Value Partners caught off guard as HK airline fails
Updated: 2008-04-10 07:19
(HK Edition)
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Sometimes even the best fund managers have bad timing.
Cheah Cheng Hye, chairman of Value Partners Ltd and one of the few home-grown star managers in Asia, found himself addressing a scheduled journalist organization event yesterday - the same day Oasis Hong Kong Airlines, one of his higher-profile holdings, shut down operations.
A former journalist himself, Cheah said he was disappointed at the Oasis news, but he kept the potential loss in perspective after a $150 million private equity fund run by Value Partners was on the hook for a $30 million convertible bond investment in Oasis.
"How can I not be disappointed? Of course I'm disappointed. But life goes on," Cheah, 54, told reporters. His firm manages about $6.5 billion in investments.
He said the investment management business is fraught with calls that ultimately go bad.
"One-third of everything we do, in hindsight, turns out to be a stupid mistake," the Malaysia native said at a lunch with the Foreign Correspondents' Club of Hong Kong.
Cheah, who dislikes marketing and says he'd rather spend his time reading, noted that his funds have returned 22 percent a year on average over the past 15 years.
Value Partners, which focuses on small-cap stocks and China, went public in November and has been ranked as Asia's second-largest hedge-fund manager, behind Japan's Sparx Group Ltd.
Cheah owns more than one-third of the firm, which has a market value of $1.17 billion.
Value Partners' shares fell 2.5 percent on Wednesday, underperforming the broader market selloff, and are down 24 percent since their November trading debut shortly after the peak of the 2007 market rally.
Cheah, who co-founded the firm in 1993, said China alone could eventually support five fund management companies the size of US giants Fidelity Investments or the Templeton arm of Franklin Resources.
He said the Value Partners investment in Oasis - a long-haul budget carrier that began flying in October 2006 - was protected by several layers of guarantees. "We have been advised that there is a very reasonable chance that we will get our money back," Cheah said.
China recovery
Despite recent market volatility, he said net redemptions by investors in his funds had been small.
He also said that the sell-off in China stocks should reverse when sentiment improves.
"There is a disconnect in my market, which is greater China, because the reality on the ground level is not too bad, but people are behaving as though things are going to be really awful," Cheah said.
"At some point, when investor sentiment improves, I'm expecting a rebound, and this is especially true in the context of the negative interest rates that we are experiencing both in Hong Kong and on the mainland," he said.
Reuters
(HK Edition 04/10/2008 page2)