Success and More Interesting Stuff

Jun Bei Liu's extraordinary journey

Matthew Kidman

Centennial Asset Management

This episode of Success and More Interesting Stuff features a new face in Australian funds management in the form of Jun Bei Liu.

Jun Bei landed in Australia as a 16-year-old without a social or business network and very little English. From this humble beginning, she has worked her way through the ranks and today is managing close to $1 billion for well-known fund manager Tribeca.

Jun Bei is tireless and an inspiration for both women and anyone from outside the establishment. Here she recalls her earliest exposure to share market investing as a child in Shanghai and relates the path she has taken to lead Tribeca's alpha plus long-short fund.

Jun Bei's energy, humour and sheer enjoyment of a career in investing have brought her a long way, and she's certain there are bigger and better things to come.


Edited transcript

Matthew Kidman

Welcome to the latest episode of Success and More Interesting Stuff. Jun Bei Liu is the new breed of fund manager in Australia.

Gradually the old school tie has been tossed in the bin, and only those with the drive and ability to deliver performance are being chosen to run the savings of the Australian public.

Jun Bei grew up in China. It wasn't until she was deep into secondary school did she land in Sydney with the dual task of performing well enough at school to make university and learning Australia's version of English.

Once those hurdles were overcome, she ignored tradition and pursued a career in the male-dominated finance industry. She managed to crack the nut, and before long, she had secured a job as an analyst with research and rating agency Morningstar.

Using this as a platform, she moved into stockbroking, and within a few years, she had landed in funds management at Tribeca Investment Partners. For almost 10 years, she honed her skills as a stock analyst before being promoted to portfolio manager in 2016.

In 2019, her senior colleague, Sean Fenton, left Tribeca to set up his own funds management business, leaving Jun Bei to run the $700 million Alpha Plus long-short fund.

After a rocky start, Jun Bei quickly resurrected the fortunes of the fund, and today it is close to $1 billion in size. During this hectic period, Jun Bei has had the added responsibility of getting her two children through some testing lockdowns.

Welcome, Jun Bei. It's been a busy couple of years.

Jun Bei Liu

It's been incredibly busy. Thank you so much for having me.

Matthew Kidman

And what's it been like with your two kids? How old are they, and have they been home schooling?

Jun Bei Liu

Yeah, that's right. I have two kids. One is eight years old and one is turning 11; the older girl and a younger boy.

It has been an incredible experience to home school two kids while going through a full annual reporting season. Perhaps I will in future years look back and think it's been an incredible journey really.

I set up the kids' morning tea and lunch while watching the market open and digest all the results. And we worked out a system that worked really well.

And just also giving me the opportunity to spend time with them during the business time of the corporate calendar.

Matthew Kidman

Are you a tough educator, no room for error?

Jun Bei Liu

I can be a tiger mum at times, and sometimes I think I'm more like a witch than a tiger mum! And I think my volume is getting louder and louder.

But interestingly, my daughter is getting to the years where she's turning 11; the volume of my voice doesn't really change her behaviour anymore. So this is where I become a better negotiator, I hope, in the next few years!

Matthew Kidman

Yeah, they definitely get tin ears after a while, don't they? All children.

Jun Bei Liu

That's right.

Matthew Kidman

Let's go back and discuss your journey. We're at the end where you are today, but go back. Born in China. Can you give us some colour about where it was and the family structure?

Jun Bei Liu

Yeah, absolutely. So China was very different. I was born in the '80s in China, and there I disclosed my age! But look, I was born in the '80s, and back then in the '80s, China still had a very closed border.

At the time, most of the people had very limited resource, as in access to running water, telephone, and even colour television was very difficult to come by. You literally had to pull strings to get a colour television. And so the world was very different then.

Matthew Kidman

And were you living in a major city, or was it in a rural area?

Jun Bei Liu

I was living in Shanghai, probably the most cosmopolitan city in China, but at the time most cities were more or less the same. And with the borders closed, everyone is pretty much the same.

In the '80s, it was quite interesting. It's really literally just a decade after the Cultural Revolution, and the remnants of the Cultural Revolution are still quite obvious in the culture.

Most of the people don't want to dress with bright colour because you want to blend in. Most of the people don't really want to buy expensive possessions simply because it was discouraged during the Cultural Revolution just a decade earlier.

So the '80s is still that time where people are trying to be subdued, trying to blend in and have no possession, if possible. So it was a very interesting time.

And then the education during that period was quite different because it was still more about the revolution and all of that. So it's a very interesting time to be born in China.

Matthew Kidman

And were you a product of the single child policy at that stage?

Jun Bei Liu

Yeah, absolutely. In the '80s is where the policy becomes a little bit more strict, and I think by the '90s it was pretty much all set. Everyone's just a single child.

So '80s is the onset of that policy being filtered through pretty much everywhere in China. And so the family structure is very interesting because all of us, we don't have brothers and sisters. We tend to just play with our neighbours' kids. And we sort of act like brother and sisters with neighbours, and you'll see lots of kids roaming about the streets.

Matthew Kidman

Did you live in an apartment block or a general neighbourhood?

Jun Bei Liu

Yeah, it was general neighbourhood. Apartment block was really in the centre of the city, you get a few of them. But in the '80s, my grandfather was a migrant into Shanghai.

He literally came off the boat, and he landed in Shanghai, and then he built a house by himself. So we lived in a building, probably didn't pass any building code or anything. It didn't collapse and lasted for many, many years until it was sold to a property developer.

But yeah, at the time it was all single house in the neighbourhood, pretty much all built by those elder generations themselves.

Matthew Kidman

And where did he come from?

Jun Bei Liu

He came from a small village nearby Shanghai, but there was a lot of flooding and things near Shanghai. This is in the early 1900s. And then when he came to Shanghai, Shanghai at the time was not belonging to the Communist Party at the time.

Matthew Kidman

It was a free trade zone.

Jun Bei Liu

It was a free trade zone. And when he came, Shanghai was still like the old Shanghai. The stories he would tell us was quite different. He used to pull a rickshaw for all the people that sat on it. It was very, very interesting stories that we heard from him.

Matthew Kidman

And did you live with the extended family, or was it just you and your parents, or your grandparents were there? How did it work?

