Editorial Board Spotlight: Candid Q&A with Thijs Aaten
Thijs Aaten is the CEO of APG Asset Management's Asia operations, based in Hong Kong.
With over 25 years of experience in asset management, primarily in the Netherlands and Asia, Aaten oversees strategy and Asia operations for one of the world's largest pension investors, which manages nearly €577 billion ($633 billion) in assets.
APG Asset Management
He is an executive committee member of ASIFMA's Asset Management group, a member of the Investment Committee of Bpf Schilders, and a board member of the International Swaps and Derivatives Association.
In the first of a two-part series, AsianInvestor puts Aaten in the hot seat of our rapid-fire question round, to learn more about the man behind the decisions shaping billions in pension investments across Asia.
What's a typical morning look like for you? Do you have any rituals?
The first thing I do is get out of bed and grab a cup of coffee. It doesn't matter if it's a weekday or weekend - that's always step one. Then I spend about 10 minutes, just sipping my coffee.
It's a precious 5-10 minutes of quiet time in the house. I try not to think about anything, just enjoying the silence and my coffee.
What's the most unconventional piece of investment advice you've ever received that actually worked?
Here's the thing - unconventional advice doesn't work. You need to stick to the basics. Buy companies that are cheap with good prospects. Don't waste time on fancy structured products with complex optionality.
As a retail investor especially, stay away from all that nonsense. Just buy boring companies with decent dividends. Stick to traditional asset classes: bonds, equities, and real estate.
Do you have any hobbies or play any sports?
When I was young, I went windsurfing every weekend. These days, I work out at the gym, do some running, hiking and occasionally swim.
As for hobbies, I enjoy photography. I love capturing cityscapes and street scenes, especially during my travels.
I recently took some nice shots in Amsterdam that I'm quite proud of. And Hong Kong always serves as a source of inspiration.
If you could have lunch with any historical figure in finance, who would it be and what would you ask them?
I'd choose Robert Merton and Myron Scholes, the Nobel Prize winners for economics, who were involved with Long-Term Capital Management. I'd ask them how such brilliant minds could be so reckless with leverage.
How could they think a 200:1 leverage was sustainable? It's mind-boggling that such smart people, albeit academics, didn't realise the market would speculate against their position and force them to liquidate at a loss.
It triggered the entire implosion of Long-Term Capital Management that made the Fed worry and step in back in 1998. I'd love to understand their thinking behind that catastrophic miscalculation.
Can you share a time when a seemingly small detail completely changed your perspective on an investment opportunity?
This ties into what I was talking about on complex products and hidden costs.
There was a time when pension funds were hedging equity risk using option overlays on baskets of indices. Theoretically, it looked attractive due to imperfect correlations between markets.
But when we dug into the details of trading these products, we found that banks were pricing them using a correlation of 1, effectively negating the supposed benefits.
This small detail revealed how these structured products often aren't as good as they superficially appear. It reinforces my belief that for sound long term investments – you need to stick to the basics.
What industry do you think is currently being overlooked by most investors?
It might be controversial, but I think it's the energy sector, specifically oil and gas.
The entire sector is being shunned now because it's not sustainable, and I very much agree with that — but that doesn't mean you should shun the entire industry.
We will need fossil fuels for quite some time, and there's a crucial role to play in managing the transition to cleaner energy.
There's still money to be made, and more importantly, engagement is needed to help these companies gradually shift from fossil fuels to renewables.
Which financial book or publication do you think everyone in the industry should read?
"When Genius Failed" by Roger Lowenstein. It reads a bit like a novel.
You could also refer to "Manias, Panics, and Crashes" by Charles Kindleberger.
What you will discover is that all financial crises are actually triggered by too much leverage in the system. That's one common theme. So history does repeat, just in a slightly different form each time.
Even the tulip mania collapse in 1637 was about leverage - people were buying and selling tulip bulbs that weren’t even delivered yet on promissory notes. It's all leverage.
Which country do you believe will be the next major player in the global financial market?
The future is Asian. But if you want a specific country, it's India. It's set to become the third-largest economy by 2027.
Unlike some other Asian markets that are dominated by a few sectors or companies, India has a broad, diversified equity market. It has companies across various sectors, providing a more balanced investment landscape.
If you think about Taiwan, well, that's predominantly TSMC and tech. South Korea? That's Samsung. But India benefits from a broad, diversified equity market that some markets lack.
This diversity, coupled with its rapid growth, positions India as a significant player in the global financial market of the future.
What do you think will be the biggest challenge for asset managers in the next decade?
Geopolitics will be the biggest challenge. We might see a world with different economic blocks, where financial integration looks very different from today.
This shift will require asset managers to rethink many of their assumptions.
Economists and portfolio managers are trained to think in terms of economic rationality, but national security concerns often trump economic considerations.
We'll need to adapt our thinking to a world where political decisions may not always align with economic optimality.
People will make very different decisions based on politics, which isn't economically rational.
Describe a time when your company had to adapt quickly to a changing market condition. How did you navigate it?
The 2008 financial crisis was the most challenging time. We had to quickly adapt to manage collateral and cash buffers.
As a long-term investor, you want to be fully invested, but we suddenly needed to generate billions in cash for collateral calls.
The largest I've seen was €4 billion in one day. We navigated it by getting everyone in one room - portfolio managers, risk managers, operations - to assess our position and determine our next steps.
It was truly a 'fog of war' situation that required all hands on deck.
What new financial instrument or investment vehicle are you keeping a close eye on?
While I'm generally wary of fancy new products, I've been intrigued by whiskey cask investments.
It's a straightforward concept - a 10-year-old Macallan is more expensive than a 5-year-old one, so storing a cask for five years should yield a higher price per bottle.
There's an entire industry that helps with storage and insurance. It's an interesting alternative investment, though not typically available to institutional investors like us.
Beyond financial acumen, what personal attribute do you look for when hiring for your investment team?
Team spirit is crucial. In complex market situations, you need people who not only understand what they're doing but can also work effectively as part of a team.
I look for individuals who can see beyond their own area and understand how their decisions impact the total portfolio. You can't have people optimising for their own little island at the expense of the broader strategy.
It's about finding that balance between individual expertise and collective success.