Me & My Money

A strong believer in value investing

Mr Daniel Chan and his wife Penelope Gan, 62, a homemaker. The CEO of DCG Capital says his focus is to seek out long-term compounders and sit on them. But he also diversifies his sources of returns, for example by investing in high-dividend-yielding
Mr Daniel Chan and his wife Penelope Gan, 62, a homemaker. The CEO of DCG Capital says his focus is to seek out long-term compounders and sit on them. But he also diversifies his sources of returns, for example by investing in high-dividend-yielding stocks.ST PHOTO: MARK CHEONG

Veteran fund manager takes a long-term view, and prefers to invest, not trade or speculate

Veteran fund manager Daniel Chan's first experience with investing - or rather speculating back then - was in the late 70s, while he was pursuing a business administration degree.

Mr Chan, 65, told The Sunday Times that he and a few classmates at the University of Singapore (now the National University of Singapore) decided to short a local banking stock.

"Not surprisingly, it wasn't a very successful venture. A stock may be overvalued on fundamentals but it can still go crazy when the stock market is in a frenzy," he says.

Shortly after graduating, Mr Chan joined United Overseas Bank (UOB) in 1977, where he spent the next four years working as an analyst in the investments division.

After a brief stint as an institutional salesman with a stockbroking firm, he rejoined UOB in 1982 to set up a division that later became UOB Asset Management. He spent the next 22 years building and running the bank's asset management business as its chief executive and chief investment officer.

His work at UOB won him five of seven awards at the inaugural Singapore Fund Awards in 1996. This winning streak continued at Lion Global Investors, which Mr Chan helped to set up in 2005. He ran the operations until 2010.

Mr Chan is also one of the founding members of the Investment Management Association of Singapore, where he helped create the code of conduct and standard of professional ethics for the industry.

  • Worst and best bets

  • Q What has been your biggest investing mistake?

    A In investing, there are mistakes of commission as well as omission. The biggest mistake for me is probably of the latter variety. In 1992, my wife and I went to Oregon to see Jackie Swenson, her foster mother who took care of her when she was a student at the University of Oregon. Jackie loved coffee and spoke glowingly of Starbucks, which was based in Seattle and already listed on the New York Stock Exchange.

    Being already in the investment business (and a coffee lover myself), I should have investigated further and saw the potential to invest in this stock, but did not. It has since gone on to become one of the most successful consumer stocks of all time. A US$1,000 investment then would be worth about US$150,000 today!

  • Q What is your best investment decision?

    A I regard DCG Capital to be my best investment decision ever. It’s already profitable as a business. I’ve almost doubled the investment made in the DCG Asia Value Fund since we launched it six years ago. In simple terms, if you have invested $1 in my fund, your investment will now be worth $2.

    My family and I are the third-largest investor in the fund, which has assets under management (AUM) of $150 million. The initial AUM was about $9 million.

    Some of the best returns we’ve made include investing in stocks like Valuetronics, Kweichow Moutai, China Aviation Oil, Universal Robina and Vinamilk.

Later, he tired of corporate life and left Lion at end of 2010; then in mid-2011 - at the age of 59 - set up DCG Capital, his own boutique fund management firm.

"It's been exhilarating to be able to go back to what I enjoy most, which is investing and to be able to do it full time, freed of the tedium of general administration and other non-investment work," he says.

The firm has registered gains by pursuing a disciplined, two-pronged value investing approach - combining scientific analysis and technology with interpersonal audits. This approach allows it to identify truly undervalued stocks.

One of its most successful investments - Indonesian ceramic tile maker Arwana Citramulia purchased in 2012 - increased 440 per cent in value.

Mr Chan is married to homemaker Penelope Gan, 62. They have three children aged 30, 28 and 26.

Q Moneywise, how were your growing-up years?

A I came from a humble family background. My parents had nine children and I was No. 8.

Together with my grandmother, the 12 of us squeezed into a two-bedroom flat at Beatty Road. My father was the main breadwinner and was working as a clerk at a food trading company. Mother was a homemaker.

Q Describe your investing strategy

A I'm a strong believer in the school of value investing. I was inspired by Benjamin Graham, the father of value investing, and his book Security Analysis, which has become a "Bible" for value investors like myself. One of the key points he made was the critical distinction between investment and speculation.

Investing requires thorough analysis and promises safety of principal and a satisfactory return. Any other endeavours that don't meet these requirements are considered speculative. While it might be investment 101, how many "investors" are even aware of this important distinction, much less practise it?

For me, it is better to invest, not trade or speculate. Always take a long-term view - think like a fractional business owner, be very familiar with what you are dealing with, and the risks you are taking. My main focus is to seek out long-term compounders and sit on them. Nevertheless, I also like to diversify my sources of returns by investing in high-dividend-yielding stocks, real estate investment trusts and deep-value asset situations.

Q What does money mean to you?

A As a Christian, I've been taught to be a good steward and to give generously to the needy. I've been blessed to be able to contribute to various philanthropic causes while also providing financial security for my family. If we have any surplus, it is wisely and prudently invested.

Some of the causes that I am involved in include the Salvation Army, World Vision, Lakeside family centre, YMCA, Methodist Welfare Services, and so on. I also serve on a few non-profit committees and boards.

Q What are your immediate investment plans?

A Although I'm already 65, I choose to invest the bulk of my savings in equities. I do not subscribe to the standard financial advice that as you age, one would gradually move towards cash and fixed income.

Your children will inherit what you leave behind and they should continue investing with a long-term horizon.

Q What's in your portfolio?

A My portfolio comprises two portions: income-generating assets like corporate bonds and high-yielding equities, and in the DCG Asia Value Fund, which my team members and I manage. The fund is invested mainly in Asian equities for long-term capital growth.

We apply the strict tenets of value investing in managing the Asia Value Fund. It has done well, having nearly doubled in value since we launched it six years ago.

The fund, which is only available to accredited investors, has attracted about 100 investors - mainly high-net-worth individuals and family offices. The minimum investment amount is $150,000.

It holds about 40 positions mainly in Hong Kong/China, Singapore and Asean, with some exposure in Sri Lanka and Vietnam as well. The top five positions we own are Tencent, Valuetronics, Hatton National Bank, China Aviation Oil and Singapore Bus Transit.

Q How are you planning for retirement?

A Good planning goes a long way, and I have set aside sufficient financial resources, including medical insurance coverage, to ensure they meet the future financial needs of the family.

On top of that, I draw a modest salary, which together with passive income from my investments, comfortably meets all household and personal financial needs.

Q Home is now .....

A I live in a house in Sunset estate in Clementi, which I bought more than 10 years ago.

Q I drive.....

A A 10-year-old silver second-hand Porsche Carrera, which was available at a hugely discounted price in 2009 after the global financial crisis.

A version of this article appeared in the print edition of The Sunday Times on January 14, 2018, with the headline 'A strong believer in value investing'. Print Edition | Subscribe