Jun Bei Liu

We all lived together. I lived with my grandparents, and then because he came from the village, and they brought a lot of his brothers and sisters and cousins along. And so we literally are living in the community where there's a lot of people; we are all related.

And then when the school was built nearby, so it's literally just a small community on the fringe of Shanghai, not exactly centre of Shanghai.

Matthew Kidman

It sounds like quite a nice environment, for a kid anyway.

Jun Bei Liu

For a kid, it was fantastic, roaming about and did random things. And didn't have the toys that my kids have today, but played with everything else. I think probably the most fun time of my childhood was whenever it rains.

China has torrential rain about May or June, and they rain for two months. And because our neighbourhood, the drain was really poor. So the rubbish will get in the drain, and then it will flood. So whenever it rains for a month, it just floods the whole area.

And as a little kid, we would take out the those little wooden bucket that will be sitting there, and as a boat, we will be rowing about. It was a lot of fun.

Matthew Kidman

Made your own fun.

Jun Bei Liu

Yeah, that's right. It was a lot of fun.

Matthew Kidman

And tell me a little bit about school. You mentioned part of the education was learning about the times and the Cultural Revolution and what happened after that. But just generally, was it a good education from a mathematical, scientific point of view? How did that all work?

Jun Bei Liu

The education is good, but it's just a very, very different structure for education. I spent the first 16 years of my life in China, went through primary school and middle school, and then I came to Australia, did the middle and then university and the like. So I can compare them quite well.

With the Chinese education, the belief is about memorisation, and the teacher will give you as much information as possible, and you go and memorise. And then they believe the more you practise and memorise, you will do well.

So it's very, very structured learning. I think one thing lacking at the time was that I didn't understand a lot of concept, but it's all about memorising the formula, memorise all of that.

So naturally, you'll be very good at numerical things, maths and things, because it's by memorisation. And I find once I come to Australia in year nine, it really surprised me because teacher try to explain to me why we do certain formula, why we do this.

And now I see my kids learning about the basic concept. Whether it's mathematics or anything else, they actually trying to understand it. And I loved it.

It was so different because I find with the other way, it's very dry, and you've got to just constantly repeat. Repeat, repeat, and then you get it.

Whereas the Australian way, the Western learning process, once I understand it, I don't need to memorise. I know it. And it makes it much more flexible further down the track when I learn more complex concept.

Matthew Kidman

So it moulds the way you think about things in general.

Jun Bei Liu

Absolutely. Absolutely. One is a structured mind. One is more fluid and more innovative, and they're more open-minded, so you can explore different ideas compared to the other. So it's certainly a very, very different education system.

Matthew Kidman

And before we leave Shanghai, you talked about your dad and your grandfather. What did your parents do?

Jun Bei Liu

In the '80s and '90s, well, early '90s, most of the people worked for the government-owned organisation. They worked in a chemical factory, and my mum was a chemical analyst. My dad was a engineer in that factory.

Matthew Kidman

So they are well educated.

Jun Bei Liu

They're well educated. And those factory, the leader or the manager of the organisation or the CEO, they're almost like your family member, and they will dictate everything you do in your life. And then it's the same as where you live. The local council, it's almost intertwined in your life. It's very different from what it is here.

Matthew Kidman

The political party is always present.

Jun Bei Liu

They're present. I think they just believe they're you, so they're there to foster your family and things. And plus partly those days in the '80s or even Cultural Revolution time, during those early days, the party always create those jobs for people, and then it's all controlled by the government. It's very much a structure that everyone followed.

Matthew Kidman

And I gather when you come home from school, there wasn't talk about what the share market did that day or was Wall Street up.

Jun Bei Liu

I tell you what. I tell you what. My dad was one of the earliest person invested in the China Shanghai stock exchange or China share markets.

Matthew Kidman

He was a pioneer.

Jun Bei Liu

Oh, he was a pioneer, but he was a chartist. In those days, in early '90s and things, the share market was very immature. There was a lot of volatility in China.

And if you look at the base of the investor or the nature of the investor, they're all retail investors. So the charts were incredibly important, but this is before times of computer. China, we didn't computer until probably 2000.

So the late '90s is when we start seeing computer so we didn't have computer. My dad had those paper literally with lines, and he'd stick them around the house and in my room because it's so long, because you need to get an annual chart, so he can draw lines on them and try to find pictures in them. And so my whole room was just covered with those charts.

Matthew Kidman

With stock charts.

Jun Bei Liu

With stock charts. It was so funny. And then he would draw them. And then every day he would make a prediction. Beginning of the day, he'll be like, right, I'll tell you what, because of this angle, that angle, whatever, or something he sees, and it's either up or down. Every day.

And he's always right, of course. But he would make prediction every day, essentially predicting both ways, and then see the bigger picture in the next day. It's fascinating.

Matthew Kidman

He sounds quite obsessed.

Jun Bei Liu

He was very obsessed. He actually did quite well. But investing those days in China was nothing more than punting. Because even though if you understand the company, how much do you really understand what's happening behind the scene?

In the early '90s, there's not much disclosure, and the share market is just way too volatile at the time.

Matthew Kidman

But the seed was planted then, I gather.

Jun Bei Liu

Absolutely, absolutely. If I can make money out of those lines, look, that was the technical chartist side my father always, always used.

Matthew Kidman

So can we go forward? I think you were 16, correct me if I'm wrong.

Jun Bei Liu

Yeah.

Matthew Kidman

You came to Australia. What was the trigger for that, and how did your family go about it?

Jun Bei Liu

Well, my mother came to Australia first. She got a student visa to come to Australia in 1990. Straight after, pretty much after Tiananmen Square, the student issue and the visa relaxation, my mother came to Australia as a student visa.

Matthew Kidman

Just to stop you there. So Tiananmen Square, in Australia, we all saw footage of it and reporting around the world. But what actually happened? Was it a big event on the ground? And then there was the reaction to visa relaxation. Is that what you're saying?

Jun Bei Liu

So in Australia, which prime minister?

Matthew Kidman

Bob Hawke.

Jun Bei Liu

Bob Hawke. Yeah. He relaxed the visa from China into Australia. And a lot of students applied, and my mother at the time, was qualified to come to Australia. She came through first.

