Foreword to “Rooted In Resilience: Hidden Champions Fund Letters to Shareholders”

14. Upward Toiling - Foreword header


“To live is to suffer, to survive is to find meaning in the suffering.” – Friedrich Nietzsche

“The most beautiful people we have known are those who have known defeat, known suffering, known struggle, known loss, and have found their way out of those depths.”– Elisabeth Kubler-Ross

“Character cannot be developed in ease and quiet. Only through experience of trial and suffering can the soul be strengthened, ambition inspired, and success achieved.”– Helen Keller

Sufferings. Adversities. Crushing setbacks. Terrifying trials and ordeals. Disorienting disappointments. Cutting betrayals. Countless doubters, misunderstood and self-doubts. Exhaustion. Loneliness.

If one looks closely enough, these traumas and tragedies are more common than not and inevitable in our lives.

As a fund manager and educator in the Asian capital jungles, I have been reading, listening to and analyzing stories of entrepreneurs for over 15 years. Stories of triumphs and successes – and the struggles and setbacks behind them, insights glistened when rapport is built up and knowledge from monitoring and interacting over the years is accumulated. Many succumb to the setbacks and did not regain their former heights.

Over time, a selected group continue to grow and do well not just in spite of the inevitable adversities and sufferings they have known, but maybe even because of them. Social scientists call such men and women “resilient”. They “bounce back”. They “rebound”. Theirs is a perilous, inspiring and complex journey, one that, after decade-plus of interest and research, still amazes and confounds: “How do they do it?”

When we include the narratives of the adversities and resilient entrepreneurs together in the investment letters, there is a bigger story. It is the untold story of a diverse group of women and men who are united by the experience of striving and thriving in stormy times building a certain type of businesses.

A special type of businesses that are “Hidden Champions”, an exceptional group of focused market leaders in sophisticated, hard-to-imitate niche products and valuable critical niche services that are largely invisible to the average consumer, yet are indispensable to our well-being in daily life. These Hidden Champions weather multiple crises and recession to deliver outperformance often not linked to general economic conditions, thus offering de-correlated and resilient investment returns. It is my conviction that Hidden Champions are the ultimate “shock absorbers”, transforming crises and traumas into opportunities for the future.

Rooted In Investment Resilience is that untold story of adversity and resilience. It shows that overcoming adversities is a courageous and complex endeavor. Successful people who have weathered multiple storms rarely believe things will simply work out and that optimism is overrated. She is more apt to practice defensive pessimism, imagining worst-case scenarios so she is more prepared when things go wrong. She has, however, strong faith in her own problem-solving abilities and the intangible knowledge asset – gained through the baptism of fire – that hard work and adaptation bring success.

When Bill Gates was asked in an interview “what it takes to build a Microsoft, or to build an Apple, or to build a Facebook”, his reply was unequivocal: “I think the world’s best companies are built by fanatics.” When pressed “what does fanatical mean?”, Gates said poignantly, “Work day and night. Sort of don’t worry about the possibility of failure. Every setback is just something to work a little bit harder at doing. We live in an age when people want a quick fix, a shortcut to exceptional results. But there is no such easy path. There is only an intense, long-term, sustained effort. And the only way to build that kind of enterprise is to be fanatic. Such obsessed people do not become the most popular people, as they often intimidate others, but when fanatics come together with other fanatics, the multiplicative effect is unstoppable.”

Thus, above all in our Hidden Champions, she is a fanatic who may not be a popular organization person with an EQ of 100, but definitely has PQ (Purpose Quotient), remaining unwavering in her commitment to an idea larger than oneself in service of others, and OQ (Obsession Quotient), the focus, intensity, conscientiousness and discipline towards her craftsmanship. In service of others, she may use her powers to be good and do good even as she struggles with exhaustion. She may live with incredible alienation even as only relationships can save her. It’s a never-ending battle.

An inner battle that never ends even if one achieves phenomenal success, like in the case of billionaire Shigenobu Nagamori, founder of Nidec Corp (TSE: 6594), the world’s #1 manufacturer of electric motors, which compounded over 5,000% since 1992 to a market value of US$46.9 billion. Nagamori-san recounted his story when he told his mother that he is starting his own business: “My mother asked me: ‘Are you ready to work twice as hard as everyone else? If other people work eight hours a day, are you going to work 16 hours?’ After I assured her on this point, she quietened down, and gave the venture her blessing. At the end of the day, if I’m tempted to slacken off, I can look out [of his 20th floor office] and see my mother’s grave. I say to her on these occasions: ‘I made you that promise, and I am still working.’”

