October 1, 2025 • 39 mins
The competition is intensifying among global hedge funds giants to attract top traders and analysts. There's particularly high demand for talent at "pod shops", which allow portfolio managers to run their own strategies and manage allocated capital.
High-profile managers with strong track records can command pay packages in the tens of millions of dollars.
"The type of manager we're trying to hire, they are hiring us. It's not [us] hiring them", says Jay Luo, President of Dymon Asia Capital, a regionally focused alternative manager with about $5 billion in assets. He likens managing a pod shop to running a high-performance sports team and shares his insights on competing against global hedge funds like Millennium and Point72 -- with hiring the right person sometimes years in the making. He joins John and Katia on the Asia Centric podcast.
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Speaker 1 (00:00):
Investor interest in hedge funds continues to grow. Institutional investors
poured nearly twenty five billion dollars into the sector in
the second quarter this year, the most since twenty fourteen.
That's according to the latest hedge fund research report.
Speaker 2 (00:16):
It's getting tougher recruiting the rate talent. It's not uncommon
for hedge funds these days to even get into bidding wars.
Some companies like Point seventy two pay tens of millions
of dollars to secure the people they want.
Speaker 1 (00:29):
You're listening to Asia Centric from Bloomberg Intelligence. I'm John
Lee in Hong Kong.
Speaker 3 (00:33):
I'm Cuid Dimitrievals on Hong Kong, and today we're discussing
the hedge fund industry, strategy and talent with Jay Law,
president of Diamond Asia Capital, a regionally focused alternative investment
manager with about five billion dollars in assets.
Speaker 1 (00:48):
He also previously managed SAC's activities in Asia. Jay, Welcome
to the show.
Speaker 4 (00:53):
Thank you.
Speaker 1 (00:54):
Jay. Diamond started off as a macro hedge fund at
your fund transition more towards a multi manager platform, i e.
A pod shop. Why did you make that transition.
Speaker 4 (01:05):
When Danny and I came together in twenty twelve. It
was a vision to build what we have today in
a way many our investors and a lot of old
friend of mine has been sharing with us and said,
what took you guys so long? So if you give
you a little history back, I worked for SAC Capital.
I worked for Steve Cohen for ten years, my first
(01:27):
five years at a US headquarter, and in two thousand
and seven he sent me to Asia. Back then, Asia
did not have these pod shops. In fact, none of
the large competitors that you'll be familiar with were establishing
in Asia at a time. So in the next five years,
I was fortunate enough that Steve gave me a sufficient
runway to have figured out in twenty twelve. By the
(01:51):
time I left the SAC to joint Diamond, I gave
back a program I believe it was fourteen different profoto
manager teams that would have been the first hot shop
structure that was uperating at scale in Asia. So Danny
started Diamond in two thousand and eight as a single
s or macro fund. As you mentioned, by twenty twelve,
Diamonds macro fund was at two point five billion, which
(02:14):
back in two d and twelve was a very large size,
and he and I've been talking for a while. I
got a call from him basically I said, look, you know,
how come all of the large institutionalized hedge funds alternative
asset platforms were US firms where we Asians couldn't do it.
So I bought into that pitch to come over and
(02:34):
try to join force, bring my equity set or knowledge,
so you know, collectively going towards building the smulti strategy
MULTIPM platform as you.
Speaker 2 (02:42):
Have today, just for listeners who aren't aware. So pod
shops are sort of like a bit of a different structure.
So you have teams and each team has sort of
a different strategy. Is that right? Is that the way
we look at it?
Speaker 4 (02:53):
Yeah, that's the right way to look at it. And
you know, I was fortunate to join the industry, believe it,
joined Steve sac back in two thousand and one. That
was the early stage of the hedge funds. I call
them the previous generation hedge fund titans started to evolve
from in the beginning, most of them were managing money
by themselves. And then what's the next thing you do?
(03:15):
You start hiring your friends to help you manage money
and at some point the next step is to just
bringing talent, just just pure skill based talent where you
can in trust them, giving them an environment, give supplying
them with resource, letting them be the ones making the
primary investment decisions, and you provide an infrastructure. That's the
(03:37):
beginning of the pot shop.
Speaker 1 (03:39):
And what are the inherent advantages of a pot job?
Because traditionally, if the public thinks of hedge funds, they
probably think of someone like a George Soros or Julian
Robinson who ran Tiger where they take big concentrated bets
on a stock or maybe like you know, like an
asset class or a currency. But pot shops are different.
But there's little teams. Can you explain why this strategy works? Right?
Speaker 4 (04:02):
See? From an investor perspective, and to refer to what
I was saying about the first generation of hedge fund
titans when they evolved these pot shops, the most important
element is how do you go harvest these uncrelated scale
based returns at a scale. So from an investor's perspective,
(04:24):
when you are investors with a single manager, you are
relying on that CIOs his ability to direct you to
a different asset class. You rely on your source to
tell you this is a year we go pound sterning.
The next year we go to Japan on the pod shop.
Like we have sevenified performer managers today, they tend to
be specialized in their own respective area. We're allowing each
(04:46):
one of them to make investment decisions completely on their
own in their areas of expertise. And because the air
structured to be specialized, and because they air structured to
go for the absolutely return, the average creentation of these
different return streams are relatively low. In our case, we
can achieve a average corredation of under five percent, zero
(05:08):
point zero five. So put down your portfolio construction and theory.
That's how you get a stability of a return. So
from an investor's perspective, the biggest attraction of these pod
shops of all time PM companies is the stability of
the return that they are receiving.
Speaker 2 (05:25):
And if we talk about Diamond specifically, I mean there's
probably diversity and returns and strategy from these different pods
that you have in these seventy five different managers. What
strategies have been would you say the most successful over
the past year, because we've seen a lot of volatility.
Speaker 4 (05:42):
So we are structured across both the macro and equities. Again,
when Diamonds started, my partner Danny, he started as a
macro PM. By the time we combined a macro and
equity business together, there's like already twenty different profolio managers.
My background was on equities. I joined diamond in twenty
twelve and in twenty and fourteen single perseverem Tamasak. You
(06:05):
funder the equity built out of the business. So by
the time when we combine the funding to the pod
shop structure, we already have seven or eight different equity managers.
So for us, it's that diversity of the managers across
different asset class and across different geographic regions. That's the
source of the stability. So for example, last year, half
of the return was from coming from the equity long
(06:27):
short last year. The phenomenon last year is for the
first two three quarters, macro has to be a challenge
in strategy, not just for us but for a global
competitors as well. But because we have the equity piece
of equity was powering through providing the stability of the
returns for our macro managers to be patient. This year.
The first two three months the equity has been challenging. Again,
(06:48):
it's not us looking across the space as well, but
Macro was driving the return. So the answer to your
question is we don't know ahead of time which strategy
is going to do well not do well. But the
power of having these multiple different strategies uncreated is that
at any given point some group of strategies are going
to be performing well, giving you the stupidity that we're
(07:09):
producing for the investor.
Speaker 2 (07:11):
And could we delve into just like to get some examples,
could we delve into some of the strategies that have worked,
Like we've talked a lot on the show about PopMart
and the Chinese consumer winning in certain places. You know,
did you have like a long on PopMart by chance?
Speaker 4 (07:26):
The other different shating thing about a pot shop. Differential
from these single CIO funds, like we rarely talk to
the investors about our positions. I'll tell you why, because
we do not have significant exposure on any single position.
That's where again the diversification is about are we LA
and Poper we are? You know? One of my Profuno
manager in one of the investor meetings, my unversor ask
(07:48):
them hey, tell me why about this is a.
Speaker 1 (07:50):
La boo boo boo?
Speaker 4 (07:52):
What is about it? I can comfortably tell you I
do not fully understand that thesis myself, however, or the
value I'm providing. There is then identifying the PROFILEO manager
and be able to say I trust this PROTFILEO manager
because he's had many years of experience, not just including
in Naboubu, but investing in some of the other companies,
(08:14):
and as he's been gone through the ups and downs. Therefore,
we were able to invite him to come to manage
a slice of a capital and given him a mandate
that as so long as he's within the risk limits.
You hear a lot about these part shops talk about
risk limits. So long as he's within these risk limits,
that he's fully empowered to makes his investment decision go
(08:34):
along on la boob or.
Speaker 1 (08:37):
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(09:00):
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and chair Jay. Your returns are being quite strong this year.
Like I read that your returns year to date up
until the end of August is up twelve percent. So
that's outperformed a lot of your global peers. Can you
explain why you've been able to have this outperformance.