Matthew Kidman

And you stayed with your dad and your family. How long was that for?

Jun Bei Liu

For six years.

Matthew Kidman

Oh really? She came by herself for that long?

Jun Bei Liu

Yeah, it was actually very common for Chinese family during those years. I met many of my school friends, and all the parents were like that. So the parents were actually separated for a long period of time, so that one can come and study and then eventually have a visa and then brought the kids along.

Matthew Kidman

And how did you keep in touch with your mum? On a daily or was that impossible basis?

Jun Bei Liu

It was very difficult because we didn't have a telephone, remember. For my mother, we will have an agreed time that she will call us. And in our neighbourhood, literally, there's a few hundred people living in a council area, and we all share one telephone line.

So there will be an old guy, sort of retiree, sitting there. And he will man the phone, and then someone will call through, and then they will say who they're calling. And then he will send someone to go to that house, knock on the door, saying you've got a telephone. So we will have an agreed time. Most of the people will have agreed time on what time she will call. And then we sit around in that little room waiting for the call to come through.

Jun Bei Liu

So my mother will call once a week, and sometimes a bit harder because there's 20 people waiting for that telephone to finish. And then when you talk, everyone's waiting for you. You can't talk for too long. So it was an interesting, but the challenging period for me absolutely.

Matthew Kidman

So you stayed with your dad. You're obviously pretty close to your dad on that basis.

Jun Bei Liu

Yeah. I'm closer to my dad, and we lived with my grandparents as well, so they provided a lot of help while my mother was away.

Matthew Kidman

And she established herself here.

Jun Bei Liu

Yeah. She got work, but like a migrant, she had three, four, five jobs. And when I came over she supported me, and then my dad came much later, late '90s.

Matthew Kidman

So you came after six years, and he came later again.

Jun Bei Liu

That's right.

Matthew Kidman

So as a family, you weren't together for more than a decade.

Jun Bei Liu

That's right. It's incredible, my parents have been able to do that. Obviously the purpose is to have a better life. And of course, for me to have a better life, better education, and more exposure to the world.

If I stayed behind in China, my world would be very narrow. And I always say, when I was little all I've ever wanted to do was to be a waitress, nothing more. And that's because our world was so narrow, I want to be what I can see.

Once you come to a country where every possibility, every job is possible, you just see the limitless possibility. The sky's the limit, really.

Matthew Kidman

And you land in Sydney at 16 years of age. You're getting towards the back end of high school. How was your English?

Jun Bei Liu

I was horrendous. We didn't learn English those days.

Matthew Kidman

But your mum would've picked up some English, I gather.

Jun Bei Liu

My mother could speak a little bit, like just basic communication so she could get around. She could do things. But my English was really bad, because those days in China, English was not a compulsory thing. They didn't teach English many classes, indeed.

So when I first came, I have to do six month of language school. Where I actually went to — now it's shut — a language school in Narabeen high school (on the northern beaches of Sydney). They had a little section, they teach all the kids, migrants.

Matthew Kidman

And would you do your normal classes?

Jun Bei Liu

No.

Matthew Kidman

Just English.

Jun Bei Liu

Just English. Actually how it works, is it's just immersion. They will have basic science, general science class and things, but there will be kids range from eight to 16. But because everything is in English, we just work it out. And this is when I realised our incredible ability to...

Actually, for two month I didn't understand anything. I just felt sleepy during class. And suddenly, I think by month three, I understood. I don't know where it came from, and I suddenly understood everything, and I could communicate. It was incredible how agile our mind is, really.

Matthew Kidman

When you're young.

Jun Bei Liu

Oh, I don't know. I think when you're adult it's the same — we just need to allow the possibility to change.

Matthew Kidman

Maybe it's just your mind. I can't imagine my mind being so flexible!

Jun Bei Liu

Put yourself in France, you get French in time.

Matthew Kidman

So then you started normal school, or they put you back into classes. And you had what, two or three years before you graduated?

Jun Bei Liu

Before I graduated, yeah. I started year nine at Mackellar high school in Manly Vale, northern beaches. And it was great. Year nine, straight into the school.

It's quite interesting because though I can speak English, but there's still... Because I missed the primary school, the building blocks of learning, it actually was quite tricky to really get on top of it. Not only just English, even biology and a lot of those other things, because we missed the building block of the language.

Even today, I feel my son at eight, he already know more than I do, I think. I think his vocabulary is probably better than me because of these building blocks of language that I missed.

Matthew Kidman

And how did you find it socially?

Jun Bei Liu

Socially was a little bit hard at the beginning. I think it's naturally we stick to the migrant because the language was harder. Even though I could speak English, but it's much harder to understand the culture.

How do you tell a joke? And then we feel very shy to approach people to, not to mention, make a joke. Definitely no joke, because I might not pull it off. But just very shy because it just take a lot of courage to...

I remember, I have to take so many deep breath before I go and speak to anyone, or even to ask for something, or even to buy a bus ticket.

I still remember I practised this line of buying a stamp from the post office. Because first week my mum said, "Go buy a..." I think it was 47 cents stamp, or something. And I practised so many times and I still couldn't say it properly. I think even today it's like, "Can I have a 47 cent stamp please?"

Matthew Kidman

It's a tongue twister.

Jun Bei Liu

I know. And is it stamps and stamp? Anyway. But it was very interesting experience.

Matthew Kidman

And was there any many other Chinese kids?

Jun Bei Liu

We have a few, but a smaller group. We stayed friends for life pretty much.

Matthew Kidman

And did you have a pact that you must speak English to each other?

Jun Bei Liu

Oh, we did try a little while, but then it's just too hard. Because when you first learn English or first learn a new language, you don't think in that language, you think in your natural own language and then you interpret it. And then you translate it into the other one.

It just take too long trying to tell a joke. Oh, it's exhausting. So it's only until we can start think in that new language, we just couldn't, it's very difficult to speak in that new language.

Matthew Kidman

Let's go forward a couple of years. You graduate, you obviously did reasonably well. And when did you make your mind up that finance, or business or economics was your calling?

Jun Bei Liu

I mentioned earlier, share market is always in me, growing up with all the share charts. When I went to university, this is not very inspiring, but every Chinese kid would take a business course. I took a double degree, so finance and accounting.

