Insurers' lawmaker a cautious investor

PUBLISHED : Sunday, 09 December, 2007, 12:00am
UPDATED : Sunday, 09 December, 2007, 12:00am

Legislator entrusts the experts after getting burned

An experienced investor, Bernard Chan - an executive councillor and the legislator for the insurance sector - has seen good luck and bad.

He was fortunate when, as president and major shareholder of Asia Financial Holdings, the group sold its banking unit, Asia Commercial Bank, to Malaysia's Public Bank for HK$4.49 billion.

The selling-price-to-book ratio of 2.5 made it one of the highest in local banking history.

But the 42-year-old has also had his dark days. He lost his entire savings on his first investment, an Australian stock, back in 1989. It was a painful lesson that made him rethink his investment strategy.

Mr Chan, the scion of a rich Thai family, will leave the Legislative Council next year - where he has been a lawmaker since 1998 - to spend more time with his family. He may also have more time for his investment portfolio.

When did you first start investing and how did you fare?

Very badly. I lost my entire HK$1 million savings in my first investment in an Australian property stock. I had come back from the US to work in Hong Kong in 1989. A US banker told me I should invest in the stock, so I used all my savings to purchase it. The share price kept on dropping on exchange losses and the property market slump in Australia. The company eventually went bankrupt and I lost everything.

What lesson did you learn from it?

I learned a lot. First, I no longer make any overseas investments that I am not familiar with. Second, I don't put all my eggs in one basket; I always diversify my portfolio. Third, I hire professionals to manage my money instead of investing myself.

I believe I could make money if I had time to sit down all day, look at the Bloomberg machine, catch all the share price movements and react quickly to any news or price changes. But I don't have time to do my homework so I hire professionals.

What is your current portfolio composed of?

They are mainly fund products. I have some equity funds invested in Hong Kong stocks and other markets, plus some lifestyle funds investing in a combination of bonds and stocks. They are pretty stable and provide annual returns of 7 per cent to 8 per cent. My family holds 20 per cent of the Asia Financial group, which has investments in the insurance and health-care industries in Hong Kong, China and Asia.

What is your investment strategy?

I am very conservative. I don't want to be too aggressive or assume big risks. Besides the bankrupt Australian property stock, I've invested in developing exotic businesses, including another Australian company trying to develop some fax or transmission services. But that project went down with the appearance of the internet.

After getting my fingers burned, I hired private bankers and fund managers to run the portfolio for me.

Being an executive councillor and the insurance sector legislator, does the government place any restrictions on your personal investments?

We all have to report our investments in companies as well as our property holdings. However, there are no restrictions on how we invest.

Being legislator for the insurance industry, do you invest there?

I have investments in the insurance industry through my own company, Asia Financial. As a lawmaker representing the insurance industry, I am in a better position to understand market trends. So I know when is the best time to invest in insurance stocks and when to get out.

How much did you earn in your first job and how does that compare with being president of a listed company and a lawmaker?

My first job was working in New York at First Boston as an investment banker from 1988 to 1989. I earned about US$18,000 a year, or about HK$11,000 a month - not bad as a fresh graduate.

Now I receive about HK$4 million a year for my role as president of Asia Financial. As a legislator I'm paid about HK$37,000 a month and as an Exco member I earn about HK$50,000 a month. Altogether, I can take home HK$5.04 million a year.

You now earn about 38 times your first salary. Does that mean you have more money to spend and invest?

Not really. I have a much higher income nowadays but my expenses are also much higher. There are a lot of public bodies or charity organisations that call you for donations.

As a lawmaker, I have pay for certain public services, such as the cost of websites that provide information to the public.

I have two sons, aged four and seven. I have to set aside money to prepare for their education in the US where the fees are so high. It costs at least US$40,000 to US$50,000 a year for boarding secondary schools.

What was your best investment decision?

The sale of the Asia Commercial Bank last year - at a 2.5 price-to-book ratio. The group has about HK$4.5 billion in sales. In addition, I'm also proud to have co-founded the Bank Consortium Trust by forming an alliance of nine banks to engage in the Mandatory Provident Fund business in 2000. It started from zero and now the company is one of the top five MPF providers.

What do you do when you have a windfall from investment?

Nothing special. We reinvest the money in the company to invest in the insurance, hospital and health-care businesses in China and Asia.

Do you donate to charities?

A lot. A special one is in January, when I will sponsor a Korean artist's photography exhibition on 'comfort women' - those Asian women who were forced to act as sex slaves in the second world war. I wanted to support the artist, as well as raise the public's awareness about the issue.

Are you a spender or a saver? What are your major spending items?

I am a saver. My major spending is on travelling with my wife and sons. Other than that, I don't spend much on food or clothing. There are a lot of foods I cannot eat due to dietary restrictions and I do not fancy deluxe clothing.

How much do you spend in a day?

Under HK$1,000 in a normal working day and around HK$2,000 to HK$3,000 on the weekend for family gathering meals.

Do you think you are rich or poor?

I think I am certainly wealthier than average, though much less wealthy than some others.

I don't want to be too aggressive or assume big risks ... I've invested in developing exotic businesses, including another Australian company trying to develop some fax or transmission services. But that project went down with the appearance of the internet