Speaker 4 (09:22):
When we merge the found together in twenty p twenty,
it was actually the unset of COVID. In fact, our
funds started trading the very first day after the lockdown
of UHA. It took a bit longer than we were
planning to hire the adequate number of PROFILEO managers to
achieve this level of diversification that I was describing to
(09:45):
you about.
Speaker 2 (09:46):
So you were hiring during the pandemic.
Speaker 4 (09:48):
Basically we learned or hired during a pandemic. We learned
hired pandemic. This kind of path structure found the stability
is rooted on the diverse number of teams of profonno
manag With a bit of a benefit of hindsight, you
need about at least of forty PROFOTO managers to be
able to give you this level of stability. Once you
(10:09):
achieve this magic number for this my number, maybe other
people have a different number, then you're able to fully
entrust your PROFILEO managers for them to make bottom up decisions.
To give you an example a career which just came
out of short sales band, we were not at icy
level tenning our career managers what to do during the
short sales band. We were there supporting them because there's
(10:31):
the expert, there's a front line. Their decision subject to
the risk guideline that we set for them. Are much
better at guiding the profile asset locating decisions than let's
say Danny or my partner said or was able to
call on from the top down level. So the performance
of this year, in my mind, is really a continuation
of the power of the platform. We've been pretty steady
(10:53):
ever since we cross that forty profilo manager mark. These days,
it's pretty hard for me to painpoint do one trade right.
Back in the Macro days, it was all about Danny
making the right call. You know, if we had a
fantastic month, fantastic year, it was because Danny got the
daughter yet right.
Speaker 1 (11:10):
It was any country or any sector that has done.
Speaker 4 (11:14):
Actually no, I mean would been profitable in every country
we're updated in and every country we are marketing neutral
or neutral to the country or nature to the sector.
In some of the countries were neutral to the factor
as well.
Speaker 2 (11:27):
Any surprises, like anything this year that you know you're
looking at returns or you're looking at performance and you're like, oh,
I didn't think that that would do so well.
Speaker 4 (11:38):
Any point, there will be a surprise. Let's say last year,
the surprise at the beginning of the year was that
China marketing on shore China Alphas suddenly came back in
Q one last year. We did not anticipate that. If
you recall twenty three, it was pretty miserable years for
any China natural manager because it doesn't matter what you do,
(11:59):
you always lose money. With a better benefit of hindsight,
we now know those were the two years where then
the global investors were pulling money away. It's like, it
doesn't matter how good your company's earnings are, the stock
just doesn't go up because someone is a consistent setting pressure.
And we did not know that. But it was the
first quarter of twenty twenty four we started to see
(12:19):
the China, naw shore managers started to performing again. I'm
using the story to emphasize the point a lot of
earlier is that today our job as an investment committee,
as an ex CO is not about go picking which
opportunity is going to be right for the next month
or next quarter. Our job is going pick the individual,
to pick the talent to then invite the talent to
(12:39):
come to say come to work for us. You don't
need to run your own hedge fund. What provides you
everything you need capital, infrastructure, corporate access, AI tools, So
you focus on what you're good at. That's really the
source of it. And any point is always surprised. What's
the surprise this year? The fundamental luntual equity as a
(13:03):
category was struggling for the first three months. Again, I
don't think we're only one and it was kind of
understoodable because you have President Trump imposing tariff friends and
full and a lot of binary situation, so as equity investor,
it's very difficult to place your bet in this binary situation.
What we did not know was that the low point
(13:24):
of the equadininuncial performance was a day after the announcement
of the Liberation Day it was like ooh, after Liberation
Day announcement, all of a sudden, all the bad news
starting and market started behave rationally. I want to emphasize
is we did not know that. I'm only telling you
this was after effect of looking at a performance saying wow,
that's interesting. That was a low point.
Speaker 1 (13:46):
Jay, you mentioned that the most important aspect of your
job is to find the right talent. Now, there's been
a lot of media reports that you know, head funds
in a battle or a war to recruit the right talent.
Some of the large pot shops like Millennium, Citadel, Ballyosny,
your old film, like Point Sift two, they're paying tens
of millions of dollars to get the star Trader. How
(14:10):
can you manage that? And how difficult is it to
compete with these large guys.
Speaker 4 (14:15):
It is difficult. But I want to say is in
Asia we're the incumbent. You know, when I first came
in Asia in two thousand and seven, these pot shops
did not exist. I think at the time Cenada was
probably had the largest presence. They were in newspaper front
page taking out a large four at Chatterhouse. My partner
Danny was part of that cohort, and in two thousand
(14:36):
and eight they pretty much completely retweated. So over the years,
in my time on the equity side and Danny's time
on the macro site, we were the first group of
people in Asia that were hiring perforno managers, training portformo
manager and providing environment for them. I would not have
dreamed to compete with little large shops in New York
(14:56):
or in London. I just don't have the edge. But
in Asia this our home turf and for our perfornal managers,
I mean, the hiring of talent is also quite different
in twenty twenty five versus back in twenty and seven
to eight when I was hiring for Steve Cohn. Back then,
my job was about finding who are these hire boat
(15:17):
managers are? Who are the managers who has a track
record of managing market neutral, be able to manage towards
a very tight Joe down risk limit that this platform requires,
and go explain to them that you don't have to
run your own hedge FuG and join one of these platforms.
You'll be highly satisfied, You'll be paid very well. Back then,
I was a job that is not a case anymore. Today,
(15:37):
all the big boys you mentioned are here in Asia.
Every good performal manager out there, they already know which
are the good platforms they want to work with. We
keep telling our bid teams for the type of manager
we are trying to hire. They are hiring us, it's
not where're hiring them. So what I translate to my
answer to your question of how do we compete, it's
(15:59):
not a out go say, competing on the terms or
competing on the dollars, is about building the right kind
of firm that these people we like to attract, they
would like to prefer to work with us as opposed
to most of the larger platforms west out the Western firm.
So quick question to your answer is about building the
right culture where people would like to come to work
(16:20):
with us as opposed to larger global platforms.
Speaker 2 (16:25):
And how much would you say a portfolio manager in
Asia is making these days? You know, because we did
see like zero point seventy two had hired someone earlier
this year approached a tech analyst for about fifty million dollars.
I mean, I know it's not just about the dollars
and cents, but you know, is there sort of an
(16:46):
accepted number that you start at.
Speaker 4 (16:50):
Every global platform tells their BD team business development team,
which in our industry, the business development team is a
team who's charged to hire people. They're not called HR,
they are called the business development team, which shows you
in our industry how important we put this talent acquisition.
As so in most of global platforms, the instructor business
(17:11):
team to hunt for only the whales. The wales definition
in Asia may have changed in these days, would say
cover take you make a one hundred million of dollar
p and L every year, and there are not too
many teams in Asia who's being able to consistently produce
that number, So maybe that gives you a scale. So
I do not know where that biot numbers come from,
(17:33):
but yes, we hear large numbers as well, but I'll say,
like one hundred million of dollar PNL it still considered
a weale in this region today.
Speaker 2 (17:40):
And just a follow up, so you have seventy five
portfolio managers, you said, are you looking for more?
Speaker 4 (17:46):
Yes, we are. I was asked by one of our investors,
how many managers do you want and why do you
need so many more managers? I think the answer to
that is that if I go back to why this
pot model again, going back to the last generation, the
Steve comes the word how they evolve the small it
was because they need to scale these uncorrelated skill based
(18:08):
return And there's the important thing about skill based return
is it does not scale very easily. I personally work
with Perforna manager who are extremely good, extremely consistent and
perhaps making ten million your daughter, And when you give
the same manager more capital and try to make make
make twenty, it's foder. So for us, the core of
(18:30):
our business is go hiring these best people and try
to work with them. We position ourselves not as our employeeer.
We position ourselves as a partner to our Perforna managers
to help them grow, to help them scale into larger
piano production. It's like, it's their business. That's language we use.
It's your business. How do I work together with you
to scale your business from ten million to twenty minute,
(18:52):
to thirty million, to fifty minter to one hundred minute.
And we do that manager by manager. So that's the
reason we're constantly in this market looking and hunting for
the very best talent, the very best athlete, and then
try to invite them to join our platform, try to
grow with them.
Speaker 1 (19:08):
Jake, where do you get your talent from?
Speaker 4 (19:10):
Like?
Speaker 1 (19:10):
Is it other hedge funds? Is it traders on like
at investment banks, but you know they've been sort of
cutting a lot of their trading book over the last
few years. Is it like long fund or mutual fund managers.
