Business
Dymon Digs Into the Hedge Fund Talent War
In this episode of Asia-centric, hosts John Lee and Cardiff Retrieval explore the evolving hedge fund landscape with J. Law, president of Diamond Asia Capital. They delve into the competitive talent a...
Dymon Digs Into the Hedge Fund Talent War
Business •
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Interactive Transcript
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Investor interest in hedge funds continues to grow.
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Institutional investors poured nearly $25 billion into the sector in the second quarter
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of this year.
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The most since 2014, that's according to the latest hedge fund research report.
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It's getting tougher recruiting the rate talent.
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It's not uncommon for hedge funds these days to even get into bidding wars.
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Some companies like 0.72 pay tens of millions of dollars to secure the people they want.
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You're listening to Asia-centric from Bloomberg Intelligence.
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I'm John Lee in Hong Kong.
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I'm Cardiff Retrieval, also in Hong Kong.
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And today we're discussing the hedge fund industry, strategy and talent with J. Law,
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president of Diamond Asia Capital, a regionally focused alternative investment manager
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with about $5 billion in assets.
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He also previously managed SACs activities in Asia.
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J. Welcome to the show.
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Thank you.
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J. Diamond started off as a macro hedge fund,
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but you fund transition more towards a multi-manager platform i.e. a pod shop.
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Why did you make that transition?
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J. Diamond When Danny and I came together in 2012,
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it was a vision to build what we have today.
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In a way, many other investors and a lot of both friends of mine
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has been sharing with us and saying, what took you guys so long.
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So if I give you a little history back, I worked for SACs capital.
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I worked for Steve Cohen for 10 years.
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My first five years at a US headquarters.
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And in 2007, he sent me to Asia.
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You know, back then, Asia did not have these pod shops.
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In fact, none of the large competitors that you'll be familiar with
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were establishing Asia at a time.
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So in the next five years, I was fortunate enough that Steve gave me sufficient
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wrong way to have figured it out.
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You know, in 2012, by the time I left the SACs joint diamond,
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I gave back a program. I believe it was 14 different
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pro photo manager teams.
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That would have been the first hard shop structure
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that was operating at scale in Asia.
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So Danny started Diamond in 2008 as a single sale macro fund, as you mentioned.
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By 2012, Diamond's macro fund was at 2.5 billion,
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which back in 2012 was a very large size.
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And here I've been talking for a while.
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I got a call from him basically.
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Look, you know, how come all of the large institutionalized hedge funds,
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alternative asset platforms were US firms,
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where we Asians couldn't do it?
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So I bought into the pitch to come over and try to join force, bring my equity settlement,
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which is so collected, going towards building this multi strategy,
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multi-PM platform as you have today.
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Just for listeners who aren't aware, so pod shops are sort of like a bit of a different structure.
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So you have teams and each team has sort of a different strategy.
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Is that right? Is that the way we look at it?
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Yeah, that's right with a look at it.
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And I was fortunate to join the industry.
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I believe I joined Steve SAC back in 2001.
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That was the early stage of the hedge funds.
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I call them the previous generation hedge fund titans.
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Started to evolve from, in the beginning,
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most of them were managed money by themselves.
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And then what's next thing you do, you start hiring your friends to help you manage money.
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And at some point, the next step is to just bringing talent, just pure,
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skilled-based talent, where you can entrust them,
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give them an environment, give supply and resource,
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letting them be the ones making the primary investment decisions.
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And you provide an infrastructure.
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That's the beginning of the pod shop.
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And what are the inherent advantages of a pod shop?
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Because traditionally, if the public thinks of hedge funds,
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they probably think of someone like George Soros,
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or Julian Robinson, who ran Tiger, where they take big concentrated bets on a stock,
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or maybe like an asset class or a currency.
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But pod shops are different.
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But there's little teams.
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Can you explain why this strategy works?
