The third-generation investor

This article first appeared in Wealth, The Edge Malaysia Weekly, on July 26, 2021 - August 01, 2021.

"Some do not like the idea of taking over an old business and having to stick to it for the rest of their lives. I would beg to differ. The company provides you with a foundation to achieve your goals faster.” - Lim

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Lim Chia Wei is not someone you would call a builder of new wealth. She was clearly born into old wealth, being the third generation of the Lim family that founded Scientex Bhd and Malacca Securities Sdn Bhd.

At 31, she is executive director of Malacca Securities, a brokerage firm founded in 1963. Typical of her generation, she is a proponent of technology and likes to try new investment approaches. These include algorithmic trading, which executes trades automatically based on technical and fundamental analysis. 

Her philosophy is to invest only in what she knows well, largely owing to her father, Lim Peng Cheong. Which explains why most of her wealth is invested in equities, which allows her to react swiftly to market changes. Unlike the views of her parents, tangible assets such as property are not her cup of tea. 

“Some people ask me, why not property. I always compare it to putting my money in, let’s say, equities. I could gain more in the future by investing in shares. Also, selling off a property can be a long process,” she says.

“It is partly because my family already owns tangible assets, which will be passed down to us in the future. So I prefer more liquid assets. My bias towards equities is because of the business nature of the firm I am managing, which is a stockbroking company.”

About 90% of her portfolio is in equities. Of that, 50% deploy algorithmic trading strategies while the rest are in blue-chip stocks. The algorithmic trading portion of her portfolio is why her parents and some of her peers view her as a rather aggressive investor. The algorithm trading strategy screens through a list of stocks utilising fundamental analysis, then automatically executes the trades based on technical analysis. 

“The strategy does not buy low and sell high per se. It buys high and sells higher. It is very much a strategy that rides the market momentum. It buys only when share prices start to rebound. We do not buy at the lowest point but slightly higher than that,” she explains.

“We develop various [algorithmic] strategies in-house. That is why I can try them out.” 

Such trading strategies are offered by a securities firm to investors under discretionary trading services based on the regulations of the Securities Commission Malaysia. Malacca Securities is currently the only brokerage firm that offers these services, according to Lim. 

“My younger brothers and I invest very differently from our parents. They also invest in equities, but the components are different. We put a lot in algorithm trading and stable stocks, whereas they invest mostly in stable ones. They buy and hold a lot. They have more patience than us.”

Lim ventured into new areas recently when she invested in tech start-ups through the engagement of a venture capital firm, partly under the influence of her peers. 

“To me, investing in start-ups is not as exciting as equities. I hold a very long-term view when investing in start-ups, probably 10 years, and hope that it will become a unicorn [defined as a start-up with a valuation exceeding US$1 billion] one day,” she says.

“However, what excites me about them is their proposals. It is very good to get exposed to how they present their businesses. Sometimes, they help me generate new business ideas too.”

Discretionary trading as a  unique offering 

As a third-generation member of the family, Lim made a promise to her family and employees that she would continue to expand the firm. As at July 15, Malacca Securities had more than 250,000 clients, according to her. Half of them actively trade with the firm. 

A key driver of the enlarged client base was the firm’s expansion plan in 2012, when it started to offer its services throughout Peninsular Malaysia. Its digitalisation plan, mainly the launch of its online trading platform MPlus Online, was another boost for its client base. 

This year, Malacca Securities has been consistently ranked the No 6 brokerage firm in terms of trading volume. As at June, it commanded 5.35% of the total trading volume in the market. 

The top five firms were Affin Hwang Investment Bank Bhd (14.7%), Kenanga Investment Bank Bhd (12.65%), CGS-CIMB Securities Sdn Bhd (10.89%), RHB Investment Bank Bhd (9.22%) and Maybank Investment Bank Bhd (8.08%).

Moving forward, Malacca Securities wants to double down on its digitalisation efforts to carve out a niche in the market. On top of enhancing the user experience of its online platform, the firm is looking forward to capturing more clients through its discretionary trading services.

A unique selling point of the services (with the approval of the SC) is that it charges investors based on a profit-sharing mechanism. There is no sales charge and annual management fee.

“With a minimum of RM100,000, investors can let our professional traders trade on their behalf. They would not be imposed any charges if the annual return is less than 10%. But they will share 30% of their profit with the firm if the return is higher than 10%,” Lim explains.

For instance, if an investor deposits RM100,000 in the firm’s discretionary trading account and the return by the end of the year is RM15,000 (15%), the investor would pocket RM10,500 while the firm would earn RM4,500 (30% of RM15,000).

“So far, the profit-sharing mechanism has worked well for us and our clients. Our traders handling discretionary accounts have been working hard to make sure they are compensated too,” she says, adding that more algorithmic trading methods will be introduced in the future, subject to the approval of the SC.

Malacca Securities is looking to allow its clients to trade on stock exchanges in Singapore, Hong Kong and the US, hopefully by year end. While this is not something new in the market, the firm is always looking at ways to deliver more value to its clients, including a competitive brokerage fee, says Lim.

Keeping an open mind 

Lim got involved in Malacca Securities in 2013 when she returned to Malaysia from the UK. It was meant to be a short visit as the UK government was tightening the application of overseas work visas at the time, prompting many foreigners to return to their respective countries while reapplying for a visa.

She was working at a luxury brand retail group as its merchandising analyst and was determined to climb the corporate ladder, with a five-year plan in mind. “I did not want to come back. I knew my two younger brothers had decided to return to work for the company, but not me,” she says.

However, Lim eventually changed her mind. When she was back in Malaysia, she followed her father to company meetings and got involved in various digitalisation projects. As time went on, she witnessed the changes she brought to the firm and felt a sense of satisfaction.

“The company I worked for was still trying to apply for my visa. But I finally decided to resign and stay here. I have a strong personality and am a very determined person. My family was quite surprised.”

Lim says the rapid development and adoption of technology across various industries have opened new doors for members of the second and third generations to return to work for the family businesses.

“My time in Malaysia coincided with the company’s digital journey, which was very much focused on the marketing of our online trading platform. That was when I found things becoming exciting,” she says.

“The experience also exposed me to the entire stockbroking industry, where many things have deviated from how they were done traditionally. People were looking at new ways of working and trying new ideas to get people to trade online.”

Based on her experience, Lim advises the second and third generation of family businesses to keep an open mind when taking the helm of companies founded by the previous generation. “Some do not like the idea of taking over an old business and having to stick to it for the rest of their lives. I would beg to differ. The company provides you with a foundation to achieve your goals faster,” she says. 

“Some might say they are not keen to work with family members and deal with legacy issues. But I believe that’s part and parcel of managing a business anyway. The challenge of managing people is always there. It is for us to learn how to manage it. And even though a family business may be in an industry that you do not want to be in, nothing is stopping you from trying to launch new initiatives.”