Speaker 2 (19:20):
Maybe Steve is calling you and saying, got this applicant,
Maybe you'd be interested too.
Speaker 4 (19:27):
In two thousand and seven, In earlier days, a lot
of these talent were from investment banks, but as you
know post GFC, most investment banks have reduced to their
risk taking activities, so that school of training unfortunately has
been shut down. I recall I think twenty fifteen, maybe
it was the last year one of these large global
(19:48):
competitors that you mentioned previously, they took out a very
large prop desk in Japan. That was the last large
prop desk accredation I could think of. So today half
our hires, about fifty percent hires a bit more are
from these other platforms. Other platform has now become these
new training schools. So in the pursuit of these larger
(20:11):
platforms in ahl for these big whales and when because
there was a lack of whale. So what they do
is once they hire someone has potential, then they thrown
monstable resources to this perspective whale and help the individual
grow into a whale. In the process. A lot of
newer people get trained in the process and some make it,
(20:33):
some not make it. Sometimes a brilliant junior felt his
potential would be capped by the senior performance manager and
they choose to leave. Those were the opportunities we have.
And then there's the other half of hiring are from
these ASIA multi threats, so people tend to use multi
SPAT and a MULTIPM potch up a bit interchangeably. The
(20:54):
difference to me is that in our type of MULTIPM model,
PM is at the center of our activity. All of
the investment decisions are made by the performer managers versus
most of the traditional asia's multi stats there's still a
single COO model. So if you are a profilo manager
working at these multi swat, you have a CIO boss
(21:16):
who's going to tell you why are you so long
on China? I'm beared on China. So that these group's
collectivity tends to be a training shop where they're best
performer manager at some stage when they're mature, they tend
to want to leave to have their own portfolio. It's
either US or one of those global platforms.
Speaker 2 (21:33):
So let's say that there's someone out there that you
really want. You know, you have your your meeting and
all of the team decides it we want we want
this guy or we want this girl. Can you tell
me a bit about you know, just I'm personally curious,
what is the courting process for this individual? Is it simply,
you know, you reach out on LinkedIn or you send
them an email, or is it something a bit more intricate,
(21:56):
Like I imagine these people are very busy. You also
probably want to stand out, you know, as a company.
So how do you kind of go about that?
Speaker 4 (22:05):
The courting process probably have started two to three years
ago to three years ago.
Speaker 1 (22:10):
Oh wow, Oh well, okay.
Speaker 4 (22:12):
They Tier one players in this platform business have their
in house business development team. This tends to be individuals
who are fairly experienced, fairly senior. A lot of them
have previously came from a bicycle, came from seal side.
They're able to have this dialogue with profoitio managers risk takers.
Even though when a risk manager is not looking for
(22:32):
a job. So our philosophy is that we're not looking
for people who's looking for a job. If I just
do that, I can sit here all day long wait
for the resume to show up. And unfortunately there's a
legative selection processing there because better individuals they're not looking
for a job. They you know, they're never looking for
a job. So it's a research driven reverse process of
(22:52):
figuring out who is good in which sector and the
systematical go court, go introduce ourselves to the individual before
the individuals looking for a job.
Speaker 2 (23:02):
How do you introduce yourself? Dinner, champagne and sushi.
Speaker 4 (23:07):
A lot of coffee, and used to be a lot
of drinks too. I don't do drinks anymore, but I
know my team's do. It's about the marketing your firm.
It's about sharing with the perspective candidate you believe one
day you may want to work together. What is our
proposition the question you asked me earlier, why Diamond? You know,
if one day you were getting an offer from Diamond
(23:27):
and one from points I mean two from an indium
from Cereda, why we think you should seriously consider Diamond
despite our found is three point five billion and their
founday sixty billion. It's about that process. That process does
not happen after the candidates. I'm looking for a job.
So that's the first part of process is we call
the business development process. It's kind of dating process that
you know, we're introducing ourselves to the candidate and through
(23:50):
the process we're understanding the candidate of what's is this
person's edge, what does it care for? What is a
career plan. It's a lengthy process. Sometimes it goes on
for years and then at some point something happens. In
our industry, something always tend to happen. It can be
many things. We called a catalyst, so I make Canada
say I'm ready to move, and he's going to reach
(24:11):
out to a few people that he felt comfortable with
in the multi year dating process, say I'm ready to move.
I like to come into an interview process. Then we
switch on the interview process. I think every firm does
a bit differently. This is where seriously go and come
down interview with score to night's number. We talk about
winners and losers, etcetera. Then we make a decision out
(24:32):
we really would like to work with this individual and
let's see if we can cut a contract.
Speaker 2 (24:37):
How many more of those editions could we see this year, potentially.
Speaker 4 (24:44):
Anywhere between probably ten two twenty.
Speaker 2 (24:49):
Oh, adding ten to twenty more profolio managers.
Speaker 4 (24:51):
Yeah, I mean this industry. Unfortunately, I thought you were
already going to ask me. It's a performance streaming industry,
which means that despite our intent, there's going to be
a number of managers at any given year who's going
to leave the platform. Right, it's the necessary nature of
a performance business. We speak of that. We're running a
high performance sports team. We're inviting all the team members
(25:13):
to come to play. Everyone come to play for the team,
and we do our job to support everyone and make
sure everyone's well taken care of. But it's your job
to perform for the team at some junking. At some
point when you're not performing anymore, you may have to
be asked to leave the team. So there's that attrition
of a manager as well. Again, not us, but this
(25:35):
is across all the platform models.
Speaker 2 (25:37):
We were talking about that yesterday.
Speaker 1 (25:38):
Actually, yeah, look, I love this analogy of comparing a
HHE fund manager to a sports star. And interestingly, the
co founder, Danny Jung stepped back and he became a coach.
That's obviously got like a sports analogy. Can you tell
us what a coach does in edge funds?
Speaker 4 (25:55):
So we have today's seventy five profileal managers. That's seventy
five partners we have. That's seventy five individuals who, by
virtual of them being in the seat, have done something
very fantastic, has achieved quite a bit in their career.
That's why we invited them to them. Every single one
of them has their own career development plan, and we've
(26:17):
positioned ourselves say we're going to be your partner. We're
gonna help you. We're gonna help you get into new markets,
we're gonna help you hire pms, We're going to help
you get through this mental hurdle of like every time
you have more capital, your performance start a job. What's
going on that by itself is a full time job, right,
and we're gonna have to also defend our best people
(26:40):
when our competitors come to say you should come to
join us, I'm gonna give you this package. You know,
all those add up to full time job.
Speaker 1 (26:49):
Okay, Like the sports industry, is there a period we
like you just become too old to hit fu manage.
Do they have expiring dates, butuse if you think of
like for example, like the NBA, if you got a
good career, you got a fifty in your career, what's
it like in you know, being a h FUM manager
in a portrait.
Speaker 4 (27:06):
We actually done a study the corredation between age of
a profile manager and performance. Now we know our larger
global competitors also done that. But of course you know
I wants to talk about it. What we actually conclude
is not the age. We use a phrase called a vintage.
It's like when you became a profile manager, the first
(27:27):
few years your industry, your first mentor your secondment or
your third mentor someone taught you how to invest. There
was a particular setting. It could be maybe it was
an environment on equity side, maybe that was an environment
there was a China was going to hyper growth face.
All you needed to do is to identify the right
sector and the best company within the sector be making money,
(27:49):
and then that region will shift, will change. And nowadays China
is not a single one way growth market anymore. I'm
on nu ones. So some of the managers are able
to make that so that transition. Others could not. So
this is a dvantage concept that we believe that for
some managers there's no definite number of years. But for
some managers when the market WHICHI shift, when the environment
(28:12):
where they were trained to make money changed, some of
them may not be able to adapt. Then that's our
shelf life.
Speaker 2 (28:20):
What else was in the survey? Were there any other
interesting findings?
Speaker 4 (28:25):
If you were to survey all of the population of
the perfuno manager across all the industry, if you're able
to have that data, you probably find most of the
managers fall into the relatively younger bracket, maybe the mid
thirties to mid forties, you probably see the most of that.
So that's your starting observation. So then that begs the
question of why is it age? Is it like the
(28:47):
sports like past some stage, past some age, you just
maybe your brain doesn't work as fast anymore, or maybe
we speculated maybe it was a hunger level. Maybe when
you're younger, you're just more hungry and we still have children.
When you made money already, you're no longer. But then
we look at some of the very successful managers. They
(29:08):
don't need money anymore. It still works the same part,
They just like it. So when we end up concluding
it's not an age, it's not the money factor, it's
not a bradd It is the vintage that that's the
most important. JF.
