Gamble that failed to pay dividends

Within five years four Southeast Asian countries would have the world's strongest currencies, supporting a vast Asian bond market dominated by Asian issuers and investors. That was the bold vision that Andre Lee, Peregrine's then 32-year-old managing director for fixed income, preached to colleagues.

Two years on Peregrine Investments Holdings is bust and the currencies of Malaysia, Thailand, Korea and Indonesia are close to liquidation. The man that top finance magazines only recently dubbed Asia's debt tzar now seems all too mortal as does the investment bank that promised to do it the Asian way.

Yet, back in late 1995 Mr Lee had every reason to bristle confidence. Like the newly emerging regional debt market his career was in overdrive. Asian economies had seemingly leap-frogged a whole stage of development through booming exports, huge capital inflows and strong currencies.

Peregrine chairman Philip Tose was another visionary who considered foreign banks hamstrung by their obsession with form in a market where deals are sealed over lunch with a handshake. That combination of boundless optimism and risk controls that proved inadequate was a fatal cocktail for Peregrine, which folded on Monday, January 12 under the weight of a vast illiquid portfolio of high-yield - or junk - bonds.

At last Tuesday's post mortem press conference the Peregrine chairman was far from contrite. 'Who could have predicted the collapse of the Indonesian rupiah,' he asked rhetorically. It was as if an act of god had befallen the firm he founded 23 years ago.

Mr Lee learned his trade at Lehman Brothers with a small team of commercial paper traders in Hong Kong. They thrived selling short-term debt securities issued in a variety of Asian currencies. Seen as the grunt work next to the more ritzy Dragon bond market, the experience provided essential training for juggling a bond portfolio and managing credit finance.

At Lehman he came under the wing of Howard Pollock, a hard-nosed New York trader, who was renowned for stalking the office wielding a baseball bat. Despite a fractious management style, Mr Pollock had a soft spot for Mr Lee - indeed Lehman executives remember the almost hypnotic power the intense young salesman had over his boss.