Investor's Checklist: Asset Management and Insurance

Look for diversity in asset management companies.  Firms that manage a number of asset classes - such as stocks, bonds, and hedge funds - are more stable during market gyrations.  One-hit wonders are much more volatile and are subject to wild swings.

Keep an eye on asset growth.  Make sure an asset manager is successful in consistently bringing in inflows greater than outflows.

Look for money managers with attractive niche markets, such as tax-managed funds or international investing.

Sticky assets add stability.  Look for firms with a high percentage of stable assets, such as institutional money managers or fund firms who specialize in retirement savings.

Bigger is often better.  Firms with more assets, longer track records, and multiple asset classes have much more to offer finicky customers.

Be wary of any insurance firm that grows faster than the industry average (unless the growth can be explained by acquisitions).

One of the best ways to protect against investment risk in the life insurance world is to consider companies with diversified revenue bases.  Some products, such as variable annuities, have exhibited a good degree of cyclicality.

Look for life insurers with high credit ratings (AA) and a consistent ability to realise ROEs above their cost of capital.

Seek out property/casualty insurers who consistently achieve ROEs above 15 percent.  This is a good indication of underwriting discipline and cost control.

Avoid insurers who take repeated reserving charges.  This often indicates pricing below cost or deteriorating cost inflation.

Look for management teams committed to building shareholder value.  These teams often have significant personal wealth invested in the businesses they run.



Ref:  The Five Rules for Successful Stock Investing by Pat Dorsey


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Investor's Checklist: A Guided Tour of the Market...

Pheim, CEO appeal on stock-rigging case

Pheim Asset Management Sdn Bhd and its Chief Executive Officer Tan Chong Koay, appealed a Singapore High Court ruling that they’d manipulated the shares of a listed company in the country’s first civil stock-rigging lawsuit.

“If left to stand, the decision would either serve to curtail genuine market activity by the timorous or to set a penal trap for the unwary,” they said in their appeal filed Dec 21 at the Singapore High Court.

Tan and Pheim bought almost 90 per cent of the traded shares of United Envirotech Ltd. from Dec 29 to Dec 31, 2004. The shares rose 17 per cent over the three trading days and helped raise the net asset value of the fund management firm’s accounts, triggering bonuses of S$50,790 ($38,866) and a management fee of S$115. Justice Lai Siu Chiu said the gain sought by Pheim and Tan wasn’t monetary, in ruling they manipulated the stock.

Tan and his Malaysian fund management company were fined S$250,000 each. The Monetary Authority of Singapore sought a fine of S$1 million for each.

Pheim “is a value investor,” the company and Tan said in their appeal. “Pheim is also a contrarian investor -- buying when others are selling and selling when others are buying.”

The Monetary Authority has no evidence to prove Pheim and Tan had any other intention but to buy undervalued shares, they said in the 212 pages of court documents filed to back the appeal.

“There was in fact no other intention,” they said.

‘Good Investment’

Pheim expected shares of companies in the water treatment sector to rise since 2001, according to the filing. United Envirotech shares were overlooked and deemed to be a good investment, Pheim said in its appeal.

Singapore, which expanded its fund management industry to a record S$1.2 trillion at the end of 2009, has vowed to clamp down on market abuse. The central bank, which won the city’s first civil lawsuits for stock rigging and insider trading this year tightened the rules for financial institutions in reporting employee misconduct.

“Such offenses undermine the effectiveness and efficiency of the securities market and are often insidious and difficult to detect,” Lai said.

Tan, who founded Pheim Group, was in 2002 named one of five successful Singapore-based boutique fund managers by the Government of Singapore Investment Corp..

Tan has offices in Singapore and Malaysia. He had said, jokingly, in August 2006 that Pheim, which manages about $1 billion, was a made-up word which means Please Help Everyone Invest Money.

Tan and Pheim “would not have risked their livelihood and business by seeking to manipulate” the stock knowing that any unusual trading activities would be tracked by the financial regulator, according to their appeal.