Speaker 1 (29:21):
You started this career in the early two thousands. What's
the big difference between the attributes of a successful edge
fund manager now versus say like two thousand and eight
or two thousand and five.
Speaker 4 (29:33):
I think specifically for Asia before Asia Financial Crisis, Asia
was by and large emerging market that the stock price
was largely driven by the flows coming from US, coming
from London. Those are the flows typically were directed by
a discretionary fundamental manager worked for one of the larger
global houses. So to be a good Asia profilio manager,
(29:58):
to be a good Asia head for manager, a lot
of what you need to do is to be there
when that tide started coming and be able to pick
the best companies within the sector, within the country where
the growth is and you can largely make it. Hedging
was quite challenging at the time, so you can probably
be forgiven if you can just lose less money when
(30:21):
that tipe receives Asians market is very different now in
the last five or eight years. You know, like most
other managers, I mentioned earlier. Today runs market neutral, runs
country neutral, runs secretor neutral. That was just not possible
in two thousand and seven. In two than eight, if
you look at the flow you know today the international
(30:41):
flow is still important, but equally largely the amount of
the domestic participant. Some of these markets are well known.
In China, it's still more than seventy percent of the
turnover is still doing by the retail. Korea number is
roughly similarly here, but if you look at the two
seven two than and eight career retail participation was maybe
(31:01):
about twenty to thirty percent. So you need to be
a lot more tuned in into the nuance of what's
going on in your local market, which also brings in
one important oppostation I want to mention here. I think
even in twenty twelve where cold there was a paper
by one of the famous hedge fund consultants, very very
(31:22):
well long hedge consultant industry making observation that back then
it was still quite popular for the CIO or investment
team of Asian hedge fund to be based in London
and to be based in New York. In fact, if
you go back to the media back then, you can
find quotes where people say that's where it's how supposed
to be because Asia's aserprise is they actually driven out
(31:43):
of the West. Nowadays, it's a non starter to have
an investment team who's not based in region. If you're
not here, you're just not in the game anymore.
Speaker 2 (31:53):
And what has that been like? I mean, you're an
Asia focused company, you also have been here for many years. Now,
what are you noticed? Are you noticing more competitors coming in?
Are you seeing more capital flowing to the region.
Speaker 4 (32:06):
We're noticing a lot more competitors coming in. I think
all of these larger global pod shops that you were
mentioning earlier five years ago, they were starting to have
some substance in here ten years ago. Most of the
oct even starting here, we're picking up a huge amount
of interest from really from the alpha hunting community, both
from the allocator side and from the head from manager side.
(32:29):
That recognizing Asias having gone through the transition from a
market where you only come when you think there's gross
two Wow, even when gross is in question, it's still
bounty for alpha harvesting market.
Speaker 2 (32:44):
Who's coming in like anyone.
Speaker 4 (32:46):
In the past year that everybody, everybody, I don't want
to name my competitors, but talk to your broker friends.
At one point I was told there were fifty pot
shops hiring, Like, I kind of make that count, but
a lot of five zero. I know it's ridicular, isn't it.
I didn't know if I were believe the number, but
I do hear you know so and so large part
shops are starting to hiring one Asia person to a
(33:08):
hear person. Her was very, very high. If you look
at I Think Government in their twenty twenty three survey
labeled global pot shops number at somewhere between fifty to
eighty in their number most everyone wants to have Asia exposure,
but the ones really have Asia's presence and can effectively
compete in hiring probably can count with a single hand.
(33:33):
It's not for lack of demand, it's the lack of talent.
Speaker 1 (33:37):
Jay this you know. Cutia and I had this discussion
yesterday and she was saying, like, why it's so hard
to find really good fund managers. There's a lot of
smart people out there. There's probably a lot of people
listening to the show that have had good returns on
their stock market returns, the investment portfolio. Why is it
so hard to get a good star manager.
Speaker 4 (33:57):
You need to have some better mentorship teaching you how
to do this type of investment where it's largely scale based.
You try to filter away anything that you don't feel
you have a strong edge, not market neutralauncial equity. What
you do is you filter out the beta exposure to
(34:18):
the market, then you filter out the country exposure, then
you filter the second exposure. You need a bit of mentorship,
then you need someone to be able to supply you
that capital to try it out. In two thousand and seven,
the only shop that was willing to give you this
opportunity was a prop desk that was gone. And then
in the last few years you have a lot more
(34:39):
of these Asia's homegrown multi strategy funds on one hand
and the large global multi slad on the other hand
to continue to come in to provide that type of training.
So the supply has increased significantly, that the amount of
time available has increased significantly, but it's still not enough.
There's still another fifty or probably more or part shops
(35:01):
are waiting to set up shops in Asia.
Speaker 2 (35:03):
So what do you look for then, Like let's say
someone's listening they're in university right now or just starting
their career. What are you looking for in the personality?
Is it just returns? Is it the track record?
Speaker 4 (35:17):
What are you looking for?
Speaker 1 (35:18):
What should they study like too? We interviewed someone and
they mentioned that Jane Street doesn't hire people with business degrees,
They hire people with like science and maths. Is that
where it's going?
Speaker 4 (35:30):
If I were to look at the career growth trajectory
of a PROFILEO manager most everyone, typically you start from
being an analyst. This is where you learn from whatever
mentors by doing work he doesn't have time to do.
Manage spreadship for him, do the corporate conference care for him.
That's just how you typically get to learn what the
good performer manager actually does. Then your career progresses through
(35:54):
you become a senior analyst. Now you have a beny
bit to start pitching the ideas. Now you learned something
you apply to your own current universe. Through that process,
you gain this knowledge into initially typically a selective number
of stocks cluster around a sector around the country. That
allows you to have better insight than everyone else who's okay,
(36:15):
the same thing we call the edge. That's what's driving
your alpha at some point when you need a break,
someone need to give you this amount of capital to
set Now you can try this performo manager on your own,
and from that point you start having a track record.
So every firm is I guess, specialized at different part
of this career progression of this profoio talent. Some are
(36:37):
in I guess analogous of a venture stage training the
talent fresh from school, right that requires a different skill set.
Some firms in h are particularly good at it, we're
not good at it, and some on the other end,
I guess more anatogus to the kind of pe you
just go pay the big price to hire someone who's
already extremely mature that you say, I know you've made
(37:00):
a lot of money elsewhere, now I'm going to be
a billion dollar and please come to it for me.
We've seen examples like this in recent Asia history. And
then what we have been particularly good at is to
identify and work with the talent who have already figured
out how to make money. So we're not very good
at training people who doesn't know how to take risks,
who does not how to make money, but we're good
(37:22):
at working with someone who have already learned how to
make money from their previous mentors, but the need of
a partner to scale up from being able to make
ten million dollars to twenty thirty fiftreemen do. That's all
we focused on. So what do we look for? Because
of where we focused on? The starting point is a
track record despite the past performance is not an indicator
(37:44):
for future. It is really the lacking of everything that's
the best indicator. So we tend to start from there.
Then we go a lot deeper trying to understand what's
a methodology behind the numbers? Where the number come from?
Can we reasonably conclude that taking you out of your
previous cheap where you made that money, to a brand
new team where we tend to set you to be
(38:05):
fully independent, you no longer have a sale or tell you,
oh you should cut here, you should dubble down there,
no longer have that crutch. Can we still reasonably assured
the alpha source you previous the hat that can be
replicating here. That's where we make a bed where to
this study. Honestly, we don't care particularly much. And I've
worked with perform managers for English majors who are philosophy
(38:28):
majors as well, as science majors. It comes down to
the individual themselves. It's not so much about what they
learned in school. It's about everyone coming to field is
already very smart and probably already work very hard. Then
there's a chunk of that, maybe seventy eighty percent of that.
It's just you being passionately, be focused. You'd be good
(38:48):
at something, You'd be better at something than most everyone
looking at the same thing. There's a bit of a
I call it almost a science part of it. If
you're dedicated to it, you'll be able to get there.
Then there's a sum am I called it ten percent,
almost an art element of that as our touch to
be able to consistently make your money and still be
(39:08):
able to manage throw a very tight draw down framework.
We don't particularly know how to identify that. I don't know,
maybe have a debate. Some people say it's trainable, some
people it's not, and that's where we rely on the
track record.
Speaker 1 (39:21):
That's great.
Speaker 2 (39:23):
Thanks so much for joining us today.
Speaker 4 (39:24):
Thank you, it's been a pleasure.