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Right. See, from an investor perspective,
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and to refer to what I was saying about the first generation of hedge fund titans,
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when they evolved these path shops,
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the most important element is how do you go harvest these uncreated,
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skilled-based returns at a scale?
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Some of them investors perspective, when you are invested with a single manager,
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you are relying on that CIO's his ability to direct you to say different asset class.
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You're relying on George Soros to tell you,
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this is the year we go in a pound sterney.
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The next year we go to Japan.
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On a pod shop, we have 75 portfolio managers today.
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They tend to be specialized in their own respective areas.
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We're allowing each one of them to make investment decision
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completely on their own in their areas of expertise.
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And because they are structured to be specialized,
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and because they're structured to go for the absolute return,
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the average correlation of these different return streams are relatively low.
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In our case, we can achieve a average correlation of under 5%, 0.05.
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So, put on your portfolio construction and theory,
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that's how you get a stability or return.
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So, from an investor's perspective,
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the biggest attraction of these pod shops of all time PM companies
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is the stability of the return that they are receiving.
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And if we talk about diamonds specifically,
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I mean, there's probably diversity and returns and strategy from these different pods
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that you have and these 75 different managers.
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What strategies have been, would you say, the most successful over the past year?
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Because we've seen a lot of volatility.
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Right.
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So, we are structured across both the macro and equities.
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Again, when diamonds started, my partner Danny, he started as a macro PM.
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By the time we combined a macro and equities business together,
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there was already 20 different portfolio managers.
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My background was on equities.
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I joined diamond in 2012.
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And in 2014, Singapore's sovereign tamasak,
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you found that it's equity build out of business.
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So, by the time we combined a fund into the pod shop structure,
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we already have seven or eight different equity managers.
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So, for us, it's that diversity of the managers across different asset class
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and across different geographic regions.
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That's the source of the stability.
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So, for example, last year, half of a return
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was from coming from an equity loan short.
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In the last year, the phenomenal last year is for the first two, three quarters,
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macro has to be a challenging strategy, not just for us,
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but for our global competitors as well.
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But because we have the equity piece of it,
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so equity was powering through,
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providing the stability of the returns for our macro managers to be patient.
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This year, the first two, three months, the equity has been challenging.
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Again, it's not us looking across the space as well,
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but macro was driving the return.
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So, the answer to your question is,
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we don't know ahead of time,
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which strategy is going to do well, not do well.
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But the power of having these multiple different strategies uncreated
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is that at any given point,
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some group of strategies are going to be performing well,
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giving us the stability that we're producing to fully master.
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And could we delve into just like to get some examples?
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Could we delve into some of the strategies that have worked?
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Like, we've talked a lot on the show about Pop Mart and the Chinese consumer
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winning in certain places.
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Did you have a long on Pop Mart by chance?
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The other differentiating thing about a pot shop
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differentiated from the single CIO funds,
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we rarely talk to the investors about our positions.
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I'll tell you why,
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because we do not have significant exposure on a single position.
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That's where, again, the diversification is about,
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are we long in pop art?
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We are.
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You know, one of my pro-fono manager,
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in one of the investor meetings,
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my university asked him,
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tell me what about this is a boo boo.
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A boo boo.
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What is about it?
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I can't comfort what they tell you.
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I do not fully understand that thesis myself.
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However, where the value I'm providing there
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is then identifying the pro-fono manager
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and being able to say,
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I entrust this pro-fono manager,
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because he's had many years of experience,
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not just including in the boo boo,
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but investing in some of the other companies.
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And he's being gone through the ups and downs.
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Therefore, we were able to invite him
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to come to manage a slice of a capital
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and give him a mandate
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that as so long as he's within the risk limits,
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you hear a lot about these part-chaps talk about risk limits.
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So long as he's within these risk limits,
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now he's fully empowered
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to make his investment decision,
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go long in the boo boo or short in the boo.
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Hmm.
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Jay, your returns have been quite strong this year.
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Like I read that your returns year to date up until the end of August
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is up 12%.
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So that's outperformed.
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A lot of your global peers.
