Bad decisions teach us a lot, says fund manager Enoch Yiu
Aug 17, 2008
Hugh Young, managing director of Aberdeen Asset Management Asia, made money from his first investment more than 20 years ago. But he says this is not necessarily a good thing. He believes it may be better for investors to get their fingers burned early so they can learn from the experience and not be too speculative.
It has not all been plain sailing, and the fund manager has had some losses along the way that have helped him take a longer, more conservative view. His funds have escaped the trouble caused by the subprime crisis.
Mr Young graduated with a bachelor of arts (honours) in politics from Britain’s Exeter University. His early career included spells at Fidelity International and MGM Assurance. Recruited in 1985 to manage Asian equities from London for Aberdeen, he set up its Asian headquarters in Singapore in 1992.
Aberdeen Asset Management was founded in the Scottish city of the same name in 1983. The firm was listed on the London Stock Exchange in 1991 and is now a FTSE-250 company. The firm invests on behalf of clients globally in equities, fixed income and property. In Asia, under Mr Young’s management, Aberdeen employs more than 250 people and has offices in Australia, Hong Kong, Japan, Malaysia, Singapore, Taiwan and Thailand.
How much did you earn from your first job and how does that compare with your income now?
I earned about £3,000 a year when I started as an investment analyst, which was my first job in the financial industry. Thirty years on, I am older and can earn more. But you have to count the fact that I have more responsibility now, plus life has become more expensive in the past 30 years, and I have to spend a lot to look after my children.
Can you tell us what your first investment was and how well did it do? What lessons did you learn from it?
More than 20 years ago, I invested in a British stock when the government privatised a former state-owned entity. I invested a few hundred pounds and the share price performed very well. It was a good experience but, unfortunately, I did not have the money to buy more. But it was good start. For individual investors, I believe it’s better if things go wrong with their initial investment. You learn more through a bad investment experience. Sometimes, if you start with a good investment, you may become overconfident and easily make mistakes later on.
What’s in your portfolio? Do you invest only in stocks and funds or something more exotic such as art or wine?
All my equity investments are Aberdeen funds or shares in Aberdeen Asset Management. I like to buy paintings, but not for investment purposes. I buy them for enjoyment and I don’t care much if the price changes after I buy them.
What is the best investment decision you’ve ever made?
My best investments have been funds by Aberdeen Asset Management and the shareholdings I have in the fund company, which are part of my total remuneration. I basically invested my money in my company’s funds and shares. The Asia fund, excluding Japan, managed by Aberdeen dates back to 1987 and has a compound return of 17 per cent, which is not bad.
What has been your worst investment decision and how did you get out of it?
Before joining Aberdeen Asset Management, I made some individual stock investments and lost money. I was a bit speculative and had my fingers burned. Luckily, I didn’t lose much, but I learned my lesson. I am not a great speculator, so it’s better to be more conservative when it comes to investments.
What tips would you give investors?
Be very careful with your investments. Don’t trade at a high gearing and don’t borrow too much money to invest. Only invest as much money as you can afford to lose. Such a cautious approach may frustrate people who think they can earn much more if they are more speculative. But a cautious approach will also save them from going bankrupt.
What are the most common mistakes made by fund managers?
Often, fund managers are tempted by quick and easy trades. Like the public, fund managers can be misled by a good story about a stock. But eventually, they find out the stock is not a good bet.
How would you sum up the market? Do you think the market has bottomed out or do you think the Hang Seng Index and other major global indices will fall further?
There is a good chance the market will drop. It took many years for the market to become this huge. There will continue to be downside risks and the challenges will remain for the next 18 months. But I think the value in Asia is still very good. For example, India has many super companies. Also, the Asia region has not been seriously affected by the subprime crisis. So the markets still offer attractive opportunities.
Since the global stock markets have fallen substantially in the past year, do you get many clients complaining about their investment losses?
We are lucky that our work has been supported by our clients. We have explained our investment strategy to them, and they understand, and are happy with our performance. The conservative approach means we face more client queries during a booming market, as we are not that speculative. We’ve had to educate our investors to make them understand our investment strategy.
Has your company or have your personal investments suffered from the subprime crisis? What lessons do you think you’ve learned from it?
We are lucky that we were not directly exposed to the subprime loans. Our fixed-income investments have been indirectly affected by the crisis in that some high-quality bonds have found their credit spreads have widened. Overall, the Asia market has avoided the subprime crisis. We have seen some American and British institutions suffer from the crisis because they have done silly things due to greed.
Your company takes corporate governance seriously. You sometimes oppose the management teams of some of the firms you invest in, urging them to improve. Why don’t you just sell up when things go wrong?
Sometimes we sell the stocks and walk away. But we want to promote and urge companies to improve their corporate governance, which is why we voice our concerns. Corporate governance is a core value of the investment process. There is no point investing in a company if you do not trust the management.
Can you describe your investment style - are you a saver, spender, speculator or long-term investor?
When I manage Aberdeen Asset Management, I take a very long-term view. Many of the holdings in our funds stay in our portfolio for more than 10 years. I would say we are a fund company that adopts the same style as Warren Buffett. We do our homework and choose companies with good business foundations. So we don’t need to worry about the daily variations in the market. When it comes to my personal spending, I am a very conservative person. I am a saver but I also spend on my children.
Do you think you are rich or poor?
I think I am extremely rich, since I have a great family and great kids. I love my job. I think I am lucky, extremely lucky.