Speaker 2 (39:26):
You've been listening to Asia Centric from Blueberg Intelligence and
Cutch did mutrievea in Hong Kong.
Speaker 1 (39:31):
I'm John Lee also in Hong Kong. You can listen
to all our episodes on Apple Podcasts, Spotify or where
you listen and this podcast was also produced and edited
by Clerge and thanks for listening.
Investor interest in hedge funds continues to grow. Institutional investors
poured nearly twenty five billion dollars into the sector in
the second quarter this year, the most since twenty fourteen.
That's according to the latest hedge fund research report.
Speaker 2 (00:16):
It's getting tougher recruiting the rate talent. It's not uncommon
for hedge funds these days to even get into bidding wars.
Some companies like Point seventy two pay tens of millions
of dollars to secure the people they want.
Speaker 1 (00:29):
You're listening to Asia Centric from Bloomberg Intelligence. I'm John
Lee in Hong Kong.
Speaker 3 (00:33):
I'm Cuid Dimitrievals on Hong Kong, and today we're discussing
the hedge fund industry, strategy and talent with Jay Law,
president of Diamond Asia Capital, a regionally focused alternative investment
manager with about five billion dollars in assets.
Speaker 1 (00:48):
He also previously managed SAC's activities in Asia. Jay, Welcome
to the show.
Speaker 4 (00:53):
Thank you.
Speaker 1 (00:54):
Jay. Diamond started off as a macro hedge fund at
your fund transition more towards a multi manager platform, i e.
A pod shop. Why did you make that transition.
Speaker 4 (01:05):
When Danny and I came together in twenty twelve. It
was a vision to build what we have today in
a way many our investors and a lot of old
friend of mine has been sharing with us and said,
what took you guys so long? So if you give
you a little history back, I worked for SAC Capital.
I worked for Steve Cohen for ten years, my first
(01:27):
five years at a US headquarter, and in two thousand
and seven he sent me to Asia. Back then, Asia
did not have these pod shops. In fact, none of
the large competitors that you'll be familiar with were establishing
in Asia at a time. So in the next five years,
I was fortunate enough that Steve gave me a sufficient
runway to have figured out in twenty twelve. By the
(01:51):
time I left the SAC to joint Diamond, I gave
back a program I believe it was fourteen different profoto
manager teams that would have been the first hot shop
structure that was uperating at scale in Asia. So Danny
started Diamond in two thousand and eight as a single
s or macro fund. As you mentioned, by twenty twelve,
Diamonds macro fund was at two point five billion, which
(02:14):
back in two d and twelve was a very large size,
and he and I've been talking for a while. I
got a call from him basically I said, look, you know,
how come all of the large institutionalized hedge funds alternative
asset platforms were US firms where we Asians couldn't do it.
So I bought into that pitch to come over and
(02:34):
try to join force, bring my equity set or knowledge,
so you know, collectively going towards building the smulti strategy
MULTIPM platform as you.
Speaker 2 (02:42):
Have today, just for listeners who aren't aware. So pod
shops are sort of like a bit of a different structure.
So you have teams and each team has sort of
a different strategy. Is that right? Is that the way
we look at it?
Speaker 4 (02:53):
Yeah, that's the right way to look at it. And
you know, I was fortunate to join the industry, believe it,
joined Steve sac back in two thousand and one. That
was the early stage of the hedge funds. I call
them the previous generation hedge fund titans started to evolve
from in the beginning, most of them were managing money
by themselves. And then what's the next thing you do?
(03:15):
You start hiring your friends to help you manage money
and at some point the next step is to just
bringing talent, just just pure skill based talent where you
can in trust them, giving them an environment, give supplying
them with resource, letting them be the ones making the
primary investment decisions, and you provide an infrastructure. That's the
(03:37):
beginning of the pot shop.
Speaker 1 (03:39):
And what are the inherent advantages of a pot job?
Because traditionally, if the public thinks of hedge funds, they
probably think of someone like a George Soros or Julian
Robinson who ran Tiger where they take big concentrated bets
on a stock or maybe like you know, like an
asset class or a currency. But pot shops are different.
But there's little teams. Can you explain why this strategy works? Right?
Speaker 4 (04:02):
See? From an investor perspective, and to refer to what
I was saying about the first generation of hedge fund
titans when they evolved these pot shops, the most important
element is how do you go harvest these uncrelated scale
based returns at a scale. So from an investor's perspective,
(04:24):
when you are investors with a single manager, you are
relying on that CIOs his ability to direct you to
a different asset class. You rely on your source to
tell you this is a year we go pound sterning.
The next year we go to Japan on the pod shop.
Like we have sevenified performer managers today, they tend to
be specialized in their own respective area. We're allowing each
(04:46):
one of them to make investment decisions completely on their
own in their areas of expertise. And because the air
structured to be specialized, and because they air structured to
go for the absolutely return, the average creentation of these
different return streams are relatively low. In our case, we
can achieve a average corredation of under five percent, zero
(05:08):
point zero five. So put down your portfolio construction and theory.
That's how you get a stability of a return. So
from an investor's perspective, the biggest attraction of these pod
shops of all time PM companies is the stability of
the return that they are receiving.
Speaker 2 (05:25):
And if we talk about Diamond specifically, I mean there's
probably diversity and returns and strategy from these different pods
that you have in these seventy five different managers. What
strategies have been would you say the most successful over
the past year, because we've seen a lot of volatility.
Speaker 4 (05:42):
So we are structured across both the macro and equities. Again,
when Diamonds started, my partner Danny, he started as a
macro PM. By the time we combined a macro and
equity business together, there's like already twenty different profolio managers.
My background was on equities. I joined diamond in twenty
twelve and in twenty and fourteen single perseverem Tamasak. You
(06:05):
funder the equity built out of the business. So by
the time when we combine the funding to the pod
shop structure, we already have seven or eight different equity managers.
So for us, it's that diversity of the managers across
different asset class and across different geographic regions. That's the
source of the stability. So for example, last year, half
of the return was from coming from the equity long
(06:27):
short last year. The phenomenon last year is for the
first two three quarters, macro has to be a challenge
in strategy, not just for us but for a global
competitors as well. But because we have the equity piece
of equity was powering through providing the stability of the
returns for our macro managers to be patient. This year.
The first two three months the equity has been challenging. Again,
(06:48):
it's not us looking across the space as well, but
Macro was driving the return. So the answer to your
question is we don't know ahead of time which strategy
is going to do well not do well. But the
power of having these multiple different strategies uncreated is that
at any given point some group of strategies are going
to be performing well, giving you the stupidity that we're
(07:09):
producing for the investor.
Speaker 2 (07:11):
And could we delve into just like to get some examples,
could we delve into some of the strategies that have worked,
Like we've talked a lot on the show about PopMart
and the Chinese consumer winning in certain places. You know,
did you have like a long on PopMart by chance?
Speaker 4 (07:26):
The other different shating thing about a pot shop. Differential
from these single CIO funds, like we rarely talk to
the investors about our positions. I'll tell you why, because
we do not have significant exposure on any single position.
That's where again the diversification is about are we LA
and Poper we are? You know? One of my Profuno
manager in one of the investor meetings, my unversor ask
(07:48):
them hey, tell me why about this is a.
Speaker 1 (07:50):
La boo boo boo?
Speaker 4 (07:52):
What is about it? I can comfortably tell you I
do not fully understand that thesis myself, however, or the
value I'm providing. There is then identifying the PROFILEO manager
and be able to say I trust this PROTFILEO manager
because he's had many years of experience, not just including
in Naboubu, but investing in some of the other companies,
(08:14):
and as he's been gone through the ups and downs. Therefore,
we were able to invite him to come to manage
a slice of a capital and given him a mandate
that as so long as he's within the risk limits.
You hear a lot about these part shops talk about
risk limits. So long as he's within these risk limits,
that he's fully empowered to makes his investment decision go
(08:34):
along on la boob or.
Speaker 1 (08:37):
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(09:00):
If you like what you hear, don't forget to subscribe
and chair Jay. Your returns are being quite strong this year.
Like I read that your returns year to date up
until the end of August is up twelve percent. So
that's outperformed a lot of your global peers. Can you
explain why you've been able to have this outperformance.
Speaker 4 (09:22):
When we merge the found together in twenty p twenty,
it was actually the unset of COVID. In fact, our
funds started trading the very first day after the lockdown
of UHA. It took a bit longer than we were
planning to hire the adequate number of PROFILEO managers to
achieve this level of diversification that I was describing to
(09:45):
you about.
Speaker 2 (09:46):
So you were hiring during the pandemic.