Every never-ending story has a beginning, an origin story. There is a moment or a circumstance that sets everything in motion. An inspirational origin story in the guru Professor Dr. Hermann Simon who gave birth to the term Hidden Champions as he engaged in a conversation with Harvard’s Professor Ted Levitt who asked how could it be that Germany, in spite of its medium size, is always the #1 global export nation, and they conjectured that the mid-sized companies Mittelstand must be the cause. Thus, the Hidden Champions 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. Professor Simon went on to found a hugely successful management consultancy firm Simon-Kucher & Partners based on the success factors of Hidden Champions with a niche focus on pricing strategies.

An origin story in also how the Hidden Champions Fund was conceived and built from scratch when I joined 8I Holdings Ltd in September 2015, taking over a proprietary investment portfolio with cumulative absolute losses and portfolio stocks that include Singapore Post and Wilmar – and transformed into a proper fund structure, obtaining the Registered Fund Management Company (RFMC) status from the Singapore financial regulator Monetary Authority of Singapore; generated a cumulative positive absolute return of 31.2% (versus 21.5% for the EAHFI or EurekaHedge Asian Hedge Fund Index, an equally weighted index of 338 hedge funds investing exclusively in Asia) with an asset under management (AUM) of US$27 million as at 29 December 2017 since adopting the distinctive focused investment strategy of investing in successful yet relatively low-profile underappreciated Hidden Champions in Asia Pacific, including a 13.9% return in 2016 when overall markets are largely flat to negative; raised over US$5.6 million in new capital from high net-worth individuals and institutional clients; and received enquiries from institutional clients that include Yale Investments Office, Abu Dhabi Investment Authority (ADIA), institutional investment advisors in Japan and Australia.

It was tense at the beginning when I was confronted with the reality and ultimate responsibility of taking over a portfolio with cumulative absolute losses – and the overall market then was uncertain in outlook and continuing its decline. A natural course of action in decision is to sit and wait it out for the market to “rebound”. Wait for that proverbial “mean reversion in returns” to take its course. What if a “rebound” were to happen after you sold the losers or even realize profits in the winners in the portfolio? Shouldn’t value investing be supposedly about buying stocks when the market has crashed? While the market has corrected at that time in August-September 2015, it did not qualify as a crash like that during the 4Q2007-1Q2009 Global Financial Crisis. Is the decision to hold cash a well thought-out one to not chase after stocks while waiting for a supposed crash, or one that is masked under the guise of being paralyzed into not taking action, or not having a systematic investment strategy to identify and capitalize on mispriced opportunities?

What went through in my mind is something quite different and longer-term in perspective when making the difficult investment and business decisions back then: What should the investment philosophy, style and strategy of the portfolio be, so that it is distinctively unique to:

(1) Achieve superior long-term risk-adjusted returns, even generating positive absolute returns in down markets – value investing is thus not about market timing in waiting for a crash to happen;

(2) Not be widely followed by others in the investments industry to throw up structural and persistent mispricing opportunities;

(3) Be scalable in fund capacity to handle new money with a high-conviction investment strategy with transparency to overcome the asset size barrier to performance;

(4) Stand out amongst the thousands of funds in the marketplace to attract the attention and investments of long-term institutional clients.

Since picking up the first edition of the book Hidden Champions: Lessons from 500 of the World’s Best Unknown Companies authored by Professor Simon in 1996, I was spellbound and applied its framework to identifying and executing investment opportunities at my earlier careers at a boutique hedge fund specializing in value investing and at Korea’s largest mutual fund organization. Over time, I made improvements to adapt the business management principles of the Hidden Champions to value investing, giving birth to the proprietary Bamboo Innovator framework in analyzing wide-moat business model quality and avoiding the pitfalls of investing in Asia with its prevalent accounting fraud and misgovernance risks, which I incorporated and implemented in the investment process of the Hidden Champions Fund.

It is painful for me to witness first-hand many investors and friends who had invested their hard-earned savings in a number of these supposed value stocks which are thematic stocks that are part of the popular mantra “Ride the Asian Growth Story!”, only to find themselves subject to emotional upheavals when these stocks turned out to be inherently sick and prey to economic vicissitudes. They may seem to grow faster initially but the sustainable harvest of their returns is far too uncertain to be the focus of a wise program in investment.