1 comment:
Early failures all part of the learning curve
Bad decisions teach us a lot, says fund manager Enoch Yiu
Aug 17, 2008
Hugh Young, managing director of Aberdeen Asset Management Asia, made money from his first investment more than 20 years ago. But he says this is not necessarily a good thing. He believes it may be better for investors to get their fingers burned early so they can learn from the experience and not be too speculative.
It has not all been plain sailing, and the fund manager has had some losses along the way that have helped him take a longer, more conservative view. His funds have escaped the trouble caused by the subprime crisis.
Mr Young graduated with a bachelor of arts (honours) in politics from Britain’s Exeter University. His early career included spells at Fidelity International and MGM Assurance. Recruited in 1985 to manage Asian equities from London for Aberdeen, he set up its Asian headquarters in Singapore in 1992.
Aberdeen Asset Management was founded in the Scottish city of the same name in 1983. The firm was listed on the London Stock Exchange in 1991 and is now a FTSE-250 company. The firm invests on behalf of clients globally in equities, fixed income and property. In Asia, under Mr Young’s management, Aberdeen employs more than 250 people and has offices in Australia, Hong Kong, Japan, Malaysia, Singapore, Taiwan and Thailand.
How much did you earn from your first job and how does that compare with your income now?
I earned about £3,000 a year when I started as an investment analyst, which was my first job in the financial industry. Thirty years on, I am older and can earn more. But you have to count the fact that I have more responsibility now, plus life has become more expensive in the past 30 years, and I have to spend a lot to look after my children.
Can you tell us what your first investment was and how well did it do? What lessons did you learn from it?
More than 20 years ago, I invested in a British stock when the government privatised a former state-owned entity. I invested a few hundred pounds and the share price performed very well. It was a good experience but, unfortunately, I did not have the money to buy more. But it was good start. For individual investors, I believe it’s better if things go wrong with their initial investment. You learn more through a bad investment experience. Sometimes, if you start with a good investment, you may become overconfident and easily make mistakes later on.
What’s in your portfolio? Do you invest only in stocks and funds or something more exotic such as art or wine?
All my equity investments are Aberdeen funds or shares in Aberdeen Asset Management. I like to buy paintings, but not for investment purposes. I buy them for enjoyment and I don’t care much if the price changes after I buy them.
What is the best investment decision you’ve ever made?
My best investments have been funds by Aberdeen Asset Management and the shareholdings I have in the fund company, which are part of my total remuneration. I basically invested my money in my company’s funds and shares. The Asia fund, excluding Japan, managed by Aberdeen dates back to 1987 and has a compound return of 17 per cent, which is not bad.
What has been your worst investment decision and how did you get out of it?
Before joining Aberdeen Asset Management, I made some individual stock investments and lost money. I was a bit speculative and had my fingers burned. Luckily, I didn’t lose much, but I learned my lesson. I am not a great speculator, so it’s better to be more conservative when it comes to investments.
What tips would you give investors?
Be very careful with your investments. Don’t trade at a high gearing and don’t borrow too much money to invest. Only invest as much money as you can afford to lose. Such a cautious approach may frustrate people who think they can earn much more if they are more speculative. But a cautious approach will also save them from going bankrupt.
What are the most common mistakes made by fund managers?
Often, fund managers are tempted by quick and easy trades. Like the public, fund managers can be misled by a good story about a stock. But eventually, they find out the stock is not a good bet.
How would you sum up the market? Do you think the market has bottomed out or do you think the Hang Seng Index and other major global indices will fall further?
There is a good chance the market will drop. It took many years for the market to become this huge. There will continue to be downside risks and the challenges will remain for the next 18 months. But I think the value in Asia is still very good. For example, India has many super companies. Also, the Asia region has not been seriously affected by the subprime crisis. So the markets still offer attractive opportunities.
Since the global stock markets have fallen substantially in the past year, do you get many clients complaining about their investment losses?
We are lucky that our work has been supported by our clients. We have explained our investment strategy to them, and they understand, and are happy with our performance. The conservative approach means we face more client queries during a booming market, as we are not that speculative. We’ve had to educate our investors to make them understand our investment strategy.
Has your company or have your personal investments suffered from the subprime crisis? What lessons do you think you’ve learned from it?
We are lucky that we were not directly exposed to the subprime loans. Our fixed-income investments have been indirectly affected by the crisis in that some high-quality bonds have found their credit spreads have widened. Overall, the Asia market has avoided the subprime crisis. We have seen some American and British institutions suffer from the crisis because they have done silly things due to greed.
Your company takes corporate governance seriously. You sometimes oppose the management teams of some of the firms you invest in, urging them to improve. Why don’t you just sell up when things go wrong?
Sometimes we sell the stocks and walk away. But we want to promote and urge companies to improve their corporate governance, which is why we voice our concerns. Corporate governance is a core value of the investment process. There is no point investing in a company if you do not trust the management.
Can you describe your investment style - are you a saver, spender, speculator or long-term investor?
When I manage Aberdeen Asset Management, I take a very long-term view. Many of the holdings in our funds stay in our portfolio for more than 10 years. I would say we are a fund company that adopts the same style as Warren Buffett. We do our homework and choose companies with good business foundations. So we don’t need to worry about the daily variations in the market. When it comes to my personal spending, I am a very conservative person. I am a saver but I also spend on my children.
Do you think you are rich or poor?
I think I am extremely rich, since I have a great family and great kids. I love my job. I think I am lucky, extremely lucky.
Post a Comment