In the first year I remember I was so fascinated with the more economic side of things, rather than more accounting side of things.

And I have a lecturer, he was quite amazing. He talk about different incentives and how people work, and on the macroeconomic front, even the microeconomic front. Which was just fascinating, understanding incentive, understanding why people do things, understanding the behaviour.

Matthew Kidman

Not something you grew up with.

Jun Bei Liu

No, absolutely not. The education system in China is about accepting what it is, and memorise and work with it. Whereas the education here in Western economy is more about understanding why that is the case, and absorb it. Understand it and then work with it. So that's quite different. And I find it fascinating. It just opens your mind to so many possibilities.

Matthew Kidman

You obviously thrived in that environment, because you enjoyed it.

Jun Bei Liu

Oh, I loved it.

Matthew Kidman

What were you thinking about career-wise, and how did you go about trying to get a job in the industry that led to finance? Because the automatic thing for most people would be, I'll go and work for an accounting firm. I'll do audit. That kind of pathway leads to other things, but is the initial step. How did you go about it?

Jun Bei Liu

Yeah. Well, first of all, finding a job while I was at university, every Chinese kid was under a lot of pressure.

Matthew Kidman

From your parents.

Jun Bei Liu

From my parents. Because Chinese parents always have this perception of, you're educated, don't have boyfriend until you get to university. And then at university you just think about, what's your job? Always need to think ahead.

They believe a path that you need to follow every single step. One thing about me is that I love to do lots of things. So, simply because China was too confining to my imagination, when I come to Australia, I want to do what's possible.

I think day one in university I sign up to so many student societies. I think everything possible. And then year two I was running the commerce economic society.

Jun Bei Liu

Initially I was running the marketing for them, and then I would become the president, so I was running the society. We had a bit of funding from university, and then we run a lot of management consulting programs and things.

And I love it. Because to me, that's not just understanding numbers, it's everything. It's managing people, it's understanding incentive. And how we going to all work together, how do we raise more money? And how do we inspire the next generation to come through and join us?

I find that fascinating. So I did a lot of that as well, but that was an incredible experience. I met a lot of people in my university and a lot of people from the consulting side.

Jun Bei Liu

And I do realise that my skillset is more than just numbers, so accounting just didn't quite grab me. And I know my skillset, initially I thought I might be management consulting or maybe strategy, and a lot of those.

And it just happened that this job opportunity available was part-time when I was in year three, it was a job offer by Aspect Huntley. Now later on that got taken out by Morningstar.

Now this was a fantastic opportunity to really get to know a little bit of companies, little bit of stock recommendation, because we were writing newsletter for Ian Huntley.

Matthew Kidman

Ian Huntley.

Jun Bei Liu

You will remember Ian Huntley.

Matthew Kidman

The Huntley newsletter, yes.

Jun Bei Liu

That's right. So we wrote for Smaller Companies Guide and Your Money Weekly.

Matthew Kidman

So you're doing this while you're at university. It was a part-time job?

Jun Bei Liu

That's right. So that was last year of university. I was a junior analyst, of course, really watching how other senior analysts work. But I did have a couple of opportunity to interview management. I remember the company, I interview was Volante. You remember that, right?

Matthew Kidman

Allan Brackin was the CEO.

Jun Bei Liu

That's right. I remember him. That was very long time ago. So I interview them, but I felt incredible because I felt I was just in awe in the presence of people who are so successful and telling me how they do things. And that really fascinates me because I can learn so much from those people.

Matthew Kidman

So that was a spark. You were hooked.

Jun Bei Liu

Oh, absolutely. I was hooked and I couldn't get off it.

Matthew Kidman

So then when you finished uni, did you get a full-time job at Aspect Huntley?

Jun Bei Liu

I did. Yeah. I got the full-time job. I left before I became a senior analyst. I was there for a couple of years, and we did lots of coverage of big, small, large companies. And then there was an opportunity.

You'll hear my stories that I jump at every opportunity. I don't think too deep and further about it, but I know there's something about it that attracts me.

So that job opportunity is working for a sell-side broker, Stuart Foster, Foster Stockbroking, a small stock broker. He needed a junior analyst. And then I just felt that was an opportunity to really get into the real markets.

Matthew Kidman

So you stayed an analyst at Fosters.

Jun Bei Liu

That's right, at Fosters. But what was amazing is that Stuart Foster has given me the opportunity to be the senior analyst for the first time.

Matthew Kidman

And Stuart's a terrific market operator.

Jun Bei Liu

Oh, he's fantastic. And, actually, so lovely to talk to you when you know him. And he has so much market experience. And then he will bring me to meet some of his clients as well, and also will be hosting meetings with companies and things.

It's just brought me so much closer to what share market is, how things are done, the corporate raising, all sorts of activity. It's just been fascinating experience.

Matthew Kidman

You learnt those layers, which is always important about how the market works.

Jun Bei Liu

That's right. That's right.

Matthew Kidman

It's quite dynamic each day. Did you know at that stage the buy side was where you wanted to head, or did that just evolve over time and the opportunity came up? Because a lot of analysts do like to think at some stage they would like to be in funds management, buying stocks rather than selling the ideas on the broking side.

Jun Bei Liu

Yeah. I wish I can tell you that I wake up from China, I just want to be the firm manager I am today. But look, everything evolves for me. I really go after the experience it provides me. What attracts me.

At Aspect Huntley, it was really the initial experience of meeting the management and analysing company. Treasure hunting — it's like a treasure hunt — that was really exciting.

And then moving to Foster Stockbroking was really about be inside the market and be accountable. To be very accountable in recommendation I make.

I make a wrong recommendation, I feel terrible. And I research why I did it wrong. So accountability was very important. And then in that period, and with my contact with the buy side, it does make me want to be a investor.

Matthew Kidman

Because you're selling to the buy side, so you get to know a lot of people in the industry.

Jun Bei Liu

That's right. And I think ultimately I want to be judged at the time — well, even now — is I want to be judged on how good a investor I am, instead of I'm pushing this story to you and then I get a cart, and then that push onto something else.

So it's just very, very different dynamic. And I like to take the responsibility of being able to allocate capital, and to partner with businesses that are just incredibly growing.