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Can you explain why you've been able to have this outperformance?
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When we merged the fund together in 2020,
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it was actually the onset of COVID.
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In fact, our fund started trading the very first day
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after the lockdown of Wuhan.
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It took a bit longer than we were planning to hire the adequate number of
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pro-fonal managers to achieve this level of diversification
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that I was describing to you about.
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So you were hiring during the pandemic, basically?
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We learned to hire a hire during a pandemic.
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We learned to hire during a kind of pandemic.
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This kind of post structure fund,
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the stability is rooted on the diverse number of teams of pro-fonal managers.
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It was a bit of a benefit of hindsight.
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You need about at least 40 pro-fonal managers
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to be able to give you this level of stability.
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Once you achieve this magic number,
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40 is my number.
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Maybe other people have a different number.
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Then you're able to fully entrust your pro-fonal managers
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for them to make bottom-up decisions.
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To give you an example, Korea,
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which just came out of a short sales ban,
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we were not at an ICO level telling our career managers
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what to do during the short sales ban.
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We were there supporting them because there's an expert,
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there's a frontline,
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their decision subject to the risk-guide line
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that we set for them are much better at guiding
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the pro-fonal asset allocation decisions than,
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let's say, Danny, on my partner's sale,
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was able to call on the front top down level.
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So the performance of this year, in my mind,
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is really a continuation of the power of the platform.
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We've been pretty steady ever since we crossed
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that 40 pro-fonal manager mark.
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These days, it's pretty hard for me to pinpoint
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that we do one trade right.
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Back in the macro days,
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it wasn't about Danny making the right call.
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You know, you've had a fantastic month, fantastic year.
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It was because Danny got the dollar year and right.
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Was it any country or any sector that has done...
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Actually, no.
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I mean, we've been profitable in every country
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we're operating in.
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And every country we are market-neutral,
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we're neutral to the country,
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we're neutral to the sector.
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In some of the countries we're neutral to the factor as well.
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Any surprises, like anything this year,
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you're looking at returns or you're looking at performance.
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And you're like, oh, I didn't think that that would do so well.
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Any point there will be a surprise.
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Let's say last year,
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the surprise at the beginning of the year
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was that China market-neutral,
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China Alpha suddenly came back in Q1 last year.
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We did not anticipate that.
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If you recall, 2020-23,
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it was pretty miserable years
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for any China-neutral manager.
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Because it doesn't matter what you do.
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You always lose money.
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It was about a benefit of hindsight.
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We now know those were the two years
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where then the global investors were putting money away.
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It's like, it doesn't matter how good your company's earnings are.
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The stock just doesn't go out
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because someone is a consistent setting pressure.
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And we did not know that,
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but it was the first quarter of 2024.
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We started to see the China-neutral managers
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started to perform.
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Again, using this story to emphasize the point
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that brought up earlier is that today,
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our job as an investment committee as an ex-co
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is not about go picking which opportunity
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is going to be right for the next month or next quarter.
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Our job is go pick the individual
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to pick the tenant to then invite the tenant
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to come to say, come to work for us.
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You don't need to run your own hedge fund.
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We'll provide you everything you need.
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Capital infrastructure, corporate access, AI tools.
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So you focus on do what you're good at.
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That's really the source of it.
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And any point is always surprised.
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What's the surprise this year?
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The fundamental long short equity as a category
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was struggling for the first three months.
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Again, I don't think we're the only one.
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It was kind of understandable
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because you have President Trump imposing
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tariffs on friends and foe
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and a lot of binary situations.
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So as an equity investor,
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it's very difficult to place your bet
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in this binary situation.
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What we did not know was that the low point
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of the equity and offshore performance
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was that they after the announcement of the Liberation Day.
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It was like, ooh, after the Liberation Day announcement,
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what is certain or the bad news are in
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and market started to behave rationally.
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Well, I want to emphasize this, we did not know that.
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I'm only telling you this with the after effect
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of looking at a performance and say, wow, that's interesting.
