Simon Murray is one of the great veterans of the Asian markets. The former CEO of Hutchison Whampoa and Deutsche Bank Asia, has his own private equity firm and has recently added to his workload by accepting the Asian partner's role at Gleacher, the M&A boutique. Murray took us for lunch at Toscana, where his status seemed to be confirmed by the staff giving us black napkins rather than the usual cream ones (think Black Amex). One of the more charismatic figures you will meet in this lifetime, he speaks Thai and is appropriately enough also building the world's most luxurious hotel resort in Phuket. Simon Murray

How much advisory work are you doing in Asia now?

I am now a partner of Gleacher. We are going to open an office here.

How big is the operation going to be?

Gleacher is called a boutique, but has 70 guys in the US and a substantial set-up in London, headed by John Craven [ex-head of Deutsche Morgan Grenfell] and we have been involved in a number of deals, including the sale of Fleming to Chase, and the merger of Bank of Scotland and Halifax. Given the marketplace for M&A is supposedly not good, in a funny way I think it is. This is when you get consolidation - ie when you have weakness. Here in Asia we will have myself and we will build a small team.

So you will source the deals and bring in resources from London and New York?

Yes. Right now we have two assets that are for sale, which will certainly be of interest to Asian buyers. It's very easy for me to start that process.

How will you split your time between the Gleacher activities and your private equity firm, GEMS?

GEMS has two parts. Like any private equity fund, there is finding the deals, but there is also the periodic need to raise money. We are in a fundraising mode at the moment. We have raised $225 million. We would like to raise another $100 million before we close the fund. Our first fund was $275 million and is fully invested. We have an internal rate of return of about 43% as of January. We have returned to investors $130 million. We will return another $60 million this year. So they will have had $190 million back within four and a half years. The fund has an eight year duration.

In our second fund, 90% of the corporates have reinvested again, and the reason why is that we have given them substantial amounts back and the performance has been pretty good.

Raising money in a climate like this is very tough and comes down to me. I am the guy that raises the money. Making investments in a climate like today is ultimately easier because valuations are so much lower - although you have to be careful.

We are different from other private equity funds, in that we do take minority stakes. We're not financial investors, we're more than that. We won't invest in a company unless one of the partners has first hand experience in that business. For this reason we see very good deal flow.

We look at companies that have a track record, make profit and have a decent balance sheet. But we must know about their business.

Do you see value in Indonesia?

Up until now we haven't touched Indonesia. We haven't even looked at it. But we have recently been in discussions with some friends of ours, which has persuaded us that it's nearly time to go back again. Some of the worst political machinations are probably behind us, and it is a country with 200 million people and natural resources, and I see that our friends from CNOOC - a company in which we do have an investment - have now bought into Indonesia.

We have not invested in Indonesia or places like the Philippines in the last three years. We are more turned on by China, and quite like Japan as a longer play.

Actually the best deal I ever did in my life was in Japan, two years ago. We bought into Yozan, a little company that designed software for 3G and beyond. We bought 25% for $12 million. It went public a year ago, and within a period of two months it had a market cap of $3 billion. We sold quite a lot of stock at the IPO and took out $60 million, and we still have some stock in that company - although the market capitalization has now come down to $500 million.

How did you come across that investment?

A lot of our involvement in companies are through relationships. A friend of mine in Mitsui, who's an investor in our fund, mentioned it to me. I went along to look at it, liked it and then we spent three or four months looking at it. We got guys over from the states to look at it, and they told us this technology was about three years ahead of anyone else. I liked the owner of the company. And over a period of six months we made our investment. It's a very sexy company.

In the private equity sense, where do you think the most interesting opportunites are in Asia?

It's difficult not to say China. There's a lot of growth, there's the WTO entry, and broad brush it's the most exciting place. But then again. you have to remember the best opportunities don't come when there's growth, but when a market's flat, and the times are difficult.

Which industry do you think you know best?

Well, I don't really know any of them. I am fortunate to have good people around, who do know these industries. When I was at Hutch, we were in the telecoms business, the container ports business and we had the best guys in those areas running the businesses. So when people say how do you attribute your success, I say, as Isaac Newton once did, that I stood on the shoulders of giants.