Speaker 4 (09:48):
Basically we learned or hired during a pandemic. We learned
hired pandemic. This kind of path structure found the stability
is rooted on the diverse number of teams of profonno
manag With a bit of a benefit of hindsight, you
need about at least of forty PROFOTO managers to be
able to give you this level of stability. Once you
(10:09):
achieve this magic number for this my number, maybe other
people have a different number, then you're able to fully
entrust your PROFILEO managers for them to make bottom up decisions.
To give you an example a career which just came
out of short sales band, we were not at icy
level tenning our career managers what to do during the
short sales band. We were there supporting them because there's
(10:31):
the expert, there's a front line. Their decision subject to
the risk guideline that we set for them. Are much
better at guiding the profile asset locating decisions than let's
say Danny or my partner said or was able to
call on from the top down level. So the performance
of this year, in my mind, is really a continuation
of the power of the platform. We've been pretty steady
(10:53):
ever since we cross that forty profilo manager mark. These days,
it's pretty hard for me to painpoint do one trade right.
Back in the Macro days, it was all about Danny
making the right call. You know, if we had a
fantastic month, fantastic year, it was because Danny got the
daughter yet right.
Speaker 1 (11:10):
It was any country or any sector that has done.
Speaker 4 (11:14):
Actually no, I mean would been profitable in every country
we're updated in and every country we are marketing neutral
or neutral to the country or nature to the sector.
In some of the countries were neutral to the factor
as well.
Speaker 2 (11:27):
Any surprises, like anything this year that you know you're
looking at returns or you're looking at performance and you're like, oh,
I didn't think that that would do so well.
Speaker 4 (11:38):
Any point, there will be a surprise. Let's say last year,
the surprise at the beginning of the year was that
China marketing on shore China Alphas suddenly came back in
Q one last year. We did not anticipate that. If
you recall twenty three, it was pretty miserable years for
any China natural manager because it doesn't matter what you do,
(11:59):
you always lose money. With a better benefit of hindsight,
we now know those were the two years where then
the global investors were pulling money away. It's like, it
doesn't matter how good your company's earnings are, the stock
just doesn't go up because someone is a consistent setting pressure.
And we did not know that. But it was the
first quarter of twenty twenty four we started to see
(12:19):
the China, naw shore managers started to performing again. I'm
using the story to emphasize the point a lot of
earlier is that today our job as an investment committee,
as an ex CO is not about go picking which
opportunity is going to be right for the next month
or next quarter. Our job is going pick the individual,
to pick the talent to then invite the talent to
(12:39):
come to say come to work for us. You don't
need to run your own hedge fund. What provides you
everything you need capital, infrastructure, corporate access, AI tools, So
you focus on what you're good at. That's really the
source of it. And any point is always surprised. What's
the surprise this year? The fundamental luntual equity as a
(13:03):
category was struggling for the first three months. Again, I
don't think we're only one and it was kind of
understoodable because you have President Trump imposing tariff friends and
full and a lot of binary situation, so as equity investor,
it's very difficult to place your bet in this binary situation.
What we did not know was that the low point
(13:24):
of the equadininuncial performance was a day after the announcement
of the Liberation Day it was like ooh, after Liberation
Day announcement, all of a sudden, all the bad news
starting and market started behave rationally. I want to emphasize
is we did not know that. I'm only telling you
this was after effect of looking at a performance saying wow,
that's interesting. That was a low point.
Speaker 1 (13:46):
Jay, you mentioned that the most important aspect of your
job is to find the right talent. Now, there's been
a lot of media reports that you know, head funds
in a battle or a war to recruit the right talent.
Some of the large pot shops like Millennium, Citadel, Ballyosny,
your old film, like Point Sift two, they're paying tens
of millions of dollars to get the star Trader. How
(14:10):
can you manage that? And how difficult is it to
compete with these large guys.
Speaker 4 (14:15):
It is difficult. But I want to say is in
Asia we're the incumbent. You know, when I first came
in Asia in two thousand and seven, these pot shops
did not exist. I think at the time Cenada was
probably had the largest presence. They were in newspaper front
page taking out a large four at Chatterhouse. My partner
Danny was part of that cohort, and in two thousand
(14:36):
and eight they pretty much completely retweated. So over the years,
in my time on the equity side and Danny's time
on the macro site, we were the first group of
people in Asia that were hiring perforno managers, training portformo
manager and providing environment for them. I would not have
dreamed to compete with little large shops in New York
(14:56):
or in London. I just don't have the edge. But
in Asia this our home turf and for our perfornal managers,
I mean, the hiring of talent is also quite different
in twenty twenty five versus back in twenty and seven
to eight when I was hiring for Steve Cohn. Back then,
my job was about finding who are these hire boat
(15:17):
managers are? Who are the managers who has a track
record of managing market neutral, be able to manage towards
a very tight Joe down risk limit that this platform requires,
and go explain to them that you don't have to
run your own hedge FuG and join one of these platforms.
You'll be highly satisfied, You'll be paid very well. Back then,
I was a job that is not a case anymore. Today,
(15:37):
all the big boys you mentioned are here in Asia.
Every good performal manager out there, they already know which
are the good platforms they want to work with. We
keep telling our bid teams for the type of manager
we are trying to hire. They are hiring us, it's
not where're hiring them. So what I translate to my
answer to your question of how do we compete, it's
(15:59):
not a out go say, competing on the terms or
competing on the dollars, is about building the right kind
of firm that these people we like to attract, they
would like to prefer to work with us as opposed
to most of the larger platforms west out the Western firm.
So quick question to your answer is about building the
right culture where people would like to come to work
(16:20):
with us as opposed to larger global platforms.
Speaker 2 (16:25):
And how much would you say a portfolio manager in
Asia is making these days? You know, because we did
see like zero point seventy two had hired someone earlier
this year approached a tech analyst for about fifty million dollars.
I mean, I know it's not just about the dollars
and cents, but you know, is there sort of an
(16:46):
accepted number that you start at.
Speaker 4 (16:50):
Every global platform tells their BD team business development team,
which in our industry, the business development team is a
team who's charged to hire people. They're not called HR,
they are called the business development team, which shows you
in our industry how important we put this talent acquisition.
As so in most of global platforms, the instructor business
(17:11):
team to hunt for only the whales. The wales definition
in Asia may have changed in these days, would say
cover take you make a one hundred million of dollar
p and L every year, and there are not too
many teams in Asia who's being able to consistently produce
that number, So maybe that gives you a scale. So
I do not know where that biot numbers come from,
(17:33):
but yes, we hear large numbers as well, but I'll say,
like one hundred million of dollar PNL it still considered
a weale in this region today.
Speaker 2 (17:40):
And just a follow up, so you have seventy five
portfolio managers, you said, are you looking for more?
Speaker 4 (17:46):
Yes, we are. I was asked by one of our investors,
how many managers do you want and why do you
need so many more managers? I think the answer to
that is that if I go back to why this
pot model again, going back to the last generation, the
Steve comes the word how they evolve the small it
was because they need to scale these uncorrelated skill based
(18:08):
return And there's the important thing about skill based return
is it does not scale very easily. I personally work
with Perforna manager who are extremely good, extremely consistent and
perhaps making ten million your daughter, And when you give
the same manager more capital and try to make make
make twenty, it's foder. So for us, the core of
(18:30):
our business is go hiring these best people and try
to work with them. We position ourselves not as our employeeer.
We position ourselves as a partner to our Perforna managers
to help them grow, to help them scale into larger
piano production. It's like, it's their business. That's language we use.
It's your business. How do I work together with you
to scale your business from ten million to twenty minute,
(18:52):
to thirty million, to fifty minter to one hundred minute.
And we do that manager by manager. So that's the
reason we're constantly in this market looking and hunting for
the very best talent, the very best athlete, and then
try to invite them to join our platform, try to
grow with them.
Speaker 1 (19:08):
Jake, where do you get your talent from?
Speaker 4 (19:10):
Like?
Speaker 1 (19:10):
Is it other hedge funds? Is it traders on like
at investment banks, but you know they've been sort of
cutting a lot of their trading book over the last
few years. Is it like long fund or mutual fund managers.
Speaker 2 (19:20):
Maybe Steve is calling you and saying, got this applicant,
Maybe you'd be interested too.
