Interview with Ho Tian Yee, Pacific Asset Management

Ho Tian Yee is the CIO and oversees all investment management decisions at Pacific Asset Management. He is assisted in this by a four person investment team. Pacific Asset Management Ltd was founded in Singapore in 1995 by Ho, the major shareholder. Ho and his partners own 89% of the equity, with the balance held by Pacific Investment Management Company of the US. Prior to establishing the company, Ho worked for Bankers Trust in Singapore where he was employed for 19 years.

Mr. Ho runs three hedge funds for Pacific: The Pacific Asset Fixed Income and Currency Fund, The Pacific-Rossignol Multi Asset Global Macro Fund and The Pacific Asset Alpha Fund.

Interview with Ho Tian Yee

  1. The group offers quite a number of hedge fund products. Can you explain each fund, the team and how they fit into the overall organization?

    Pacific Asset Management started as a fixed income and currency manager and has since added tactical asset allocation as an expanded strategy for our products. The intent is to offer investors opportunities in all asset class - equities, fixed income and currencies. The Pacific Asset Fixed Income and Currency fund (PAFIC) offer strategies in Asian fixed income and currencies, the team consists of Ho Tian Yee, Desmond Soon and Stuart Goh. The Pacific Asset Alpha Fund (ALPHA) is a total return fund maximizing returns in currency trading; the team includes Ho Tian Yee and Steven Tay. Lastly the Pacific Rossignol fund offers tactical asset allocation strategy, managed by Dr. Audrey Chin and Steven Tay.

    The firm's corporate vision is to be the investment manager of choice for total return investors, delivering superior risk adjusted returns. In setting out to fulfill this vision, the firm has identified that its competitive edge is to focus on Asia Pacific. Domiciled in Singapore, the firm has access to contacts like central banks, policy makers, domestic think tanks and financial institutions in the region.

  2. Could you explain the investment philosophies for the Firm's three products: Fixed Income/Currency, Macro and Alpha Funds, respectively?

    The investment philosophy of the PAFIC Fund (Fixed Income/Currency) is to exploit investment, relative value and arbitrage opportunities in the fixed income & currency markets of North Asia, SE Asia, Japan, Australia and New Zealand. PRMA fund (Macro) seeks opportunities in relative value and trend between equity, bond and currency markets arising from the evolution of the global business cycle.

    The ALPHA currency fund adopts a proactive approach in seeking opportunities in the currency markets without the long bias inherent in most equity or bond funds. The fund aims to produce superior returns from currency trading skills of its managers and not be subjected to cyclical trends.

  3. Of the three funds that the Firm runs, which one(s) are you focusing your marketing efforts on?

    For the European based private banks and family offices as well as Japanese institutions, we are marketing the PAFIC Fund (Fixed Income/Currency) as it offers geographical diversification from US and European assets. It also offers stable and consistent returns.

    For the major multi manager players, whose preference is for "long/short" strategies and demand high returns, PRMA and ALPHA Funds will fit their needs.

  4. What are your views on Asian bonds for 2003?

    High-grade Asian bonds are likely to return 7-8% in 2003. The gains in US Treasuries that helped Asian bonds to return a stellar 13% last year is not likely to be repeated this year. However, the low interest rate environment in the G3 economies, excess USD liquidity and moderate economic growth in Asia will underpin demand for Asian bonds. We see Asian bond returns this year coming mainly from credit and relative value plays vis-à-vis duration targeting. North Asia will continue to outperform SE Asia despite recent tensions in the Korean peninsula.

  5. It was surprising that the Korean Won (KRW) remained strong against the US Dollar in December with the negative geopolitical events occurring in North Korea. What is your analysis of why this occurred? What are your views on the Won for the 1Q 2003?

    The Won exchange rate should not only be seen bilaterally against the US Dollar but also as a cross against the Japanese Yen (JPY). The KRW/JPY cross rate has remained little changed at the 9.8 to 10.1 trading range and the correlation between USD/KRW and USD/JPY is +0.97 (highest being +1.0) over the past 12 months. This means that the strengthening of the KRW against the US$ is entirely due to the strength of the JPY (or weakness of the US$). The geopolitical risk of North Korea is buffered by the strength of the South Korean economy. Last year, South Korea achieved 6% GDP growth; the highest in Asia outside of China. We are optimistic that the North Korean issue can be resolved diplomatically; as such we still see a 9.5-10.5 trading range for the KRW/JPY cross for 1Q 2003.

  6. You were quite positive on Japan in the Macro Fund's December monthly. What are the reasons for holding this view? What is the Firm's view on the Yen for the 1Q 2003?

    We were positive on Japan because the Japanese indicator turned positive for both December and January. This was due to improvements in industrial production and the leading indicator. Moreover, interest rates remained very low and liquidity continued to be supportive. This was coupled with a change in the policy environment. The Bank of Japan (BoJ) began their stock purchase program. Moreover, there remained a great deal of cynicism about Japanese policy. We thought this would provide an opportunity for the market to rise given that there was also the possibility of more "unconventional" monetary policy being discounted with the pending retirement of the BoJ Governor Hayami. Finally, the technicals were positive.

    Regarding the Yen, we believe that the US Dollar will remain underpinned for the 1Q which should benefit the Yen, but the Yen will continue to under perform against the Euro and other G7 currencies.

  7. The Alpha fund was +32.30% in 2002. What strategies did the fund make money last year? How is the Fund currently positioned?

    The US Dollar weakness began to accelerate during the 4Q 2002 with the Euro and Yen taking the lead. Most of the performance for Alpha was capturing this trend move through spot and option trades.

  8. Are fund managers over-reacting to the perceived risks that a U.S. led invasion into the Republic of Iraq would have on Asian and Japanese markets?

    Fund managers are cautious on both the timing and the extent of the war. The best case scenario calls for less surprises and a swift, conclusive war. However, the market is uncertain of the eventualities and this uncertainty will heighten volatility and diminishes liquidity in the months ahead.