Ep48: Franki Chung – If Trust is Lost, All is Lost

Franki Chung is a CFA charter holder and has a massive 24 years of experience in equity/fixed income analysis and portfolio management in Asia Pacific ex-Japan.  He was the Chief Investment Officer of MEAG HK, the asset management arm of Munich Reinsurance. Based in Hong Kong, he and his team cover Asian equities and fixed income portfolios for Munich Reinsurance. Before joining MEAG in 2010, he was the deputy head of Asia Equities in Baring Asset Management and responsible for country allocation, stock selection and managing equity portfolios in the Asia Pacific.  He currently heads Prosper Global Asset Management, an investment company, as its Chief Investment Officer.

Get to know Franki as he shares his worst investment story as a fund manager studying a recycling company portfolio. Learn the operational frauds that he discovered as he was studying this company. Know why it is important for a traditional active management manager to visit the company, know the stakeholder’s values and build trust around the business model before considering adding the business to the portfolio.

 

 

“At the end of the day, the complete avoidance is almost impossible. If they want to hide from you, they can always hide.

Franki Chung

Topics Covered:

01:09 – A brief introduction of the guest and how they crossed paths with Andrew years ago

03:05 – Franki narrates on how he, as a Fund Manager in CIBC (Canadian Imperial Bank of Commerce) studied a recycling company and the unusual and odd operational transactions he discovered in it

09:03 – Unveiling the lessons he learned from this experience

10:10 – Andrew sums up his takeaways

15:17 – Franki’s advise as a passive investor

 

Main Takeaways:

Lesson 1: “At the end of the day, the complete avoidance is almost impossible that if they want to hide from you, they can always hide. So, the only thing is that through diversification to put all the extras. Understand the management, but you can do as much as you can.”– Franki Chung

Lesson 2: “(As passive investors), we just actively studied the company, but in the end, we do not have the operational control or did intervene. We have to be active to some part, but like any one of us, we have to know our limit, how active we can.”– Franki Chung

Lesson 3: “Fraud does come as a surprise at times.  And so, there’s nothing you can do sometimes if someone’s a very good, sneaky, tricky person.”– Andrew Stotz

 

Resources:

 

Connect with Franki Chung:

 

Connect with Andrew Stotz:

About the author, Andrew

Dr. Andrew Stotz, CFA is the CEO of A. Stotz Investment Research, a company that provides institutional and high net worth investors with ready-to-invest stock portfolios that aim to beat the benchmark through superior stock selection.

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