Speaker 4 (19:27):
In two thousand and seven, In earlier days, a lot
of these talent were from investment banks, but as you
know post GFC, most investment banks have reduced to their
risk taking activities, so that school of training unfortunately has
been shut down. I recall I think twenty fifteen, maybe
it was the last year one of these large global
(19:48):
competitors that you mentioned previously, they took out a very
large prop desk in Japan. That was the last large
prop desk accredation I could think of. So today half
our hires, about fifty percent hires a bit more are
from these other platforms. Other platform has now become these
new training schools. So in the pursuit of these larger
(20:11):
platforms in ahl for these big whales and when because
there was a lack of whale. So what they do
is once they hire someone has potential, then they thrown
monstable resources to this perspective whale and help the individual
grow into a whale. In the process. A lot of
newer people get trained in the process and some make it,
(20:33):
some not make it. Sometimes a brilliant junior felt his
potential would be capped by the senior performance manager and
they choose to leave. Those were the opportunities we have.
And then there's the other half of hiring are from
these ASIA multi threats, so people tend to use multi
SPAT and a MULTIPM potch up a bit interchangeably. The
(20:54):
difference to me is that in our type of MULTIPM model,
PM is at the center of our activity. All of
the investment decisions are made by the performer managers versus
most of the traditional asia's multi stats there's still a
single COO model. So if you are a profilo manager
working at these multi swat, you have a CIO boss
(21:16):
who's going to tell you why are you so long
on China? I'm beared on China. So that these group's
collectivity tends to be a training shop where they're best
performer manager at some stage when they're mature, they tend
to want to leave to have their own portfolio. It's
either US or one of those global platforms.
Speaker 2 (21:33):
So let's say that there's someone out there that you
really want. You know, you have your your meeting and
all of the team decides it we want we want
this guy or we want this girl. Can you tell
me a bit about you know, just I'm personally curious,
what is the courting process for this individual? Is it simply,
you know, you reach out on LinkedIn or you send
them an email, or is it something a bit more intricate,
(21:56):
Like I imagine these people are very busy. You also
probably want to stand out, you know, as a company.
So how do you kind of go about that?
Speaker 4 (22:05):
The courting process probably have started two to three years
ago to three years ago.
Speaker 1 (22:10):
Oh wow, Oh well, okay.
Speaker 4 (22:12):
They Tier one players in this platform business have their
in house business development team. This tends to be individuals
who are fairly experienced, fairly senior. A lot of them
have previously came from a bicycle, came from seal side.
They're able to have this dialogue with profoitio managers risk takers.
Even though when a risk manager is not looking for
(22:32):
a job. So our philosophy is that we're not looking
for people who's looking for a job. If I just
do that, I can sit here all day long wait
for the resume to show up. And unfortunately there's a
legative selection processing there because better individuals they're not looking
for a job. They you know, they're never looking for
a job. So it's a research driven reverse process of
(22:52):
figuring out who is good in which sector and the
systematical go court, go introduce ourselves to the individual before
the individuals looking for a job.
Speaker 2 (23:02):
How do you introduce yourself? Dinner, champagne and sushi.
Speaker 4 (23:07):
A lot of coffee, and used to be a lot
of drinks too. I don't do drinks anymore, but I
know my team's do. It's about the marketing your firm.
It's about sharing with the perspective candidate you believe one
day you may want to work together. What is our
proposition the question you asked me earlier, why Diamond? You know,
if one day you were getting an offer from Diamond
(23:27):
and one from points I mean two from an indium
from Cereda, why we think you should seriously consider Diamond
despite our found is three point five billion and their
founday sixty billion. It's about that process. That process does
not happen after the candidates. I'm looking for a job.
So that's the first part of process is we call
the business development process. It's kind of dating process that
you know, we're introducing ourselves to the candidate and through
(23:50):
the process we're understanding the candidate of what's is this
person's edge, what does it care for? What is a
career plan. It's a lengthy process. Sometimes it goes on
for years and then at some point something happens. In
our industry, something always tend to happen. It can be
many things. We called a catalyst, so I make Canada
say I'm ready to move, and he's going to reach
(24:11):
out to a few people that he felt comfortable with
in the multi year dating process, say I'm ready to move.
I like to come into an interview process. Then we
switch on the interview process. I think every firm does
a bit differently. This is where seriously go and come
down interview with score to night's number. We talk about
winners and losers, etcetera. Then we make a decision out
(24:32):
we really would like to work with this individual and
let's see if we can cut a contract.
Speaker 2 (24:37):
How many more of those editions could we see this year, potentially.
Speaker 4 (24:44):
Anywhere between probably ten two twenty.
Speaker 2 (24:49):
Oh, adding ten to twenty more profolio managers.
Speaker 4 (24:51):
Yeah, I mean this industry. Unfortunately, I thought you were
already going to ask me. It's a performance streaming industry,
which means that despite our intent, there's going to be
a number of managers at any given year who's going
to leave the platform. Right, it's the necessary nature of
a performance business. We speak of that. We're running a
high performance sports team. We're inviting all the team members
(25:13):
to come to play. Everyone come to play for the team,
and we do our job to support everyone and make
sure everyone's well taken care of. But it's your job
to perform for the team at some junking. At some
point when you're not performing anymore, you may have to
be asked to leave the team. So there's that attrition
of a manager as well. Again, not us, but this
(25:35):
is across all the platform models.
Speaker 2 (25:37):
We were talking about that yesterday.
Speaker 1 (25:38):
Actually, yeah, look, I love this analogy of comparing a
HHE fund manager to a sports star. And interestingly, the
co founder, Danny Jung stepped back and he became a coach.
That's obviously got like a sports analogy. Can you tell
us what a coach does in edge funds?
Speaker 4 (25:55):
So we have today's seventy five profileal managers. That's seventy
five partners we have. That's seventy five individuals who, by
virtual of them being in the seat, have done something
very fantastic, has achieved quite a bit in their career.
That's why we invited them to them. Every single one
of them has their own career development plan, and we've
(26:17):
positioned ourselves say we're going to be your partner. We're
gonna help you. We're gonna help you get into new markets,
we're gonna help you hire pms, We're going to help
you get through this mental hurdle of like every time
you have more capital, your performance start a job. What's
going on that by itself is a full time job, right,
and we're gonna have to also defend our best people
(26:40):
when our competitors come to say you should come to
join us, I'm gonna give you this package. You know,
all those add up to full time job.
Speaker 1 (26:49):
Okay, Like the sports industry, is there a period we
like you just become too old to hit fu manage.
Do they have expiring dates, butuse if you think of
like for example, like the NBA, if you got a
good career, you got a fifty in your career, what's
it like in you know, being a h FUM manager
in a portrait.
Speaker 4 (27:06):
We actually done a study the corredation between age of
a profile manager and performance. Now we know our larger
global competitors also done that. But of course you know
I wants to talk about it. What we actually conclude
is not the age. We use a phrase called a vintage.
It's like when you became a profile manager, the first
(27:27):
few years your industry, your first mentor your secondment or
your third mentor someone taught you how to invest. There
was a particular setting. It could be maybe it was
an environment on equity side, maybe that was an environment
there was a China was going to hyper growth face.
All you needed to do is to identify the right
sector and the best company within the sector be making money,
(27:49):
and then that region will shift, will change. And nowadays China
is not a single one way growth market anymore. I'm
on nu ones. So some of the managers are able
to make that so that transition. Others could not. So
this is a dvantage concept that we believe that for
some managers there's no definite number of years. But for
some managers when the market WHICHI shift, when the environment
(28:12):
where they were trained to make money changed, some of
them may not be able to adapt. Then that's our
shelf life.
Speaker 2 (28:20):
What else was in the survey? Were there any other
interesting findings?
Speaker 4 (28:25):
If you were to survey all of the population of
the perfuno manager across all the industry, if you're able
to have that data, you probably find most of the
managers fall into the relatively younger bracket, maybe the mid
thirties to mid forties, you probably see the most of that.
So that's your starting observation. So then that begs the
question of why is it age? Is it like the
(28:47):
sports like past some stage, past some age, you just
maybe your brain doesn't work as fast anymore, or maybe
we speculated maybe it was a hunger level. Maybe when
you're younger, you're just more hungry and we still have children.
When you made money already, you're no longer. But then
we look at some of the very successful managers. They
(29:08):
don't need money anymore. It still works the same part,
They just like it. So when we end up concluding
it's not an age, it's not the money factor, it's
not a bradd It is the vintage that that's the
most important. JF.
Speaker 1 (29:21):
You started this career in the early two thousands. What's
the big difference between the attributes of a successful edge
fund manager now versus say like two thousand and eight
or two thousand and five.
