Clinton Ang, a third-generation member of one of Singapore’s wealthiest families, doesn’t take due diligence lightly. Charged with managing the family’s investments estimated at more than S$100m ($80m), he hired private investigators to check on the chief executives of two Singapore publicly-listed companies and their managers before buying their shares. This methodical approach is indicative of his investment style, in which thorough analysis is paramount.
“You can have the best business model and the worst management and it won’t work,” Ang says. “We have been very happy with the investment because both companies have done extremely well.”
A single family office
Founded by his great grandfather, Ang Soo Seng, who came from China’s Fujian province, the family’s business Hock Tong Bee, started selling gunny sacks and later became a provisions wholesaler and retailer. The company’s name in the local Hokkien dialect means “Prosperity and Beauty.” Ang Soo Seng died in 1952 and his son, Aloysius Ang, abandoned law school to take over the business. Following a chance meeting with a wine producer from Bordeaux, Hong Tong Bee made the shift to become a wholesaler and distributer of wines and spirits and has never looked back. Aloysius Ang, Clinton’s father, died in 2003. “In his will, my father gave me majority share of the company and he gave cash and properties to my siblings,” says Clinton Ang, who is the youngest of four children. Hock Tong Bee, which is into its 75th year of business this year, was then valued at about S$30m. “We are the oldest surviving wine merchant in Southeast Asia and our current market share ranges between 5% and 10%.”
Armed with a PhD in Corporate Turnarounds, Ang took over the reins of the family business, terminating a number of relatives and re-structured the company. Today, Hock Tong Bee is a holding company which manages the family’s property and equity investments. It is also the parent company for Twelve Degrees, a storage facility for precious vintages, and CornerStone, a winemaker, distributor and warehouse and logistics provider.
Ang’s siblings sit on the board of Hock Tong Bee. “Ultimately a lot of decisions stem from there; it is run like a single family office.” The strong performance of the family’s investments has helped to keep conflicts at bay, he adds. “We make sure that we do all the research before making a decision and you need to exercise accountability and responsibility.”
The company has no plans to form a multi-family office. “When you have more people, ideas will be diverse and different.”
Family portfolio
The family’s portfolio is currently split equally among three asset classes – properties, equities and the family’s wine-making and distribution business, which Ang regards as exposure to private equity. Hock Tong Bee has joint ventures with vineyards in France, Australia, New Zealand, Italy, Spain and Chile. The company contracts the vineyards for a minimum of 10 years to make, blend and mature its own brand of wines before bottling and release, he says. Hock Tong Bee currently sells to 22 countries around Asia. While the downturn in Europe has helped to reduce the cost of imports, intense competition and rising operational costs have squeezed margins. “Just to give you an idea, there are about 4,000 registered wine importers in Singapore. Among them, there are about 20 that are reasonably well known in the market place. Out of the 20, may be eight have market share. Out of the eight may be 2 or 3 are profitable. The reality of the market bites.”
The long-term growth target for the company’s wine business is 9%, without sacrificing margins, says Ang. Annual turnover has reached more than S$30m and net profit is about S$3m. “If we outperform, I am very happy. If we underperform, I ask why.”
Amid the weakness in Europe, the strong Singapore and Australian dollars and rising operating costs, Ang expects a drop in turnover this year. “I am very bearish in the second half of the year,” says the 39-year old who regularly provides feedback on labour and business conditions to Singapore’s Ministry of Trade and Industry on behalf of small and medium enterprises.
“While our properties and investments have done exceptionally well, our core business is steady or facing a little bit of a decline,” he adds.
In equities, the company holds about a 3-4% stake in a lifestyle and a similar proportion of a technology company, both based in Singapore and has stakes ranging between 0.5% and 1% in 10 different companies, explains Ang. The family’s equity holdings are spread across jurisdictions including Hong Kong, Europe and the US.
“We generally stay away from bonds and other asset classes because being business people ourselves, we love assessing publicly-listed companies,” he says. “We analyse analysts’ reports and companies’ annual reports. We even track their management.”
Since 2003, the family’s equity and property portfolios have grown by about five times while revenue at its wine business has doubled. While acknowledging that market information and expertise is important in today’s highly volatile markets, the family’s assets aren’t run by institutions or wealth managers.
“The problem with a lot of fund managers is that all they want is AUM because they are driven by commissions,” says Ang. “They come and they try to convince you how much money they think they can make for you but they don’t tell you how they are going to make it.”