Worse still, some turned out to be involved in accounting frauds, in which their financial numbers were “propped up” artificially to lure in more funds from investors, and the previous assessed asset value had already been “tunneled out” or expropriated in money-go-round tunneling opportunities via unusual related-party transactions. The four categories of commonly-used tunneling methods used by actual insiders, manipulators and syndicates to expropriate corporate assets include: (1) Money-go-round intercorporate loans, guarantees, other receivables and investments, (2) Capex irregularities, (3) Deals potion, (4) Consolidation craftiness e.g. the improper pushing of operating expenses and debt liabilities into unconsolidated entities in which the listco has effective economic control and power to artificially inflate its own profit and balance sheet asset value.

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.

Thus, accounting information can be used to inform – or to deceive. I am fortunate to have taught accounting at the SMU, including launching the inaugural 15-weeks course Accounting Fraud in Asia. I am grateful to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about the potential of implementing the world’s first fact-based fraud detection system for Singapore.

I incorporated and implemented this fact-based forward-looking fraud detection system that combines accounting data, especially footnotes, with a wide array of contextual information – including unusual related-party transactions; money-go-round off balance-sheet activities; governance, group structure, consolidation accounting and ownership analysis; textual and linguistic analysis; analysis of event-based “catalysts” (information-based manipulation) and sensitive market announcements (action-based manipulation in prices and volume) – to provide fresh insights in equity valuation to inform our decision making in investments at the Hidden Champions Fund.

Caring is an exacting, serious and demanding business, especially when it comes to being entrusted to invest in another person’s financial assets, which represent much more than money – they are a tangible product of one’s life’s work and a repository of aspirations for the future. We are acutely aware of the intensive work nature with time sensitivity and the weight of short-term performance pressure on our shoulders. We must endure periodic bouts of being misunderstood while we focus on delivering sustainable long-term returns over time. The daily grind of the investment work is not to the liking of most people and the work finds us only when we decide to live with a greater purpose to serve.

Like the ancient Painters descending into the clay pits to study the rudiments of color, we enter our 30-square-meters investment room to embark upon a learning journey of self-reflection and discovery to nudge and help one another to strive towards mastery and excellence as we lose ourselves in the service of others. I have invested a lot of my time, energy, emotions and dedication in training and grooming the team wholeheartedly, never holding back with what I know.

For instance, Joyce Pang Qin, our Investment Analyst, is now quite adept at plowing through the prospectuses and annual reports of Taiwan listed companies to assess the quality and evolution of the origin story, having being encouraged and pushed by me to go through several dozens of prospectuses and annual reports, for one need to walk through the coals of fire to get to a critical mass of knowledge for the callused feet of resilience, ferreting out nuanced important information such as whether the company talks significantly more about the industry and less about the company itself in its business model, strengths, weaknesses, opportunities and threats; as well as to evaluate critical risk factors that over 80% of the listed Taiwan companies have, such as whether the management made any share pledge 股權質押 and unusual non-core investments 轉投資, etc.

Tho Jinliang, our Business Development Analyst, has supported under my guidance in listing our Hidden Champions Fund on HFM Global database and EurekaHedge, which highlights some unique statistics of our Fund, such as the percentage of positive months which stands at over 70%, and also puts our Fund in the radar screen and direct scrutiny of the asset allocators and institutional investors. Jinliang is also instrumental in bringing to fruition our website that will make it easier for investors to appreciate our unique investment philosophy and process. The website also includes a section of “Business Builders of Asian Hidden Champions – Heroes in our Lives” to map out a selected group of Asian entrepreneurs whom we have monitored over the decade plus and admire and respect them. Please let us know of your valuable comments and who else do you admire in Asia and would like us to include in the Hall of Fame, as well as share with us which Asian entrepreneur do you like most.

Both Joyce and Jinliang have dedicated themselves to the craft and I will like to promote Jinliang to Business Development Manager and Joyce to Investment Manager. They do not talk about how they have no time to do deep work, the things that matter and need to be done, for all of us to move and progress ahead.

“No matter how hard your job is, don’t try to make easy money. If you want to realize your dream, work twice as hard as others do. It’s hard but if you work hard and never give up, you will succeed!” – This heartwarming advice by Nagarmori-san’s mother to her son is what my loving mother would have said to me too. The personal story of Nidec’s Nagamori-san in how he etched his mother’s advice and love deep in his heart, and the tales of struggles to success of these Heroes in Our Lives, have inspired me deeply all these years that there is no short cut to success.

