While many investors are bailing out of Asia as if it were the Titanic, Hong Kong's Victor K. Fung has an enviable problem: trying to figure out what to do with the gobs of cash that investors are lobbing at him. As one of Asia's few seasoned professionals in the venture-capital business, Fung is amassing a $1.8 billion war chest for the private equity activities of Prudential Asia Investments Ltd., where he is chairman.
With that money, the 52-year-old Fung wants to begin reshaping Corporate Asia. When he started Prudential's Asian venture-capital arm in 1986, his strategy was simple: ride the coattails of growth by taking lots of small stakes in companies such as Taiwan's Acer Inc. and Hong Kong's Golden Harvest Entertainment Holdings Ltd., then cash out when they go public. "We have to rethink that strategy," says Fung. "There will be a fundamental change in the Asian corporate model."
Now, Fung wants to invest in larger, more established companies and then prod them to slim down and focus on profitable core businesses. He is looking at a $1 billion regional conglomerate based in Singapore and a $2 billion group in Hong Kong. He will also encourage mergers to bulk up companies' remaining businesses and give them commanding positions in their markets.
The eldest son in a wealthy Hong Kong family and a PhD from Harvard University, where he taught economics and finance, Fung is up close to the big changes going on in Asian business. Besides chairing Prudential Asia, Fung is chairman of the Hong Kong Trade Development Council. He has used its $200 million annual budget to help develop policies that boost Hong Kong's 300,000 small and midsize companies, especially in the service sector. Moreover, as the chairman of a second-generation family trading company with sales of $1.7 billion and operations in 26 countries, he has a feel for the market that few investment bankers do. The company, Li & Fung Group, run by younger brother William, has seen its stock price rise 40% in the past year, while the Hang Seng Index fell 47%.
Even in hyperactive Asia, where endless evenings of entertainment follow long workdays, few people can match Fung's energetic pace. He stunned staff on one project by calling 5:30 a.m. pre-breakfast meetings at his penthouse apartment overlooking Hong Kong harbor. Fung's days begin before dawn and regularly stretch past midnight. He says with age he now needs more sleep--but still only around five hours a night.
Fung is a man who straddles two worlds and somehow brings them together. His Western world is one of bookstores and libraries in Boston, where the Fung family has a home and where two sons now live. A U.S. citizen, he also has a weekend house in New Hampshire.
Fung's other life is in the Chinese world of the Hong Kong elite, where Chief Executive C.H. Tung is a neighbor and family friend. It is the world where his mother's apartment is next to his; his younger brother and sisters live downstairs.
Fung brims with ideas to help develop Asia's capital markets. He's backing plans for a NASDAQ-style second board for Hong Kong stocks that would enable smaller companies to get financing more easily. Another idea, a joint venture with the Asian Development Bank, would provide subordinated debt for infrastructure projects. Subordinated debt, which carries higher risk as well as return, is relatively rare in Asia. But the fund may help bridge the gap between equity and straight debt.