So would you say you're good at spotting talent?

Maybe that's right, or maybe I am better at breeding loyalty, and creating an energy and desire to score goals.

How do you think the Enron situation will affect Asia and the world?

The Enron situation is going to make the auditing process much tougher. It also raises a huge question mark over the role of non-executive directors. These non-executive directors are going to be sued for the rest of their lives. It rather makes you wonder why anybody wants to be a non-executive director. The reason you are a non-executive director is because you are flattered, and you like the contacts. But it's not the most overpaid thing you can do.

You are basically there to watch for the interests of the shareholders. That is not so easy to do as a non-executive director. You meet four times a year, and how can you possibly know what is going on if the management is giving you garbage. You have to be very clever to get round that. It does occasionally happen, and non-execs do gang up on management. But it aint so easy.

So you think the system is flawed?

Hugely flawed.

Do you think it benefits the likes of Li-ka Shing, where people have a sense of trust that he has always delivered value for shareholders?

Li-ka Shing is so conservative that he is almost the other way around. He writes off everything as soon as an issue emerges. Having been there [as CEO of Hutchison], I would think his balance sheets are at the opposite extreme. They probably contain more value than the man reading the report can see. He is extremely conservative.

After the Asian crisis, the companies here were lectured about how much they had to learn from the US system of corporate governance. With the Enron crisis, and Global Crossing, do you think investors will reassess the Asian risk premium?

That is a good thought. Whether it will happen or not, I don't know. It may be the opposite. There may be a reaction that goes, "If it's that bad in America, god knows what it's like in Asia", rather than, "Since we're bad, Asia must be better than we thought". I think, sadly, there is a good chance of it going the other way.

The world is also coming to terms with the fact that economic forecasts tend to be wrong, because changes are brought about by politics. So if Bush decides to declare war on Iraq tomorrow, that will have an effect on everybody and oil prices and so forth. If China or India decides to do something, ie if someone makes a move on the political board, that can change the game overnight, and have a more radical impact than an economic move.

Do we have to get used to living with a lot of volatility?

Yes, for the next few years, I do.

Let's talk about your foray into hotels in Phuket.

Before we got involved in the hotel situation, Phuket was originally the meeting place of our advisory board, and this happened once a year. We brought over all the boys, the Kissingers, the Charles Powells and the managing director of Mitsubishi and so forth. And we also invite our investors and some of the management of our investee companies. So it's a jamboree of 80 people, and we have dinners, speakers, golf and it's a very nice environment. We explain where we are and spend a great deal of time discussing the politics and economics of Asia. It's a great platform. It makes Davos look like a silent movie. We have guys from Europe, the US, investors like GE Capital, AIG, Mitsui, Mitsubishi, Japan Tobacco, Deutsche Bank, private families like the Rothschilds and Flemings. So it's a good melting pot.

And the hotel you've bought?

It's called Trisara and will be the most luxurious hotel in the world. It will have 33 bedrooms and each of these are 1000 square feet. Each bedroom has a swimming pool. It is built on a high slope, so it is cascading down onto a private beach. We also have 14 villas, which are $2-3 million each, and we've sold 10 of those and that helps the cashflow. We'll sell a couple more this week. It's on 60 acres and is the most beautiful site in Phuket.

GEMS is a shareholder, and we have three hotel companies that want to buy us out right now and we haven't even finished yet.

Whose idea was it?

It came from one of our guys, Kevin Yip who knew the former general manager of the Aman Puri hotel - and who is now the general manager of our new hotel. There are two other partners, one who is an ex-Citibank guy and the guy that built the Boathouse.

What's the economic rationale behind the project?

Tourism is growing in Thailand, Phuket is beautiful and it's safe - the latter being very important at this point. Phuket has an international airport, and from a service point of view it compares favourably with the Caribbean. Thai food is among the best, while Caribbean food, in my opinion, is like English public school food gone bad.

So the economics are good. The super-rich are sitting in the Aman Puri and can't wait to come to our place. It will be totally exclusive. And whether its $1000 a night or $1500 a night, the guy checking in is not that interested.

But we've gone into this thinking about how to get out. We've been in this for a year and a half and we will make an internal rate of return of 40% plus.