"To reach a port we must sail, sometimes with the wind, and sometimes against it.
But we must not drift or lie at anchor."
- Oliver Wendell Holmes Jr.
With over a decade-plus in the Asian capital markets, Koon Boon, our Chief Investment Officer, has witnessed many investors, including family and friends, be seduced by the popular mantra: “Ride the Asian Growth Story!” stories and invest their hard-earned money, only to find themselves subject to emotional upheavals when these stocks turn out to be inherently sick and prey to economic vicissitudes. They may seem to grow faster initially, but the sustainability of their returns is far too uncertain to be the subject of a wise investment. Worse still, some turned out to be involved in accounting frauds, where financial numbers were “propped up” artificially to lure in more funds from investors, and the previous assessed asset value had already been “tunnelled out” or expropriated. This issue is compounded as western-based fraud detection tools and techniques have not been adapted to the Asian context to avoid these traps. It is disheartening to witness many fraud perpetrators go away scot-free and live a life of super luxury, on these unsuspecting minority investors’ hard-earned money.
Hidden Champions Fund was set up with a simple philosophy: Invest in hardworking Asian entrepreneurs and capital allocators who are serious in building a wide-moat business, and avoid these dubious companies. We have always been fascinated by why and how even under the most austere of conditions and environment, wide-moat business models remain resilient and continue to compound value. Some of these companies are dominant global players that focuses on sophisticated, hard-to-imitate niche products and valuable critical niches, but are largely invisible to the average consumer. Investing at an earlier stage or the tipping point in the long-term growth trajectory path of Hidden Champions has been proven rewarding. We aim to grow with these Hidden Champions by investing in these owner-operators, and grow our clients’ wealth together while making a difference in the world.
Hidden Champions Fund is managed by Hidden Champions Capital Management Pte Ltd, a Registered Fund Management Company (RFMC) with the Singapore regulator Monetary Authority of Singapore (MAS). Headquartered in Singapore, Hidden Champions Capital Management Pte Ltd was formed to allow investors and clients to benefit from long-term ownership of common stocks meeting the firm’s research-driven fundamental stock selection process and methodology. Hidden Champions Capital Management Pte Ltd is also a wholly-owned subsidiary of 8I Holdings Limited (ASX: 8IH). 8I Holdings Limited is an investment holding company focused on investing in public listed companies and private businesses based on the principles of value investing.
The HCF’s investment objective is to achieve long-term investment returns in listed equities in the Asia-Pacific through a focused strategy of investing in low-profile underappreciated Asian Hidden Champions who are focused market leaders in sophisticated, hard-to-imitate niche products and valuable critical niches that are largely invisible to the average consumer yet are indispensable to their well-being in daily life. The outcome of corporate events and intrinsic outperformance of Hidden Champions is often not linked to economic conditions, thus offering potential de-correlated returns. HCF also employs a collaborative activism strategy, engagement and approach geared toward creating and unlocking long-term value in our key portfolio companies to contribute to the Fund’s performance. The fund does not employ leverage in its investment strategy.
The Hidden Champions Fund is not for everyone. Only for investors who see themselves in the Hidden Champions – their struggles, how they are misunderstood and overcome the odds with persistence, and the non-linear triumphs – that we invest in with high-conviction when the reward-to-risk and value-to-quality are compelling. Only for investors who want to go the right way, not the easy way.
The Fund logo symbolizes how Hidden Champions are rooted in a Greater Purpose, guided by an Inner Compass, and belief system while they navigate trials and adversities, enabling them to serve their targeted customers and solve their most burning problems better than any competitors in the market and in the process generate growth with resilience.
Like a lotus growing with determination, rising up from the murky water, removing obstacles in its stems while its petals remains unstained and pure, the lovely blooms of the lotus flower typifying a chaste and noble heart, opening under the light of value creation in the murky Asian capital jungles.
The muddier and more opaque the water, the greater the beauty of the Lotus flower blooms when it emerges; the tougher the economic environment, the more tenecious the Hidden Champions become, growing to create and compound value whilst being rooted in resilience.
Special tribute to Hermann Simon, Honorary Chairman at Simon-Kucher & Partners, who first coined the term Hidden Champions almost 30 years ago in his best-selling books Hidden Champions: Lessons from 500 of the World’s Best Unknown Companies and Hidden Champions of the 21st Century.
The Hidden Champions-type companies have their roots in the esprit de corps of Germany’s Mittelstand who are the 3.5 million small and midsize family enterprises that form the backbone of Germany’s resilient export-driven economy, employing more than 78% of workers and contributing more than half of the country’s GDP.
There are also lesser-known, quiet, resilient, successful compounders, including sanitary systems specialist Geberit, commercial kitchen equipment company Rational AG, diagnostic and life-supporting equipment maker Ambu A/S, ophthalmic lenses and ophthalmic optical equipment maker Essilor international S.A., door technology systems specialist ASSA Abloy.
Asian Hidden Champions include the world’s leading velro maker Taiwan Paiho, Australia’s premier plumbing and bathroom specialist Reece Ltd, Japan’s dominant home furnishing retailer Nitori Holdings, India’s Godrej Consumer products, Indonesia’s integrated consumer health and nutrition specialist Kalbe Farma, and many more.
Our investment team believes in working with people whom we like and trust, who shares a disciplined commitment to the Hidden Champions way of value investing, and integrity in servicing clients and investors. Our investment team has incorporated 10 core values that are essential to the long-term working relationship to win together as a team, creating a distinctive investment culture inspire the extra level of intensity and dedication in performing for our clients, investors and shareholders.