Speaker 4 (29:33):
I think specifically for Asia before Asia Financial Crisis, Asia
was by and large emerging market that the stock price
was largely driven by the flows coming from US, coming
from London. Those are the flows typically were directed by
a discretionary fundamental manager worked for one of the larger
global houses. So to be a good Asia profilio manager,
(29:58):
to be a good Asia head for manager, a lot
of what you need to do is to be there
when that tide started coming and be able to pick
the best companies within the sector, within the country where
the growth is and you can largely make it. Hedging
was quite challenging at the time, so you can probably
be forgiven if you can just lose less money when
(30:21):
that tipe receives Asians market is very different now in
the last five or eight years. You know, like most
other managers, I mentioned earlier. Today runs market neutral, runs
country neutral, runs secretor neutral. That was just not possible
in two thousand and seven. In two than eight, if
you look at the flow you know today the international
(30:41):
flow is still important, but equally largely the amount of
the domestic participant. Some of these markets are well known.
In China, it's still more than seventy percent of the
turnover is still doing by the retail. Korea number is
roughly similarly here, but if you look at the two
seven two than and eight career retail participation was maybe
(31:01):
about twenty to thirty percent. So you need to be
a lot more tuned in into the nuance of what's
going on in your local market, which also brings in
one important oppostation I want to mention here. I think
even in twenty twelve where cold there was a paper
by one of the famous hedge fund consultants, very very
(31:22):
well long hedge consultant industry making observation that back then
it was still quite popular for the CIO or investment
team of Asian hedge fund to be based in London
and to be based in New York. In fact, if
you go back to the media back then, you can
find quotes where people say that's where it's how supposed
to be because Asia's aserprise is they actually driven out
(31:43):
of the West. Nowadays, it's a non starter to have
an investment team who's not based in region. If you're
not here, you're just not in the game anymore.
Speaker 2 (31:53):
And what has that been like? I mean, you're an
Asia focused company, you also have been here for many years. Now,
what are you noticed? Are you noticing more competitors coming in?
Are you seeing more capital flowing to the region.
Speaker 4 (32:06):
We're noticing a lot more competitors coming in. I think
all of these larger global pod shops that you were
mentioning earlier five years ago, they were starting to have
some substance in here ten years ago. Most of the
oct even starting here, we're picking up a huge amount
of interest from really from the alpha hunting community, both
from the allocator side and from the head from manager side.
(32:29):
That recognizing Asias having gone through the transition from a
market where you only come when you think there's gross
two Wow, even when gross is in question, it's still
bounty for alpha harvesting market.
Speaker 2 (32:44):
Who's coming in like anyone.
Speaker 4 (32:46):
In the past year that everybody, everybody, I don't want
to name my competitors, but talk to your broker friends.
At one point I was told there were fifty pot
shops hiring, Like, I kind of make that count, but
a lot of five zero. I know it's ridicular, isn't it.
I didn't know if I were believe the number, but
I do hear you know so and so large part
shops are starting to hiring one Asia person to a
(33:08):
hear person. Her was very, very high. If you look
at I Think Government in their twenty twenty three survey
labeled global pot shops number at somewhere between fifty to
eighty in their number most everyone wants to have Asia exposure,
but the ones really have Asia's presence and can effectively
compete in hiring probably can count with a single hand.
(33:33):
It's not for lack of demand, it's the lack of talent.
Speaker 1 (33:37):
Jay this you know. Cutia and I had this discussion
yesterday and she was saying, like, why it's so hard
to find really good fund managers. There's a lot of
smart people out there. There's probably a lot of people
listening to the show that have had good returns on
their stock market returns, the investment portfolio. Why is it
so hard to get a good star manager.
Speaker 4 (33:57):
You need to have some better mentorship teaching you how
to do this type of investment where it's largely scale based.
You try to filter away anything that you don't feel
you have a strong edge, not market neutralauncial equity. What
you do is you filter out the beta exposure to
(34:18):
the market, then you filter out the country exposure, then
you filter the second exposure. You need a bit of mentorship,
then you need someone to be able to supply you
that capital to try it out. In two thousand and seven,
the only shop that was willing to give you this
opportunity was a prop desk that was gone. And then
in the last few years you have a lot more
(34:39):
of these Asia's homegrown multi strategy funds on one hand
and the large global multi slad on the other hand
to continue to come in to provide that type of training.
So the supply has increased significantly, that the amount of
time available has increased significantly, but it's still not enough.
There's still another fifty or probably more or part shops
(35:01):
are waiting to set up shops in Asia.
Speaker 2 (35:03):
So what do you look for then, Like let's say
someone's listening they're in university right now or just starting
their career. What are you looking for in the personality?
Is it just returns? Is it the track record?
Speaker 4 (35:17):
What are you looking for?
Speaker 1 (35:18):
What should they study like too? We interviewed someone and
they mentioned that Jane Street doesn't hire people with business degrees,
They hire people with like science and maths. Is that
where it's going?
Speaker 4 (35:30):
If I were to look at the career growth trajectory
of a PROFILEO manager most everyone, typically you start from
being an analyst. This is where you learn from whatever
mentors by doing work he doesn't have time to do.
Manage spreadship for him, do the corporate conference care for him.
That's just how you typically get to learn what the
good performer manager actually does. Then your career progresses through
(35:54):
you become a senior analyst. Now you have a beny
bit to start pitching the ideas. Now you learned something
you apply to your own current universe. Through that process,
you gain this knowledge into initially typically a selective number
of stocks cluster around a sector around the country. That
allows you to have better insight than everyone else who's okay,
(36:15):
the same thing we call the edge. That's what's driving
your alpha at some point when you need a break,
someone need to give you this amount of capital to
set Now you can try this performo manager on your own,
and from that point you start having a track record.
So every firm is I guess, specialized at different part
of this career progression of this profoio talent. Some are
(36:37):
in I guess analogous of a venture stage training the
talent fresh from school, right that requires a different skill set.
Some firms in h are particularly good at it, we're
not good at it, and some on the other end,
I guess more anatogus to the kind of pe you
just go pay the big price to hire someone who's
already extremely mature that you say, I know you've made
(37:00):
a lot of money elsewhere, now I'm going to be
a billion dollar and please come to it for me.
We've seen examples like this in recent Asia history. And
then what we have been particularly good at is to
identify and work with the talent who have already figured
out how to make money. So we're not very good
at training people who doesn't know how to take risks,
who does not how to make money, but we're good
(37:22):
at working with someone who have already learned how to
make money from their previous mentors, but the need of
a partner to scale up from being able to make
ten million dollars to twenty thirty fiftreemen do. That's all
we focused on. So what do we look for? Because
of where we focused on? The starting point is a
track record despite the past performance is not an indicator
(37:44):
for future. It is really the lacking of everything that's
the best indicator. So we tend to start from there.
Then we go a lot deeper trying to understand what's
a methodology behind the numbers? Where the number come from?
Can we reasonably conclude that taking you out of your
previous cheap where you made that money, to a brand
new team where we tend to set you to be
(38:05):
fully independent, you no longer have a sale or tell you,
oh you should cut here, you should dubble down there,
no longer have that crutch. Can we still reasonably assured
the alpha source you previous the hat that can be
replicating here. That's where we make a bed where to
this study. Honestly, we don't care particularly much. And I've
worked with perform managers for English majors who are philosophy
(38:28):
majors as well, as science majors. It comes down to
the individual themselves. It's not so much about what they
learned in school. It's about everyone coming to field is
already very smart and probably already work very hard. Then
there's a chunk of that, maybe seventy eighty percent of that.
It's just you being passionately, be focused. You'd be good
(38:48):
at something, You'd be better at something than most everyone
looking at the same thing. There's a bit of a
I call it almost a science part of it. If
you're dedicated to it, you'll be able to get there.
Then there's a sum am I called it ten percent,
almost an art element of that as our touch to
be able to consistently make your money and still be
(39:08):
able to manage throw a very tight draw down framework.
We don't particularly know how to identify that. I don't know,
maybe have a debate. Some people say it's trainable, some
people it's not, and that's where we rely on the
track record.
Speaker 1 (39:21):
That's great.
Speaker 2 (39:23):
Thanks so much for joining us today.
Speaker 4 (39:24):
Thank you, it's been a pleasure.
Speaker 2 (39:26):
You've been listening to Asia Centric from Blueberg Intelligence and
Cutch did mutrievea in Hong Kong.
Speaker 1 (39:31):
I'm John Lee also in Hong Kong. You can listen
to all our episodes on Apple Podcasts, Spotify or where
you listen and this podcast was also produced and edited
by Clerge and thanks for listening.
Hosts And Creators
John Lee
Tom Corbett
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