Idea Brunch with James Hay of Pangolin Asia Fund
Welcome to Sunday’s Idea Brunch, your interview series with great off-the-beaten-path investors. We are very excited to interview James Hay!
James is currently the chief investment officer and director of the Pangolin Asia Fund, a long-only Southeast Asia equity fund he founded in August 2004. James lives in Kuala Lumpur and founded it after successfully investing his own capital in the region. Since inception, the Pangolin Asia Fund has delivered an annualized return of 8.6%, net of fees.
Editor’s Note: We very much enjoyed publishing this interview with James Hay. If you know of any great investors with a track record of outperformance, please nominate them for Idea Brunch by emailing edwin@585research.com
James, thanks for doing Sunday’s Idea Brunch! Can you please tell readers a little more about your background and why you decided to launch the Pangolin Asia Fund?
I’m British and first started working on Asian markets in London forty years ago in 1986 for a unit of Barclays Bank (BZW). It wasn’t a choice – they just told me where to sit and that was on the Asian desk.
I realised very quickly that I enjoyed analysing companies and even more so, visiting them on my trips to Asia. I always learnt so much during my visits and felt it was such a privilege to be able to sit down with a company’s senior management. I mean, surely they had more to do?
I moved to Malaysia in 1993 thinking I’d only be here for two years! Thirty-three years later, I’m still loving living in Kuala Lumpur. I became a research-focused equity salesman, visiting companies in the mornings and calling my clients in the UK in the afternoons. Malaysia was in a huge bull market in the 1990s and, incredibly, was 24% of the MSCI Asia ex-Japan Index at one point. I think it’s maybe a little over 1% now; so small that most don’t even bother with it.
Then the Asian Financial Crisis hit us in 1998 and I was made redundant. I didn’t own shares at this point but I could see that this was a huge opportunity. I invested every penny I had, pretty much at the low, in around five companies and went backpacking for a year. Twelve months later they had doubled and by 2004 I’d made 11x my money. In 2002 I started to buy some Indonesian shares, some of which are now in the Pangolin Asia Fund. The valuations were incredible then – PEs of 2x etc. They hadn’t seen an analyst for four or five years.
My friends started to tell me I should start a fund. Many suggested a 130/30 hedge fund but I didn’t want to hedge. I wanted to continue to invest in the undervalued. I was in a fortunate position to be able to launch a fund with almost no outside money, having made enough in the previous six years to be able to finance the business.
We’ve never taken commission cuts, offered side letters or managed accounts in order to attract funds. All our investors pay the same fees, however large they are. To be able to be fair to all is a luxury, but I think it feels a lot better as a manager. Many of our Day 1 investors remain with us and I consider them to be my friends.
You’ve been in Asian markets since the mid-80s and living in Malaysia since 1993. What did living through the Asian Financial Crisis teach you that still shapes your investing today? How has the region evolved over time?
The Asian Financial Crisis (AFC) taught me that there is always a recovery, despite the prognosis at the time. And by focusing purely on a company’s fundamentals I could distance myself from the noise. For well-managed, cash-rich companies, crises throw up many opportunities. There will always be crises so one needs to be positioned to get through them and emerge stronger. The best managements will do that for you.
In 1998 I moved from owning no shares to being fully invested. But the Road to Damascus moment for me was during the NASDAQ crash in 2000. NASDAQ fell 85% or so and all markets fell by a lot. My portfolio lost 30% but I just thought “this is great, my dividends will buy more shares for less.” That’s when I realised what kind of investor I am.
Your research process seems intensely field-based, with repeat company visits and attending annual meetings (AGMs) in person. What do you learn from visits that you can’t learn from filings? Can you share any stories of red flags or positive signs you discovered on these in-person visits?
One learns how management is thinking by talking to them. A company can look great on paper or a screen, but if the management is planning to reinvest their cash in something totally unrelated, or is planning to go on the acquisition trail etc. then that is very different. I think it’s important to know how the decision makers are thinking. We’ve normally determined that a company is a good one before we even see them. The question is if the company will remain one.
There have been so many red flags over the years. I remember we were close to investing in a company that manufactures vacuum cleaners for Dyson. At our meeting we learnt that they were planning to invest their surplus cash into an Indonesian plantation. Which they did and it was a disaster. Fortunately, we hadn’t invested.
If you own shares in a company I believe you must attend AGMs. It is your chance to meet management, grill them, praise them and criticise them. This is when you can learn so much about how they are thinking. It is your chance to bypass the Investor Relations people and talk directly to those in charge. You can and must also grill the independent directors. Are they really independent and likely to put up a fight against the major shareholders in order to protect the interests of the minorities? Or are they retirees happy to keep their heads down and supplement their pensions with their directors’ fees, thus effectively being more “dependent” than “independent.”
Brokers’ research analysts don’t attend AGMs. By going, you’re putting yourself ahead of them.
After over two decades of meeting management teams in the region, I’m sure you have met some incredible operators. Who are some of the other operators or investors you’ve met that impressed you the most?
I’m slightly removed from the investment management industry by living in Kuala Lumpur, which is rather a backwater. Claire Barnes of the Apollo Asia Fund was my inspiration and benchmark. I also think what Desmond Kinch has achieved at Overseas Asset Management is more than noteworthy.
In your December 2025 letter, you said you believe your holdings trade at a very large discount to what an independent buyer would pay. How do you estimate a “private-market bid” value for your holdings? Do you ever push management teams to make changes to realize that value?
We constantly assess all our companies. If there’s something in the portfolio that I don’t believe an independent buyer would pay substantially more for, then we shouldn’t own it.
In Malaysia, the Swiss parent of DKSH Malaysia is attempting to take it private at a 25% premium to the pre-bid price. We think the company is worth more than double its pre-bid price. We have enough shares to block the bid, which we will do. Actually we have no desire to sell DKSH Malaysia. It is growing at a decent rate and picking up new clients regularly. Having bought into a company, if we’ve got our analysis right, there’s little incentive to sell unless any offer is at a substantial overevaluation.
To the second part of the question, we often encourage management teams to increase the shareholder returns via dividend payouts. We own net cash companies which generate more cash every year. The problem we have is with companies sitting on this cash. Academically, it has been shown that cash paid out is valued at 4x cash retained. But in ASEAN we find that cash sitting on a balance sheet is valued at ZERO or sometimes less than zero. The cash is often in the control of a single major shareholder and the risk is that they buy something which destroys our value.