A slightly dated but interesting interview with Jim Mellon, a private investor with a wide range of holdings in private and public companies. He was formerly a co-founder of Regent Pacific Group, an investment firm based in HK, and spent a large part of his career focused on Asia and emerging markets. He discusses some of the lessons from his career journey and his current areas of focus, including longevity and what he calls the “new agarian revolution.”
Some of my notes are included below the embedded video (these are for personal reference only and not meant as a comprehensive transcript; any mistakes are also my own).
On his start in fund management: before he left university, they had something called the milk round, where companies would come to campus and interview candidates for jobs. He ended up with job offers from Clark Shoes, a now bankrupt British shoe manufacturer, and a stockbroker in London. He was also offered a job by an obscure little company in HK, which he ended up taking because he wanted to go overseas. He turned up in HK, they bought him a suit, and he sat in an office with 20 other people in a round circle, and that was it. So there was a huge element of luck to how he got started. About a year into that job, his company opened an office in San Francisco and he got sent there. That was a great opportunity because the US market was on its knees but about to have a huge recovery and it was the start of the big technology boom.
His early career investing in Asia: the HK company he joined was called GT Management, and it still exists today as part of a larger investment group (LGT). In those days, however, GT stood for Griffin and Thornton, its two founders. They had previously been at an investment trust in London called Foreign & Colonial, which was one of the earliest investors in global markets. GT was set up to invest primarily in Asian equity markets. At the time, most of these markets were not particularly well covered by foreign investors. It served as a good apprenticeship for him, and he was sent on research trips everywhere in the region. One of his more memorable investments was in San Miguel. At the time, there were 50mn people in the Philippines. And the market cap of San Miguel, which had 90% of the beer market, was US$50mn. So his summary analysis was for a dollar per person you could get the dominant beer company in the Philippines. They also had the rights for Coca-Cola, Nestle Carnation in the Philippines, the dominant ice cream brand in the country etc. They bought ~10% of the company and it turned out to be a remarkable investment.
On the transition to his own firm: when GT was acquired by LGT in the 1980s, he got a small payout from that. Then Richard Thornton (the T in GT) set up his own firm and he went to work with him. That fund company was also acquired, by Dresdner Bank in 1990, and he got a few million dollars from the sale. That was enough for him and his longtime partner Jayne Sutcliffe to go off and start their own business (Regent Pacific). The firm started off investing in Asian markets, but in 1994 he read about Russia’s voucher privatization, so they got on a plane to Russia and started buying up these vouchers. They eventually set up a fund for foreign investors to invest in Russia, which was successful until Russia defaulted on its debts and devalued its currency in 1998. Eventually, he had made enough money that he felt he didn’t need to be on daily calls, kowtowing to clients etc. He became interested in the biotech sector and made several investments in that area, got involved with real estate in Germany, invested in hotels and so on. More recently, he has become very interested in the science of longevity and the food revolution (e.g. cellular agriculture), where we are still in the early innings.
On his success across so many unrelated sectors: when you are starting out in your career, you need to focus. Partly because you have a lack of capital, but also because of the sheer bandwidth that is required to juggle multiple things. In some ways, however, he might have done better if he had just stuck to fund management and nothing else. Friends of his have done incredibly well being fund managers all the way through their careers. But he has always been more of a nomad, he likes to do different things and create new businesses. His advice is to start out by specializing and build up enough capital so you have the luxury of spreading your bets across multiple sectors. In his view, the three most important traits are having a sense of curiosity about the world around you and being open to ideas, being adaptable and then putting in the hard work. He keeps doing what he is doing in part because he still suffers from some insecurity, but more importantly because he loves the work.
On structuring his time/involvement across businesses: he still works with the same partners he has had for many years. He is not a solitary operator, he needs to have people around him. That in turn gives him the opportunity of having ~10-30% slices of multiple businesses. It is rare that he owns businesses outright, with the exception of his real estate investments in Germany. His experience (i.e, through making plenty of mistakes) means he often has a good sense of whether a deal or investment might work or not, is able to assess the quality of the business plan and the people involved.
On his greatest professional setback: this was probably in 1998, when Russia defaulted on its debt and the currency was devalued. They had made US$100mn in profit the year before for the management company and literally in 1-2 days they lost half of it. He remembers getting a call from Morgan Stanley for a margin call of US$40mn. They had just enough money to satisfy the margin call, but it taught him that having all your eggs in one basket is a very bad thing to do. Ever since then, he has tried to do 2 things consciously – diversify and de-lever. For example, in his German real estate investments, he hasn’t taken on any debt at all. He also had an unfortunate incident with an ex-partner in Korea that caused him a lot of angst. Those are the only times in business when he has felt any particular strain or stress.
On positioning to profit from an emerging sector: using the example of the food revolution, he thinks the whole dairy business will be out of business in ~10 years time. That is not science fiction. In fact, Borden and Dean Foods, two of the largest dairy producers in the US, have gone bankrupt as a result of the tipping point reached just with plant-based alternatives. Similarly, he thinks that half of all the meat eaten around the world will be either be plant-based or cell ag produced by 2030. Other products like collagen, cotton and leather will also be produced in labs within 10-15 years on an almost exclusive basis. He has written a book that outlines his thesis in more detail (Moo’s Law). There is this massive change underway and he thinks we in a period equivalent to the horse and cart just become the automobile came on to the market in the early 1900s. The best way to take advantage of the opportunity is to find the best management teams with the best business plans and then to diversify (they have 14 investments in the sector). He is very focused on the quality of management, in particular their ability to navigate the regulatory hurdles that are inevitable in the food sector, having a deep understanding of their market segment and competent financial capabilities.