Matthew Kidman

Well, you can relax for a minute, we're not here to judge you. We're here to listen to the story. Those couple of jobs, Aspect Huntley into Morningstar, then to Fosters — any good mentors? Who imparted good knowledge to you? It sounded like you learned a lot in that period, but were there individuals that helped you along?

Jun Bei Liu

I think every job there's individuals that helped me along, and really helped me to really understand what I'm doing. I think with the first one, with Aspect Huntley, Ian Huntley will give us mentoring speech and things. Actually, Ian Huntley always say, "Write like an eight year old." I'll never forget that.

Matthew Kidman

He told you to do that.

Jun Bei Liu

He told everyone: write like an eight year old.

Matthew Kidman

So everyone can understand.

Jun Bei Liu

Yeah.

Matthew Kidman

Now you've got an eight year old yourself.

Jun Bei Liu

That's right, that's right. He writes better than me. Aside from that, I was working with a senior analyst at Aspect Huntley, his name is John Russell. He's actually moved on to the corporate side now.

And he worked for many big businesses, helped many big businesses doing M&A (mergers and acquisitions) and things. Yeah, he was helping me to understand initially about companies.

And how do I interview? Interview skills, interview businesses. How do I get the information I want out of the interview, and yet without being overly aggressive or any other way? That was very important.

Matthew Kidman

Still is.

Jun Bei Liu

Absolutely important. I never mastered that, it's incredibly difficult. And then at Foster Stockbroking, my senior analyst was Michael Henshaw. I think at the time he just come from UK; he was an analyst from one of those big houses in UK.

And he helped me, first of all, to write slightly better than I was. And two is that he really helped me to think.

Because at the beginning as an analyst, you just pick a stock and you just want to write about a story. And then, whether it's really good investment or not, you just want to write about the story because it's really exciting.

And you spend a month to write about a story, you're attached, and then you become a little bit compromised with what your real recommendation is. But he was the one who really helped me to see.

I remember I wrote article about this little tech company. I liked it. But then after I wrote the article I kind of go, oh. And then he read it. He said, "Do you really like it? Give me three things of why you like it."

I couldn't come up with it. And then I ditched the report. And then it turned out to be a really good decision. But it's just along the way, every step of the way, there's always people that help me. I've been very fortunate. Help me to refine and understand what investing is. God, I've made mistakes; I made lots of mistakes.

Actually, there's another mentor is that when I was at Foster Stockbroking, I remember writing on Strathfield Car Radio. That was at the same time when JB Hi-Fi just listed and I looked at the difference as a — what do they call it — desktop analyst, right?

So I just go, "Oh, Strathfield Car Radio is so much cheaper than JB Hi-Fi — why wouldn't you buy this one? Things are going well; their contract with Telstra is going to do well." And you know, blah.

So I remember I wrote that report and Richard Uechtritz from JB Hi-Fi, he listed JB Hi-Fi, he ran JB Hi-Fi successfully for so many years. He came and saw me. He said, "JB," (he calls me JB). And he said, "JB, have you been to Strathfield's shop at all, yourself?"

I was like, "No, I saw the pictures." He's a retailer. "You've got to go to their shops and have a look to see if you really like it and see how different it is from JB Hi-Fi." And I did and that was fantastic advice.

Matthew Kidman

Very good advice.

Jun Bei Liu

It's amazing advice. And it's about kicking the tyre. So these are the little things I learned from people around me. Not necessarily just people I work with, but it's companies and it's everyone. And it's just been an incredibly rich experience.

Matthew Kidman

Very gradual but you learned a lot over time.

Jun Bei Liu

A lot, yeah.

Matthew Kidman

So tell us about Tribeca. You're at Fosters and you move to Tribeca. How did that come about and why did you think that one day you could be a good portfolio manager? Because once you go that way, that's what you want to be, I presume.

Jun Bei Liu

Yeah. I was headhunted from Foster Stockbroking to Tribeca. I think I'd written a few reports at the time that the recommendation has done very, very well, as a lead analyst. So I was still quite young at the time, early 20s.

And so they found me and I joined as a junior-ish analyst, but given this is boutique management, junior as in you still cover the stock. But you know, there's lots of people that help you, can give you the advice and help you to form your view and things.

I find it's quite an easy transition, but I love the experience of being so accountable for every recommendation I make, absolutely accountable. Initially it was a little bit terrifying because you go, "Oh, what if it's wrong?" It's just that you feel bad for the wrong recommendation.

Matthew Kidman

You got to have some fear that you can't do it.

Jun Bei Liu

That's right. But it's important, because once you do that, once you make mistake, you kind of need to put aside emotion and rationally reassess, going, "Well, did I make the mistake or was it just market being random?"

It's very important to distinguish between these two. And so this is when I find it's fascinating because market can be wrong but then you got to be flexible, because market's changing, it's dynamic, you got to work with it.

You got to listen to the market and how do you work with the markets? Because I don't believe that I'm 100% right all the time.

I do believe that we need to work with the market and if the information change, I need to change. That's a core belief I've always had. That has really worked for even running the portfolio and things.

Matthew Kidman

And who were you giving your research to? Who were the portfolio managers at that time?

Jun Bei Liu

At the time Sean Fenton was a portfolio manager and also we had David Aylward, who was the founder of the business. He manages small cap funds. So I report to them. My research goes to the small and then the large and we cover essentially sectors across the size spectrum.

Matthew Kidman

So you're doing a broad range, you weren't just doing retail?

Jun Bei Liu

That's right. I did a bit of everything and the good thing is, we did rotate the sectors because I had a couple of kids after some time and we had a sector reshuffle and the team structure changed a little bit. So I actually, pretty much, get to cover most of the sectors, range from property trust, to retail, to builders, to healthcare. I just haven't really covered the resources sector.

Matthew Kidman

And do you think that's held you in good stead? If you're running a fund, like you are today, I've always thought that being a generalist was better than being a specialist. Because you could have a general view and pick up on the key points that might change the value of the stock.

Jun Bei Liu

That's right.

Matthew Kidman

If you're a specialist, sometimes you can't see the wood from the trees.

Jun Bei Liu

That is a very, very good point. I think that's actually one of the key points of being able to run a portfolio, is that you need to have this broad-based view of everything. Knowing what's happening on the sector level and also on the macro level.

