Fund manager Pheim Malaysia wins big on market crises

Tan Chong Koay with his new book which delves into how Pheim Malaysia weathered various crises from 2015 to 2023.

PETALING JAYA: Boutique fund management company Pheim Asset Management Sdn Bhd’s (Pheim Malaysia) biggest investment wins have come on the back of financial and market crises that have hit the global and Malaysian stock markets over the past 30 years.

Pheim Malaysia not only survived every market crash since the Asian Financial Crisis in 1997 to the Covid-19 crash, it has also thrived, reaping its highest investment returns during these crises.

Founded by fund manager Tan Chong Koay in 1994, this relatively low-profile group has racked up a host of international awards over the years that is the envy of many international asset management companies.

“I need a crash to outperform,” he said in a recent interview with FMT Business.

Tan, 74, given the monikers “Warren Buffett of Asia” and “Southeast Asia’s Small-cap King”, said: “A crisis creates problems, but it also provides opportunities.”

According to him, a market crisis presents investors with a golden opportunity to buy good stocks at depressed prices.

Ironically, he noted, investors often panic when the market crashes and instead of buying stocks at huge discounts, they end up selling their shares at huge losses.

As a value investor, Tan said, the company has stringent investment criteria when it comes to snapping up stocks during a crash.

“We prefer companies with low gearing, that can grow, have good management, and the share price is reasonable,” he said.

A winning investment philosophy

Its success has been based on implementing the investment philosophy “Never Fully Invest At All Times” crafted by Tan, who is also Pheim Malaysia’s executive chairman and chief strategist.

This philosophy entails buying shares during a market downturn that can potentially recover very well. “When it recovers, these good shares rise sharply.”

The second plank of its investment philosophy involves selling shares bought during a crash when the stock price is nearing its peak.

This is an opportunity for investors to cash in their profit but many fail to do so as they think the market will go even higher, Tan noted.

“Our investment philosophy works in the sense that when the market becomes overvalued, we recommend investors start selling their shares.

“Then when the market corrects strongly, you are hurt less. You also have the cash to buy undervalued shares,” he said.

The Covid crash in 2020 saw Pheim Malaysia snapping up many good stocks for a song. Its funds were able to take advantage because Tan had the foresight to reduce its equity exposure before the pandemic crash hit.

One of the best performing stocks it invested in during the pandemic was glove maker Supermax, which peaked at RM23.90 after the Covid-19 outbreak triggered a spike in demand for rubber gloves.

The stock returned a profit of more than 15 times of its cost within less than eight months for Pheim Malaysia based on the lowest purchase prices of 71 sen to RM1. This outperformance was a huge boost for its funds in 2020.

Major crisis in 2024?

Asked if there will be a major market crisis in 2024, Tan said a potential crisis would be if the US equity market experiences a major correction.

“The US market is very overvalued. When the US corrects, markets around the world will follow. If the US is going to correct then you need to be careful,” he warned.

He cited the example of early 2020 when the US market was riding high, and many investors did not believe it would correct but crash it did as the pandemic hit, and Asian equity markets followed suit.

This ability to foresee when a crash is around the corner and take advantage of it is what sets Pheim Malaysia apart from its competitors.

Its Pheim SICAV-SIF-Asean Emerging Companies Fund (Pheim Asean Fund) has been ranked No. 1 by both LSEG Lipper and Morningstar.

The fund has posted a 1,130.9% positive return in US dollars for the 25-year period from 1998 to 2023 and is ranked No 1 among its peers within the Asean Equity Category under the Lipper Global Classification, globally.

Its flagship Islamic balanced fund Dana Makmur Pheim has won a record-breaking 56 Refinitiv Lipper Fund awards, registering a total return of 452.11% since inception in January 2002 till Sept 30, 2023, outperforming its benchmark by a huge margin of 337.79%.

It also holds the distinction of being the Employees Provident Fund’s (EPF) longest serving external fund manager, since 1997.

Cumulatively, Pheim Malaysia’s Time Weighted Rate of Return (TWRR) outperformed the benchmark set by EPF every calendar year for 27 years ended December 2023. To date, its cumulative return has outperformed the benchmark by over 650%.

30th anniversary

Pheim Malaysia will be celebrating its 30th anniversary on Jan 4, 2024. Tan recounts he set up Pheim Malaysia after Bank Negara Malaysia offered him an asset management licence in late 1993.

The offer was conditional on him leaving Singapore, where he was then working with a London-based asset management firm. He happily took up BNM’s unexpected offer and within a month had set up his office in the heart of Kuala Lumpur’s financial district.

In conjunction with its 30th anniversary, Tan has written his second book titled “Never Fully Invest at All Times” which will be available in all major bookstores from January 2024.

The book covers how Pheim Malaysia weathered through crises from 2015 to 2023 including the oil and gas crisis of 2015/16, US-China trade war of 2018, Covid-19 pandemic of 2019/20, oil and gas crisis of 2020, tech correction after mid-2021, and the Russian invasion of Ukraine in February 2022.

“It unveils insights covering proven investment strategies, philosophy and processes, market inefficiencies, crises and opportunities, and risk management with real-life examples,” Tan said.

His first book “Rising Above Financial Storms”, published in 2015, became a bestseller with over 14,000 copies sold in Asia.

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