The case is Pheim Asset Management Sdn Bhd v Monetary Authority of Singapore, CA186/2010 in the Singapore High Court. - Bloomberg

Read more: Pheim, CEO appeal on stock-rigging case http://www.btimes.com.my/Current_News/BTIMES/articles/20101223112041/Article/index_html#ixzz18vQHvfh9

Landmark case in Singapore on rigging the market

SINGAPORE, Aug 28 — A landmark legal action by the authorities against a prominent Singapore fund manager who handles more than US$1 billion (RM3.5 billion) of assets got under way in the High Court yesterday.

The Government of Singapore Investment Corporation (GIC) is among the manager's major clients.

Dr Tan Chong Koay, one of Singapore's pioneering boutique fund managers, is founder and chief executive of the Singapore unit, Pheim Asset Management (Asia), and Pheim Asset Management (Malaysia). The market-rigging lawsuit against Tan and the Malaysian unit has been brought by the Monetary Authority of Singapore (MAS).

It is being closely watched in the investment community, as Tan is well-known in fund management circles. Also, the case touches on the practice of “window-dressing” where big investors may try to ramp up or push down share prices — a key concern at the year-end when the value of a fund is determined.

MAS has accused Tan and Pheim Malaysia of market rigging and market manipulation and is asking for civil penalties such as monetary payments. Under the Securities and Futures Act, Section 197 (1) (b), a person should not create or do anything intended or likely to create a false or misleading appearance over the market or price of securities.

In Pheim Malaysia's case, MAS says it created a false market in the shares of China water player United Envirotech, a company which listed on the Singapore Exchange in April 2004. The case centres on the three days from Dec 29 to Dec 31 in 2004 when Tan and Pheim Malaysia allegedly instructed Tang Boon Siah, then a broker at UOB Kay Hian, to buy United Envirotech shares.

On Dec 29, Pheim Malaysia bought 65,000 shares at 38.4 cents. The next day, 210,000 shares were bought at 42.9 cents. On Dec 31, 85,000 shares were bought at 43.9 cents. Over the three days, the share price had jumped about 17 per cent.

MAS said: “This was not the conduct of a genuine buyer seeking to buy shares at the lowest possible price. They 'saturated the market for United Envirotech shares with 88 per cent of the purchases in the last three trading days of 2004.”

The trades occurred towards the end of each trading day, except for the trade on Dec 30, which allowed Pheim to “fix the closing prices at significantly higher prices than the previous day”.

MAS added that Tan and Pheim “are not naive individual investors. They are experienced professionals who knew full well... the effect that such targeted trading would have on the market”.

The regulator said that with the rise in the share price at the year-end, Pheim Singapore was able to exceed certain benchmarks for its fund.

Pheim Malaysia's case is it had already invested in the company when it was floated on the stock exchange earlier in the year. Its investment committee was keen to buy more United Envirotech shares, on the back of its success in investing in Hyflux.

There were three funds in question — but under Malaysian rules, each fund could not hold more than 10 per cent of foreign (non-Malaysian) stocks.

So it was only after these three funds had sold off some Singapore stocks on Dec 28, that the firm was able to buy into United Envirotech. Pheim Malaysia argues that it was a genuine investor, believing the shares were undervalued in 2004.

Tan says it was not he who told the broker to buy the shares, but another staff member.

This point was raised at the hearing yesterday, before Justice Lai Siu Chiu. MAS is arguing that there were phone calls from Tan to Tang at the time the trades were supposed to have been done. MAS' lawyer, Senior Counsel Cavinder Bull from Drew & Napier, called a StarHub representative to give evidence of this.

Tan is represented by Senior Counsel Michael Hwang, and Pheim by Foo Maw Shen of Rodyk & Davidson. Foo cross-examined a witness from SingTel who said numbers dialled from a landline such as the broker's could not be retrieved unless the subscriber had signed up for itemised billing.

Tan has not yet taken the stand while the broker, Tang, is expected to take the stand today.

This is only the second time that MAS has taken civil action in the courts against players in the financial industry, and the first under this section.

Earlier this year, for the first time, MAS took a civil suit, on insider trading against former WBL Corp executive Kevin Lew. That case is ongoing. — Straits Times