Fund management is boring for M’sian stock picker

KUALA LUMPUR: Lim Tze Cheng says all you have to do is ignore the noise.

Choose a handful of stocks you know are set to boost profit and hold out until they rise. If you get the first part right, and can resist the temptation to react to daily events or try to time the market, the rest of the job should, essentially, be dull.

“Fund management is boring,” says the shaven-headed chief executive officer of Inter-Pacific Asset Management Sdn Bhd, who looks like a monk without the saffron robes. “You find, you buy and there’s nothing else to do but sit and wait. The busy ones are those who try to trade.”

The Malaysian stock picker, who donates half his pay to charity, is trouncing everyone else in the country this year. Lim has been buying Malaysian technology and manufacturing stocks that he thinks will increase profit over the long term, betting that the rally in technology has several years to run. That’s helped his two flagship funds return about six times the benchmark equity gauge in 2017.

Inter-Pacific’s assets under management have surged 10-fold since Lim joined the investment firm controlled by Vincent Tan, the Malaysian tycoon and owner of Cardiff City Football Club, in December. Lim was attracted to the company because it gave him a chance to set up a social enterprise fund, an ambition he had for 10 years, he said.

Inter-Pacific is still a boutique investor, overseeing just RM50mil, a far cry from Lim’s previous position as head of equities for the RM44bil asset-management arm of RHB Bank Bhd, the country’s fourth-largest lender by assets. That’s partly because the firm doesn’t charge front-loading fees and foots the cost of promoting and marketing funds itself, making them less attractive to distributors than bank-led funds.

Lim pursues a concentrated approach, never holding more than 40 stocks, with most holdings usually making up at least 3% of the portfolio. Some years, he says, he won’t add any new companies if he can’t find good ideas, preferring to double-down on existing picks.

The Inter-Pacific Dynamic Equity Fund, which invests in firms listed on Malaysia’s exchange, has gained 46% in 2017. A syariah-compliant version of the fund is up 51%. The next-best performer of 246 Malaysiafocused equity funds has returned 26%, according to data compiled by Bloomberg.

The strong performance is largely due to technology companies, which make up 38% of the Dynamic Equity Fund’s assets, according to Bloomberg calculations based on holdings as of May. Top picks include VisDynamics Holdings Bhd., a machine manufacturer for the semiconductor industry, and Notion Vtec Bhd, a maker of precision parts for hard disks and cars. Both stocks surged at least 157% this year.

For Lim, 37, the rally that sent a gauge of Malaysian technology stocks up 70% in 2017 has at least two years to run. It’s thanks to cars as much as phones, he says, pointing to demand for electronic components as vehicles become more autonomous. Elsoft Research Bhd, the largest holding in Lim’s Sharia-compliant fund, is a manufacturer of LED testers whose stock has doubled since Jan 1.

“The world’s biggest-selling items are not mobile phones but cars and the value is much higher,” he said. “iPhones may have a few LEDs but a car has much more.”

Lim says inspiration for his stock picks comes from many sources. He cites Systech Bhd, a maker of cybersecurity software that he bought after news of the WannaCry ransomware attack in May, after realising that Malaysian investment in cybersecurity was still in its infancy. The stock has surged 65% since June. “We entered quite early and have made good returns.”

Another example is Hong Leong Industries Bhd, which assembles and sells Yamaha Motor Co motorbikes and spare parts. The stock has almost doubled since 2014. — Bloomberg