I will always remember the date 8 January 2011. It was nearing midnight on a Saturday. I was looking at my excel spreadsheet and doing some research work on stocks. My mother was in her own room next to mine. She suddenly let out a really scary yet strangled scream, one that I had never heard before. When I rushed into her room, she was vomiting. Later, I noticed that she cannot move one side of her hand and leg and she cannot talk. After rushing her to the hospital did I realize that she had suffered a severe hemorrhage stroke that had burst her blood vessels. She has since been disabled and speechless for the past seven years, with added pain complications in her central nervous system that affects a rare few in post-stroke victims, and my dad and I are caregivers to her. Till today, I can never forget the sound of that scream by my mom on that night which is a life-altering event for my family.

Imagine if an investment professional says he or she finds it difficult to have quiet time – over an extended period of time – to do deep work and the investment work that matters and is needed to be done for all of us to move and progress ahead. I worked on research and dedicate to my craft when the night is quiet, for years, even till today. While I am nowhere near successful, I feel very strongly that the journey of a struggling artist-like career is like that of a value investor and is akin to what Lee Kuan Yew and Sim Kee Boon once said, that joining the administrative service is like entering a royal priesthood. It is a sacred journey. It requires a reverence for the craft. You do not desecrate the craft of an artist. You do not denigrate the journey of an artist. That investment professional should feel strange and perhaps even ashamed to have that responsibility in handling the hard-earned assets of the clients. There are certain values, principles and decisions involved towards craftsmanship that perhaps should not be disputed or interfered with.

While I am merely the “football coach” of the Fund, I have pour forth my whole heart and blood into creating from scratch and building an ongoing business with recurring income and cost discipline for the Group and football club owners, also risking my own hard-earned savings investing into the Fund with the same fees and terms as the external client, to demonstrate with action my personal commitment and alignment with the client. On this note, I like to express my thanks and gratitude to Ken and Clive, the co-founders of 8IH, for providing the platform with 8IH seeding the initial capital.

I would also like to take the opportunity to express my heartfelt gratitude and thanks to the people who have been so supportive and encouraging despite my many flaws and weaknesses: my wise and kind and loving mentor Professor Leong Kwong Sin from the Singapore Management University (SMU); Professor Pang Yang Hoong, the Vice-Provost and former accounting dean of SMU; Hemant Amin, founder, Managing Director and CIO of the hugely successful multi-million Asiamin single-family office; Arun Chopra, CEO of IIFL Singapore; François Badelon, founder and President of Amiral Gestion Group; John Mihaljevic from Manual of Ideas and Oliver Mihaljevic; Chuck Royce, founder of Royce Funds and one of the pioneers of small-cap investing, and clients of the Moat Report Asia.

It is easy to feel like a failure if you have not made your mark by the time you are forty, or even thirty, especially since popular culture bombards us with messages that make overnight success seem deceptively ordinary. Yet many people hit roadblocks and quit points that challenge their dedication to a goal, and a lot of them give up and move on to something that is easier or more convenient. What sets Hidden Champions apart is the determination to succeed on their own terms, no matter how long it takes, what form or shape it takes.

In more than one letters to shareholders, Warren Buffett and Charlie Munger suggest that the best investment you can make is in yourself. We hope these letters to the shareholders will be a useful resource of learning and analysis that you can adapt for your own investment decisions.

This is not a how-to book. You get, however, a candid and frank account of investment mistakes made and obstacles overcome. You will be able to view our decision-making process from a unique vantage point. You have a collection of insights about what went on beneath the surface of those decisions over time. You will see our fallible side. You will see how we responded to our own mistakes and faced challenges as the world changed around us. You see how the same timeless principles are applied to vastly changing landscapes and circumstances.   These letters will sometimes be rambling like a loving mother to emphasize its importance. They will also be full of tales of the lure and dangers, shocking revelations and intrigue of money management. And they will be loving as well.

Hidden Champions thrive in stormy times: Market positions are not redistributed during sunny and calm times, but during times of crisis. The specialization and innovative force of many mid-sized Hidden Champions makes them indispensable for their customers and Hidden Champions have stood the test of time in facing crises, proving themselves to be adept consolidators in snatching market share from unfocused rivals to achieve market leadership and even market dominance, and to be innovators in creating new categories of growth.

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 metrics are compelling. Only for investors who want to go the right way, not the easy way.

These letters are the story of Stage 1.0 thus far in this initial two years and three months of the Hidden Champions Fund’s journey, with the ongoing long-term resilient growth of our portfolio companies. Overall performance has been gratifying, giving us confidence in the robustness of the investment philosophy. As we now progress into Stage 2.0, a collaborative activist investment approach will be undertaken to unlock non-linear jumps in market value creation of our key portfolio companies in which we are substantial shareholders by engaging in constructive discussions with management to identify and execute on opportunities to unlock value for the benefit of all shareholders.

To our clients, we are thankful and grateful for your trust and support in us.