I met so many people during my career that are so fixated on that individual stock information or research, they fail to realise that some of the stuff they're doing doesn't matter. Some does, some doesn't.

So I think this will separate a successful analyst from an unsuccessful analyst, is that knowing which factor matters and which doesn't, and that changes as well. You just got to have a very flexible, open mind and work with what is everyone else doing.

This actually comes back to one of the things that fascinated me during finance course was behavioural bias. The behavioural finance side of things. This market is filled with behavioural biases and herd mentality and everything else.

As a real investor, you got to syphon through all of that and knowing sometimes if I'm reluctant to sell something, if information is changed and results bad and the investment thesis is no longer intact, we just got to recognise that behavioural bias we have and do something about it and be rational.

Matthew Kidman

Very difficult to do.

Jun Bei Liu

Very difficult. And remember, every day's a fresh day. It's not about how much money you lost, it's about from today, is that the best decision? Incredibly difficult, but I think this is something it's important to do in this market.

Matthew Kidman

And in 2016 I think it was, you got to manage money rather than being an analyst. Was there some early wins, was there some early losses? What do you remember that set you up in that period? Start with the winners, that's always easier.

Jun Bei Liu

Look, 2016, after I had a couple of kids, it's a transition in my life cycle. So after I had a couple of kids, after many years on the funds management as well as an analyst, I certainly feel I'm ready to broadening out my horizon. I knew I was ready for the next step, whether it's global equity, whether it's domestic equity, I knew I need to broaden it out.

So in 2016, I put a proposal to Tribeca. I wanted to run an international fund with Asian focus and I put together a proposal, and then I went on many trips to find my companies and see all of that and then I put together a model portfolio. And I ran that model portfolio for some time.

Only thing is though, with a small boutique, finding resource is always difficult. So I have to do... There's my day job, which is as analyst to cover the Australian shares and then there's my other job, which is, I work on the weekends, I work at night time, just to run international fund as a model.

Matthew Kidman

So you're still being an analyst at this time?

Jun Bei Liu

I was still analyst at the time, but I was doing that on the side. I think the opportunity came within probably eight months, the decision time came for me whether I want to work together a little bit more with Sean Fenton or on the long-short fund where there's real money or I just literally just go, "Okay, let's put everything into this and then see what we can make out of that."

And I think at the time, Sean needed someone to work with him on the funds and then I took that step forward. So I step in, I pretty much tried to help him on the fundamental side to understand companies and things. And whenever he goes on holiday, I can run the funds.

So that's when the transition took place. But at the same time, I continue to just keep watching what's happening globally. That experience has really helped me to have a global view of what's happening and once you do, you can't go back. You've got to be able to look from above, eagle view, and also go from below.

Matthew Kidman

And going back to my question, that's an interesting transition and learning a lot from that, but was there anything that stood out that you thought, "I picked a winner here. I can really do this job?" Because there's always a bit of doubt, as we talked about before.

Jun Bei Liu

Yeah. Look, I think there's plenty of them, clearly. That's why I lasted. One of the things is, the first time I went to the song conference, that's when I was looking at the international portfolio.

As my second job, I researched and I found a business that I really liked. Unfortunately, recently, it didn't do quite well, but for the first three years it was probably one of the best performers just after Tesla. It was New Oriental — it's in the Chinese education space.

That company pretty much tripled in the three years since I recommended it. But obviously now, it's going through its transition and things need to work through issues at the moment. But that was something that certainly boosted a lot of confidence when everyone else didn't quite see value in business like that. That's how I normally like to invest as well.

Thinking about even Treasury Wine that I recommended last year when no one else wants to see is when tariff and all of that, all you need to do as an investor, really, at the time, was just to stand back going, "Hang on, what are you paying at this rate? At this share price you're not really paying much."

We worked out what all the inventory that's sitting there, all these Penfolds, how much that's worth. And then we work out the price and then go, "You know what? I'm not worried about this tariff, even if it comes." And that was the right decision.

I think we make a lot of calls as portfolio managers, as the analyst, and every time you get it right, it's not just by luck when you do get it right, because you make it your homework and make the right call, reinforces that the things, how we should look at stocks. At the same time, how we should reward ourself, that we did, pat on a back going, "We did it ahead of everyone else." And it's like treasure hunting.

Matthew Kidman

That's important.

Jun Bei Liu

It's like treasure hunting — it's very exciting and now this market is full of it. I think in the last five years, I certainly feel like more investors are more short-term oriented.

Whether it's because of the structure of the market because of passive and all of that, not sure. But if an investor can take three to six month view, you can just make it much easier to generate return.

Matthew Kidman

I've got to say, I agree. It's very short term on the latest bit news. But in another funny way, some of these companies that get enormous valuations, you've got to be incredibly long term to stay around for the value to emerge.

Jun Bei Liu

That's right.

Matthew Kidman

It's a bit of a strange mix of things. So if we go to 2019, Sean leaves and you're in the position to take that senior role at the Alpha Plus Fund. That was a big step and obviously it was well known around the market you were stepping up. How did you feel at that stage?

Jun Bei Liu

Terrifying.

Matthew Kidman

Opportunity or terrifying? Terrifying.

Jun Bei Liu

Oh, look, that's me. Whenever there is opportunity, I always go for it, because I know my potential is anything — whatever we make it, right? It was terrifying, but I didn't know how terrifying it could be.

The weekend before, I remember sitting in the boardroom with the management, thinking what to do. When Sean left, the fund is pretty much is around just that $300, $350 million mark.

And we were just thinking, sitting around, the board of Tribeca was thinking, "What do we do? Do we close the fund?" I said, "Look, I could do this. I know how it works. I can run the fund. I have enough experience as analyst.

"Yes, I haven't fully run the funds; I haven't got a track record myself. I have a model portfolio track record. That was okay but I know I haven't really done that, but I've got a proposal. I'll make it work."

Matthew Kidman

You were terrified but you pitched.

Jun Bei Liu

I pitched. I didn't know how bad it could be, but I pitched and didn't really think too much about it. I pitched on the Sunday and then I actually don't know my biggest client that well. Because it's not my fund.

