Interview with Mr. Thruston Morton(5)

2007-03-06 14:23:38 Zong Xing[ Big Normal Small ]

　　

　　Z: The legendary investor, Yale’s David Swensen, wrote a book. A theme that recurs in his investment book is that, as asset classes get hot, money pours in, and returns fall due to increased competition for good deals. Many observers have noted that in China, real estate is currently awash in capital, that money for new projects is easy to find. Do you worry that there will be too much money chasing too few good ideas in this field, and how will we know when we get there?

　　M: Yes, we are worried about the amount and speed of the money that is going into China. This is the interesting thing about markets. You can have a very positive view about the growth prospects in China for the next thirty years. But whether that means China is a good investment today in entirely another question. Everything depends on price. Now we have several investments in China because we do believe that the areas we’re in, and the managers we’ve chosen, will be profitable. But we still worry about the flood of money which as you noted tends to dampen returns.


　　Z: Besides real estate, what opportunities do you see in China?

　　M: Well, the rising middle class in China and the consumer revolution I’d say are interesting themes. I think I’m correct in saying that the rapidly growing middle class in just China’s 10 largest cities is as big as the entire population of the United States. And these are people who, unlike the American middle class, have not been on a consumption binge for the past 50 years. They’re just getting going!

　　Z: From an investor’s perspective, China VS India, which one are you more willing to put your money in?

　　M: Well, there is not a simple answer to that question. Each country has grown tremendously and has very strong growth ahead of it. The financial markets in both countries have also developed dramatically over the past decade, although India is ahead of the game in terms of depth and number of securities traded. And as we just discussed, the flood of money looking for investment opportunities has found its way to India as well as China. In fact, India was a cheap stock market three years ago but it’s hard to say that now. Still, we see opportunity in both countries across different investment areas. They both have tremendous potential, but with the flood of foreign capital into both countries, you have to pick your spots carefully.

　　Z: At the end of the interview, what would you like to say to the Chinese institutional funds?

　　M: I don’t pretend to know the situation in China, but in general I think the most practical thing to do for institutions who are relatively new to investing is to find external advisors or money managers to do it for them. For Chinese universities, that route would make sense or perhaps they could try to partner with U.S. universities somehow to learn the business. As we discussed earlier, you should not underestimate how difficult it is to start a first class investment capability from scratch – I should know since that is what I am trying to do in my new firm! Over time no doubt, Chinese universities will be managing their endowments in house like their larger US counterparts, but it would seem to make sense that you start by hiring outside firms so that you can learn the processes, and build your own team over time.

　　Z: Final question, what is your typical working day? What are your hobbies?

　　M: My hobby seems to be reading emails and financial information all the time (laugh). I enjoy playing golf and fly fishing, but I’m not too good at either one. For my working day, I usually start by reading the financial press and market news on Bloomberg. Typically, we will have investment managers coming through our office and I often participate in those meetings. I will sit down with our different investment teams and discuss specific investment ideas or strategy. And of course we are constantly monitoring our investments and portfolio characteristics. The thing you always feel you should be doing more of is to just have time to think. But you have to take advantage of small windows of opportunity since it never works somehow to block out 2 hours during your day for “think time”. Actually, it’s not clear that more thinking is better. It probably just feels better – but who knows if it will lead to better investment results?


　　Z: Mr. Morton, thanks so much for sharing your insights!