Please feel free to contact me with any questions, thoughts or comments at:

Warm regards,

KEE Koon Boon
Chief Investment Officer & CEO
Hidden Champions Capital Management
Hidden Champions Fund


Birth of a Hidden Champion Issue 4: Keyence & Nitori 

Dear Clients and Valued Partners,

Birth of a Hidden Champion (Issue 4): Keyence & Takemitsu Takizaki, Nitori & Akio Nitori
Welcome to the fourth issue of the “Birth of a Hidden Champion” tribute series, where we highlight inspirational stories on the listing birth of Hidden Champions creating and compounding value in the Asian capital markets.

On the 6th of January 1992, two Hidden Champions were born in the Japanese capital market. Keyence (TSE:6861), led by the quiet and low-profile founder Takemitsu Takizaki, went on to compound nearly 2100% to a market value of over US$70 billion today; and Nitori, led by the farsighted and passionate Akio Nitori, to go on and compound over 5,000% to a market value of over US$16 billion today.

These extraordinary Hidden Champions have pushed us to delve deeper into the inner workings of what make Hidden Champions stood the test of times. We had mapped out a selected group of Asian entrepreneurs whom we monitored over the decade plus and have admire and respect them, including Keyence. Since we wrote about the learning insights of Keyence’s innovative business model in the TODAY newspaper article back in April 2013, it had quadrupled in market value. In the inaugural Intervarsity Stock Research Challenge held during the annual Value Investing Summit 2017 in January 2017, the eventual champions from NTU impressed the judges and audience with their research on Keyence, which went on to nearly double a year later. You can read more about their research here: Intervarsity Stock Challenge Booklet 2017.

By investigating deeper into understanding the owner-operators’ higher Purpose to add value to society by solving high-value problems and serving underserved customers with their unique products and services, you would be able to invest with a higher conviction and be rooted in investment resilience even and especially in fragile and weak market conditions. We dug deep to craft up-close-and-personal insights to why Akio Nitori started his business, whose Purpose has carried on till today with the mission of improving the quality of life Japanese are able to enjoy with affordable yet stylish furniture. You can find our series on the owner-operators building our Hidden Champions called “Inside the Leaders Mind” here: Inside the Leader’s Mind: Akio Nitori.

Please check out our website which includes a section of “Business Builders of Asian Hidden Champions – Invisible Heroes in our Lives” and let us know ( who else do you admire in Asia and would like us to include in the “Heroes in our Lives”, as well as share with us which Asian entrepreneurs do you like most.

Warm regards,
KEE Koon Boon
Chief Investment Officer & CEO
Hidden Champions Capital Management
Hidden Champions Fund

Value Investing Summit 2018 – Building a League of Hidden Champions

Dear Clients and Valued Partners,

Professor Dr. Hermann Simon, the godfather of Hidden Champions and founder of one of the world’s most profitable consulting firm Simon-Kucher & Partners, will be in Singapore for our Value Investing Summit 2018 (VIS2018) on the 27-28 of January.

The Value Investing Summit (VIS) is a two-day, annual conference featuring some of the best investing minds in Asia and around the world, where industry experts and investors alike meet to share ideas, discuss investment strategies and support one another to navigate the investing scenes internationally.

Now in its 7th year, VIS started an audience of just 500 (in 2012) and has grown to the average 1,300-strong crowd today, where renowned speakers like Professor Dr Hermann Simon (Founder and Partner, Simon-Kucher & Partners), Francois Badelon (Founder and President, Amiral Gestion), Hemant Amin (Founder and Managing Director, Asiamin Capital), Vishal Khandelwal (Founder,, Kee Koon Boon (Chief Investment Officer & CEO, Hidden Champions Capital Management), Zhou Guiyin 周贵银先生 (Chief Trainer, Shanghai Rongdao Culture Communication) will be present.

For all clients, we hope you will be able to attend our exclusive session in the Value Investing Summit that we have arranged for you to interact with Professor Simon, as well as interact with the CEOs of Hidden Champions that include Makrand Appalwar, CEO of India’s Emmbi Industries, and Judy Kuo, CEO of Taiwan’s Nyquest Technology. It is unusual for investment firms to invite their shareholders and clients to meet and question the chief executives of businesses in which their savings have been invested and to meet and question the investment firm’s managers and analysts about those investments. At Hidden Champions Fund, we believe in providing our shareholders with unique insights and access to the entrepreneurs and businesses that are disrupting and improving our world to see first-hand the opportunities we see.

Attached are the slides that I will be presenting during VIS2018. Hope to see you there!


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