Famously dubbed the “Ever-Victorious General ”（長勝將軍） by the Hong Kong press, Martin Lau, Managing Partner at First State Stewart Asia, part of First State Investments, is a model of how in-depth fundamental research could lead to long-term outperformance. On top of three Grand Awards won by the fund house, Provider of the Year – Offshore, Best Equity House and Best Sustainable Investment Award (Overall Leaders), Martin was once again crowned the Manager of the Year in the Asia Equity category. In a frank conversation, the investment veteran revealed the secrets to his winning streak.
BENCHMARK (BM): Good to see you again, Martin! You have been top-ranked in the BENCHMARK awards for several consecutive years. To what do you attribute your success?
Martin Lau (ML): Thank you for the honor. I believe this award belongs to the whole First State Stewart Asia team and is a testament to our long-term investment philosophy – which we have upheld for almost three decades. Our team believes strongly that investment is about being a long-term owner of quality business franchises run by people whom we can trust. There is a strong desire to do the right thing, not just for our clients, but also for society.
BM: Equity investing is tantamount to owning quality businesses – that’s an important takeaway. Besides that, how does your investment philosophy set you apart?
ML: Firstly, we are active investors. In a world where index funds are becoming more popular, we take a different approach – instead of looking at benchmark indices, we start our portfolios from a blank sheet of paper. We focus on finding the most attractive companies within our universe to invest in.
It is surprising to see how common it is for risk to be defined in relative terms, as in how much this or that fund has deviated from the benchmark. We define “risk” quite differently, in terms of how much money is lost when we make the wrong decision to invest in a company.
Secondly, we are long-term investors. We are not trying to predict which companies are going to do well over the next month or quarter; rather, we want to buy companies that have some sort of sustainable competitive edge that will position them well for the next 5-10 years or longer.
BM: Such long-term thinking is crucial to value investing. How do you pull together the best team to realize your long-term vision?
ML: As I became older, I realized that everyone has his or her limitations as an individual. The key is surrounding yourself with people who are complementary to you, or, even better than you. This is where the team comes in. We are very lucky to have a stable team with different strengths, and we encourage everyone to challenge each other.
Our team structure is very flat. Everyone is an analyst, a generalist, constantly looking for new ideas and researching companies or investment themes. At the end of each year, we also look at our mistakes and think about the lessons learned from them.
BM: In this open culture, what is your role as a leader?
ML: I believe the most important element of being a leader is the willingness to serve and help others – even including the most junior person on the team – to set an example to others. To motivate others to do well, you yourself should do so first.
Then, it is the willingness’ to share. Some companies fail because those at the top are unwilling to share – not just financial remuneration but also in terms of opportunities. In my mind, if you give people hard cash, they might be thankful for a year; but if you give people the right opportunities, they will remember for a lifetime. I myself am still very grateful for all the opportunities that I was given when I was younger.
BM: Lastly, can you tell us the motto that guides you through your career?
ML: Sure. When I was young, my motto was to work harder than others. I believed that if I spent more time working on a task, I could do it better than others. When I first started out in this industry, a friend of mine teased that I do nothing but feed on old people’s money. That still serves as a reminder today. We are all very lucky to be in the fund management industry and should not forget the responsibilities that come along with it. BM