe. And the regulators show no sign of relaxing? They are relaxing but very gradually. Over a period of time, you generally don’t want to be on the short side of China. Historically, you’d better be long, because this is a fast-growing country. Do you feel China’s growing role in the world? example, I had a particular concern about China’s savings being somehow not wisely invested. You read about these rescue investments made by China in Citigroup or U.S. Treasury bonds. Are those investments really in the interests of the Chinese people? I’m not sure. There are still worries about China, which include the lack of the rule of law, the lack of independence of the judiciary. These are very real problems. It simply means that there is still a long way to go, in terms of it becoming a really civilized country. Do you think hedge funds in Asia need greater regulation? How could you not feel it! At the rate things are going, this really will be China’s century. Not because it’s the most populous country but because of the hunger you see among Chinese people. I saw that in Malaysia myself in the ’60s — people who are very poor and determined to succeed, and who are willing to make great sacriﬁces, who are very hungry. I see that across China today. It’s hard to stop people who have that kind of thing in their minds — that they are willing to bear almost any cost, including incredible destruction of the environment, incredible hardship. You may have read articles about how 45,000 ﬁngers were lost last year alone due to industrial accidents in China. It’s hard to envisage any society now in the West or Japan where they would tolerate that kind of sacriﬁce. How much do you travel in China yourself? I do not, because you are talking to a guy who lives in Hong Kong. We are incredibly well-regulated! My own experience of working in a number of places is that Hong Kong’s regulatory regime is stricter than the one in Singapore, comparable to the one in New York and stricter than the one in London. I deﬁ nitely don’t want to see more regulation. And also I’m sensitive to the cost of regulation because, ultimately, those costs are passed on to the consumer. And the costs have been enormous. We have managed to build an airplane that is so heavily loaded down with safety equipment that it can barely ﬂy. Are we still at the earliest stages of hedge funds in Asia? I personally go to China every week, and our whole team, we are covering 2,500 companies in Greater China. We have people in China every working day of the year — visiting the factories and projects and farms — coming back with original insights. What do you think of the leadership in Beijing? People like me are eager to push along the development of hedge funds in Asia. But I need the market to develop to allow me to do it. To let it happen. I need more shorting instruments, more volume so that transaction costs can come down. And I need more of my young people to become experienced in derivatives and short instruments. We are at least a generation behind the Americans. Are you content with your performance? I think the Western world has become very ideological and does not necessarily give credit where it is due when it comes to the achievements of the Chinese leadership. Somewhere I read that the Chinese leadership has lifted more people out of poverty than any other government in the world. And that is literally true, right? A couple of hundred million people who were elevated out of dire poverty. That isn’t bad leadership. Can you disclose anything about your contacts with the government? Yes! We probably have about the highest ROE in the whole world for any ﬁnancial institution. Why didn’t other fund managers follow your lead? Yes, of course. I would say that these are high-quality people. The very top people are really very knowledgeable and really capable. At the lower level it’s much more touch-and-go. The difference in the past few years: I keep meeting ofﬁcials who were educated in the U.S. or Western countries and who speak English. I used to worry that these are people who grew up in the Communist Party or were educated in the Soviet Union and who cling to very outdated beliefs. But in more recent years my worry swung to the other extreme — that these are people who are overly impressed by Western concepts and who were trying to come up with Western-style prescriptions for China. For They wanted a quieter life. They don’t want to end up managing people, they want to manage money. And they are pretty wealthy people. So why should they bother? I’m, in a way, the sucker. People say we have only one life to invest. Did I really make the right decision? I don’t know. The common sources of failure include an inability to delegate. I don’t ﬁnd a problem there, I’m very happy to delegate to people. I have no great faith in myself, personally. So if I ﬁnd people who can do the job as well as me, I’m happy to say: “Please take the job away from me.” We were incredibly lucky; we were in the right place at the right time because we happened to be specialists in China. What is the future of Value Partners, particularly in Asia? We really think this market can support ﬁve to ten companies of a world-class nature. And we really would hope to be one of them. But I think it may take another ten to 30 years. It’s a long-term undertaking! FEBRUARY 2008 • INSTITUTIONAL INVESTOR’S ALPHA • 41

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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