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April 1, 1998

Brass Marbles, Greed and Fear and Connections

By John A. Byrne

Peregrine Investment Holdings was once one of Asia's largest investment banks. And boy was it ruthless.

Peregrine cultivated an unforgettable reputation as a financial warmonger. It was, in the words of a New York Times reporter, a swashbuckling symbol of Asia's boom in the 1990s.

Pushy and Competitive

Founded in 1988 by a brash former British Formula 3 race-car driver, Philip Tose, and billionaire property developer Li Ka-Shing, the Hong Kong-based company pushed its 2,100 staffers worldwide to be competitive. Tose said he made Peregrine the company people loved to hate. Peregrine's weekly analytical reports were titled Greed and Fear.

That visible pushiness, however, helped to vault Peregrine to the very top, making it Asia's biggest underwriter of stocks, with 33 offices in 15 Asian countries and other major global centers.

Tose and his team at Peregrine's headoffices in Hong Kong stood out in the crowd of stiff upper-lipped and tradition-obsessed financiers in the former British colony.

Corruption

But Peregrine's culture did mirror contemporary Asian standards. Its relentless pursuit of deals, its wining and dining of well-connected government officials, and its ability to skirt the boundaries of securities law, reflected the region's unprecedented growth and its acceptance of fraud and corruption.

Alas, Peregrine's connections were not as entrenched as other bigger players, and that, observers say, contributed to its sudden demise. Still, Peregrine's brass marbles were as large as its lifestyle. It paid its top staff some of Asia's largest salaries, and chauffeured executives from their homes to the office in gleaming Rolls Royces.

Peregrine was practically an Asian company. But it did have a small U.S. presence. Peregrine Asset Management (USA), a San Francisco-based U.S. subsidiary, managed one mutual fund and was co-manager on several similar portfolios. Peregrine Asia Pacific Growth Fund had about $14 million in assets.

William Hortz, the former president of Peregrine Asset Management (USA), said in an interview earlier this year that it did not suffer the same financial problems as its parent. At the same time, a sale of the fund to another U.S. money manager was being negotiated.

Hubris

In the end, Peregrine became a victim of its own sense of hubris, one Hong Kong trader maintained, collapsing spectacularly overnight as the Indonesian rupiah pounded Peregrine's capital and almost guaranteed that it will never recover the full $400 million it loaned to companies in Indonesia. That money includes Peregrine's biggest loan, $260 million given to the ironically-named Steady Safe.

Back in August, Peregrine's own research report argued that the rupiah's dips were not alarming. They "certainly look overdone and suggest a countertrend may be overdue," the report said.