Private bankers
“To every private banker that comes, I ask three questions: Are you invested in what you are selling? Is the bank invested in what you are selling me? Are the fund manager’s assets invested in what he is managing? If the answer is yes to all three, I will listen,” Ang says.
“I am also a trained fund manager; I read financial documents and we do our own investing and research,” adds Ang, who was once worked at Merrill Lynch in New York. “Private bankers - they lent me no expertise that I can’t do myself.”
In 2011, the family started cutting their exposure to real estate. Properties that were purchased in 2004 and 2009 were sold off and the money was reinvested in equities. “We felt that market was getting to a peak and there were more and more measures imposed by governments in Singapore and throughout the world to cool property prices.”
In February, Ang also sold some of the family’s equity holdings. “These days it is no longer about long-term investing, it is about cyclical investing. September was quite a lull and we bought into the market and the period after Chinese New Year is always a good time to sell.”
Wine fund
Hock Tong Bee operates a wine fund – the Conerstone Grand Cru Investment Fund - with multi-family office Stamford Management Group. “We started the wine fund on our own initially and the fund did well. We were returning at least 10% to 15% every year,” says Ang. The success of the wine fund prompted him to expand its AUM. “It was the best of both worlds” by combining the expertise of Stamford Management and Hong Tong Bee’s wine know-how.
He adds that operating the wine fund has helped the company’s business. “A typical wine fund investor is often someone who is of a certain standing and if he is considering buying physical wine he will be likely to purchase his wine from Hock Tong Bee. In this way, he will also be feeding into the wine fund,” explains Ang. “The wine fund for us is more about building customer relationships than about making money. It is about cultivating ambassadors at large in the market place for us.”
Currently the wine fund continues to return between 10% and 15% annually and is a good proxy of the family’s wine business, adds Ang. He explains the company’s wine fund venture was in part an effort to weed out wine frauds and professionalise wine investing in the city. “We buy and sell wine every day and when you come here, you see not one but thousands of cases of wine. We are internally funded, carry no debt and we have assets over a hundred million dollars.”
“In Singapore, there are about five credible En Primeur sellers, the rest I wouldn’t touch,” he adds. “When you buy En Primeur, you are given a piece of paper and you take a 2-4 years counter-party risk. At the end of the tenure, the company may or may not be around. For some companies they may have one case and they showed the same case to 500 people.”
The wine merchant expects Bordeaux prices to rise and Burgundy to fall. “When Bordeaux prices reached a three-year low last quarter of 2012, we were net buyers and we’ve been buying old vintages for the fund as well. The fund has since risen 10%.” Ang doesn’t believe in buying and operating vineyards. “Vineyards are a gift from God and if God decides that you shall have rain and disease, you are finished,” he says. “You cannot control the elements so I would never do it.”
Last year, Hock Tong Bee was approached by a group of investors to acquire a stake in Robert Parker’s famous wine journal. “After assessing the proposal, it was apparent that it is very contingent on one person and you need continuity and Parker hasn’t really been in the best of health,” says Ang. “In my view, it was quite high risk and we prefer businesses that have continuity and scalability.”
Parker’s wine guide was eventually sold to a consortium of Singaporean and Malaysian investors. “We will see life in the wine business beyond Parker. In fact there are many critics and businesses in this world that hope that Parker isn’t around,” says Ang.
Going forward, the family has no intention of giving up its wine business despite increasingly tough market conditions, he adds. “If there is a dollar to be made, we will eke out 50 cents.” The wine merchant, who was once a Singapore national badminton player, says his days start at 7.30 am and doesn’t end until 12.30 am. Ang says he believes in living within his means and has never bought a new car in his life. He currently drives a second-hand Mercedes, flies budget Jet-Star and Tiger Airlines for his business trips and rents out his GCB (Grand Class Bungalow) while choosing to live in a more modest condominium with his young family.
“My grandmother and my parents are great influences in my life,” says Ang, adding his father once told him: “Son, if there is a dollar to be made, take your 75 cents and walk away. If you try to make a dollar you will lose that chance and your profit will fall back to 50 cents. Take that 75 cents and share 25 cents with others and you will live to fight another day.”
Ang says he is “a little paranoid” of the Chinese proverb: “The first generation creates wealth, the second-generation maintains it and the third-generation destroys it.”
“We exercise prudence in everything we do. If times get tough, I know that we have structured the family’s assets with our best knowledge to protect them. I often tell my team - if everything comes back to me, I haven’t done my job; I have done my job, if everything works without me.”
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