It was Sean's fund so he raised all the money. I didn't know them very well, but I didn't really think of the consequences. So I pitched and by Monday, we had about 50 calls to all the clients and Tuesday, we had another 50. Then following three days, we went to see all the client.

That was terrifying because it's a 15 minute call with everyone explaining what's happened. And I couldn't tell people that Sean went out and set up his own funds. And I couldn't say anything, really. So they were angry.

Matthew Kidman

Because that wasn't public yet?

Jun Bei Liu

It wasn't public. And I don't know what to say because I never experienced anything like it. It wasn't friendly, right? So it wasn't, he can step out and say, "Jun Bei can do this." I didn't want to say anything bad about him because I wish him well. But I couldn't say anything, so kind of just go, "What do you want to tell me?"

But anyway, I have received very strong support from my largest institutional clients and then my largest retail clients. They underpinned the possibility of me running the funds. Both of these anchored that $350 million right at the beginning.

And then we were 10% under the benchmark in performance. But I knew I could not fail; there's no possibility of failing. Within 12 months, we caught up on that 10% under performance. So we went neutral for 12 months and then our funds started growing, but very small.

In two years, we more than tripled. We're now over a billion dollars — from flow from both institution and retail — and we have been rated number one long-short for the three year running by Mercer.

I've been running it just close to three years. Not only we caught up the under performance, we outperformed as well in this environment. Obviously our team has worked incredibly hard.

Matthew Kidman

And ironically, did COVID help? Because that period is known as a big sell-off and a big rebound — incredibly volatile for that period. Do you think that was a good thing for you personally? That you adjusted to that environment well, and gave you an opportunity to get those results?

Jun Bei Liu

On hindsight, yes. On the hindsight we've done incredibly well. However, for me, only running a fund for the first time, within 12 months we suddenly have the market collapse. And then the subsequent rebound, to be able to outperform in all of those environment, was a very new experience.

In here, I do need to give credit to my husband. He actually used to be a portfolio manager at Macquarie, then he was a portfolio manager at Acadian. So he has had more than 10 years of portfolio management experience.

That was the first thing he said to me. When it crashed, first thing he said to me, he's like, "I've seen this before." He's like, "You need to think about all of that." And there was fear and everything, all the emotion like everyone else. But the opportunity just become incredibly clear in front of me. We start buying by the end of March. Literally, that was the bottom. End of March.

Matthew Kidman

On the 23rd or 24th of March.

Jun Bei Liu

That's right. So we did lots... Start buying then, but the thing is... I took the prudent route, which is when you first buy things cheap during market crash, you buy hard asset stuff. Sydney Airport's the first one I bought. Scentre Group, Ramsay Health Care.

Things that has hard asset, I knew they will come back. Eventually they will come back. That's before the government even stepping in with stimulus and things.

Once the government steps in, you buy retailers, you buy all these other things, but initially was just steady ones, safety ones. You buy them because you see this is once in a decade opportunity of buying those assets.

Matthew Kidman

So it wasn't sleepless nights. It sounded like you enjoyed that period.

Jun Bei Liu

I enjoyed that period. You can see my energy. I get very excited when I see opportunities. When I'm not excited is when the market kind of status quo, you don't really see anything happening. That period we just saw so much opportunity, probably sleepless nights as in too much excitement.

I remember my clients called me. This is one thing, I stay very close to my clients, especially during such crisis. My clients don't know what's happening and I want to share with them what I see and how I see things. So I spoke to them end of March, or first week of April.

I remember, my clients was a bit unsure. They advise other people's money and they feel a little bit nervous when market crashed like that. I shared my insight. I share with them what I see is the opportunity and I share how I position everywhere.

It certainly helps to be on the same level of how we see things and they invest more with us through that period and they've done incredibly well.

Matthew Kidman

Can you tell us a little bit about the Alpha Plus fund? It's long-short. Do you structure in a certain way, a 130:30, a 150:50? Do you keep it under parameters or is it a lot more flexible than that?

Jun Bei Liu

It is quite flexible, but I normally keep it quite steady, just simply because I feel I can generate a lot of return without taking out additional risks. If I can make so much money without taking on that additional risk, then it's...

Matthew Kidman

When you say additional risk, what does that mean? Some listeners will know, and some won't. If you have a 130:30 fund, you short 30% of your capital and you borrow that stock and you sell that in the market. Money comes in and then you can invest your capital plus that 30%. So you end up 130% long, 30% short. But what you are saying is you didn't really need to go that short and have that because then you've got 160% exposure to the market.

Jun Bei Liu

That's right. What I'm saying is that we could go up to 150:50 — this is the maximum we could go to. So that means I'm 200% market. You could do that, but normally I sit at that 125 or 130:30. So a little bit less than the maximum I could go to.

I just find, when I do become that leveraged, unless I'm highly convicted, I just don't see the payoff to generate the return given the volatility, the additional risk, you take on because you are gearing more into the portfolio.

Matthew Kidman

You are borrowing more stock. Exactly. And so that means you've always or pretty well always got short sold stocks in your portfolio?

Jun Bei Liu

Yeah, I do. I do.

Matthew Kidman

How do you find that? That's normally difficult on a couple of fronts. Companies don't necessarily like that.

Jun Bei Liu

That's right.

Matthew Kidman

It's difficult in terms of reputation. But if you get a short wrong, it is worse than getting a long run in many ways because it gets bigger in your portfolio and it becomes a bigger headache.

Jun Bei Liu

That's right. I always run my short book quite differently from most other short sellers, especially those little bit of malicious short sellers. For us, the short selling, a lot of time it's about funding short. Say if I want to buy a very expensive growth company.

Most of the long-only manager, if you can't short it, it's very hard to buy a expensive growth company, especially if it doesn't make money. Simply because if you buy it, it makes your whole portfolio very volatile.

If the market goes down 1%, that stock can move 10%, whereas a long-short fund, I can go buy that growth company, even if it's really expensive, because I know it's the best in its arena and it's innovative, it future proofs my portfolio, but I can short other stuff that is very similar.

And these are the other companies where I see the opportunity of share price falling. So that way I keep my portfolio still pretty neutral. I'm not any more expensive than anyone else, but at the same time, I gain exposure to buy a very high quality business.

The reason they're expensive because they're high quality businesses and that is these growth profile are very difficult and rare to come by. So it just gives me a lot more flexibility in doing so. And I do find to have the ability to short in that sense give me really just a lot more flexibility.

Now we do sometimes short because we know the earnings mis-stated for a certain company. Now, with these ones, we tend to be a lot more tactical. There will be catalysts; we're expecting a result. Once it's done, we reassess if we made money and our catalyst passed, we close it.

During many periods in the last 12 months, we heard stories of all these short sellers hitting the wall and things. I think was January and February this year where the GameStop went through the roof, and others.

We've done really well out of those periods because one is we don't run stale shorts. Once we make money, we move. And then because we constantly scrape the market for the long opportunity as well. So some of the heavily shorted stock, we actually own.

We actually have done very well out of those two particular periods so that it does cement our theory that how we run this portfolio gives you upside exposure to the market, as well as protection to the downside.

Matthew Kidman

Where do you select your universe from? Is it just Australian stocks? Is it global?

Jun Bei Liu

At this point it's Australia first.

Matthew Kidman

Top 100?

Jun Bei Liu

Most of them need to be top 200, but I can go outside top 200. So sometimes it's IPO stocks and sometimes it can be really small stock where we see a lot of opportunity. It's a reasonably flexible mandate.

Matthew Kidman

And the portfolio would normally have how many stocks in it?

Jun Bei Liu

Just under 100 stocks, the reason being we got probably 30 short and 70 long. And then those shorts are, when we don't run a concentrated position, then it's a basket of them just to manage our overall portfolio exposure.

Matthew Kidman

As we sit here, the fund is around that $1 billion mark. You said it's just gone past $1 billion. What's the potential for this fund? Can it grow much larger?

Jun Bei Liu

Absolutely. We estimate that probably up to the $1.5, $2 billion mark, simply because most of our stocks are from ASX 200. They're very, very liquid stocks. And because we don't take the large short positions, it doesn't really take us much to move them. So we don't find any liquidity exposure or constraint at all. If anything, we find the market is good for that environment.

Anything beyond that, certainly I talk to my ambition of Asian or global equities. Eventually I'll have something in that space just because I love investing and the more companies I can see, the more business models.

All these Asian regions and other places are filled with those innovative ideas and growth businesses where we just don't have access here.

I really like to have something that I can show my clients, because my clients has been demanding product like that. I want to help them to create something.

Matthew Kidman

We'll stay tuned for that.

Jun Bei Liu

Yeah, absolutely.

Matthew Kidman

It would be wrong of me not to ask you. Here we are, we've had that recovery, we talked about from the COVID recovery, even though there's still patches of COVID, Europe's doing it hard at the moment and so on. Asia did a bit earlier in the year.

What does the market look like? And are you quite upbeat in general terms going out the next couple of years? I know you're a stock picker at heart, but are you bullish the market?

Jun Bei Liu

I'm certainly bullish the market for the near term. I think we have all heard from the companies that the earnings are going well, their recoveries are well on track, even though we've got a bit of supply chain disruption, but that should ease in the next six to 12 months.

Matthew Kidman

So you're not overly worried about the inflationary pressures?

Jun Bei Liu

I think it's short term. Transitory is the word they use. But it just lasted a bit longer because ships still can't go anywhere.

Matthew Kidman

Transitory plus.

Jun Bei Liu

Transitory plus. It may last 12 months. But I think investor do need to be realistic about interest rates. It has to go higher, simply because we are at the emergency level, the low interest rate, the emergency level for COVID.

Remember, every bank around the world cut their interest rate and they put all the stimulus — that's because of the COVID, the pandemic. Everyone was throwing money at it, but eventually that emergency level needs to go because it don't need to be in the system.

Once we recover to a more normalised economic activity, that's coming, but that's probably next calendar year that we'll see some interest rate increase, but that's nothing alarming like some bond manager might suggest.

Matthew Kidman

The markets seem to be doing a lot of that work now, mentally. Getting ready for that.

Jun Bei Liu

That's right. And I think it's been incredibly volatile. So I think what's happening is that the bond market, there's a lot of traders in the bond market does try to get ahead of themselves. And then we see those volatility in that market.

It does mean that our share market might potentially become a bit more volatile. At the moment, it hasn't been. It just keep going higher every day. But we will see more volatility.

But look, over the next 12 months, things should do pretty well just because recovery is on track, interest rates shouldn't move as surprise anyone, and supply chain pressure will ease, and commodity prices is okay. Oil price is high, but the rest of commodity price is okay.

Matthew Kidman

So inflation in check, markets to gradually move higher — best to have your money in the market rather than in other asset classes.

Jun Bei Liu

Absolutely. In the market and don't just buy ETF. You want to put in with active manager because market has done incredible return since pandemic. And that kind of return is not going to be repeated. It will be positive, but it won't be enough for you to future proof your portfolio, future proof your return over the longer run. So be active; put your money with active managers.

Matthew Kidman

What I ask most fund managers is that we've had this transition over many years now towards what you're just talking about, ETFs and passive investing. Do you still think in your heart of hearts that stock picking, active investing that you do and I do, has got a long term future?

Jun Bei Liu

Absolutely. I think how market will move is that there will continue to be a lot of money in passive and in ETF and the like. However, there will be a shrinking, but it will be a very profitable or very healthy group of active investors that do very, very well from here on. Simply because market become passive.

The information flow is not as well, and actually really rewards good active investor, not invested sort of follow the trend, which is follow passive. That won't work. It has to be someone who's willing to do the work or stake their reputation on something that they know is going to work out well.

At the same time, be flexible. Work with markets, see what's happening. It's a fine, delicate balance but I think it actually means active investor group will become healthier and potentially will grow, but they just got to be good.

Matthew Kidman

Well, I feel like I might have a job for a bit longer now! Jun Bei, you came to Australia and now it sounds like you want to go out and take over the rest of the world. We wish you all the best. And we thank you very much for your time today.

Access more Success and More Interesting Stuff podcasts

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Principal and Portfolio Manager
Centennial Asset Management

Matthew is the Principal and Portfolio Manager at Centennial Asset Management. Prior to this, Matthew was the CIO at Wilson Asset Management between 1998 and 2011, achieving 18% p.a. over the period.

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