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That was a low point.
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Jay, you mentioned that the most important aspect of your job
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is to find the right talent.
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Now, there's been a lot of media reports
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that hedge funds in a battle
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or a war to recruit the right talent.
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Some of the large pot shops like Millennium,
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Citadel, Baliosny,
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your old firm like 0.72,
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they're paying tens of millions of dollars
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to get the start trader.
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How can you manage that and how difficult
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is it to compete with these large guys?
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It is difficult, but I want to say
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is in Asia, where the incumbent?
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When I first came in Asia in 2007,
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these pot shops did not exist.
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I think at the time Citadel was probably
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had the largest presence.
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They were in newspaper,
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front page, taking out a large four at a trader house.
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My partner, Danny, was part of that cohort.
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And in 2008, they pretty much completely retreated.
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So over the years, in my time on the equity side
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and Danny's time on the macro side,
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we were the first group of people in Asia
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that were hiring professional managers,
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training professional managers,
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and providing a environment for them.
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I would not have dreamed to compete
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with those large shops in New York or London.
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I just don't have the edge.
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But in Asia, this is our home turf.
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And for our professional managers,
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I mean, the hiring of the talent
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is also quite different in 2025
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versus back in 2007-2008
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when I was hiring for Steve Cohen.
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Back then, my job was about finding
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who are these higher-board managers are.
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Who are the managers who has a track record
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of managing market neutral,
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be able to manage towards a fairly tight,
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well-down risk limit that this platform requires.
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And go explain to them that you don't have
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to run your own hedge fund.
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Can join one of these platforms.
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You'll be highly satisfied.
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You'll be paid very well.
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Back then, that was a job.
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Today is not a case anymore.
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Today, all the big boys you mentioned
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are here in Asia.
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Every good professional manager out there,
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they already know which are the good platforms
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they want to work with.
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We keep telling our BD teams,
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for the type of manager we are trying to hire,
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they are hiring us.
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It's not we're hiring them.
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So what I translate to my answer to your question
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of how do we compete?
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It's not about go say,
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the competing on the terms or competing on the daughters,
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it's about building the right kind of firm
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that these people we like to attract.
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They would like to prefer to work with us
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as opposed to most of the larger platform
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as other Western firms.
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So quick question to your answer is about building the right culture
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where people would like to come to work with us
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as opposed to larger global platforms.
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And how much would you say
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a portfolio manager in Asia is making these days?
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Because we did see 0.72
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and hired someone earlier this year,
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poached tech analysts for about $50 million.
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I mean, I know it's not just about the dollars and cents,
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but is there sort of an accepted number
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that you start at?
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Every global platform tells their BD team
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business development team,
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which in our industry,
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the business development team
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is a team who's charged to hire people.
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They're not called HR.
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They are called a business development team,
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which shows you in our industry
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how important we put this talent acquisition
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as.
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So in most of global platforms,
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the instructor business team
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told hunt for only the whales.
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The whales definition Asia may have changed in these days
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would say cover take you make a hundred million dollar
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P&L every year.
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And there are not too many teams in Asia
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who's being able to consistently produce that number.
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So maybe that gives you a scale.
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So I do not know where that
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biot number has come from,
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but yes, we hear large numbers as well.
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But I'll say like a hundred million dollar P&L
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is still considered a whale in this region today.
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And just a follow up.
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So you have 75 portfolio managers, you said.
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Are you looking for more?
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Yes, we are.
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I was asked by one of our investors
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how many managers do you want,
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and why do you need so many more managers?
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I think the answer to that is that
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if I go back to why this pod model,
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again, going back to the last generation,
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the Steve Coleman's award,
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how they evolved this model,
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it was because they need to scale
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this uncorrelated skill-based return.
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And there's an important thing about skill-based return is
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it does not scale very easily.
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I personally work with portfolio manager
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who are extremely good, extremely consistent
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and perhaps making time in a new daughter.
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And when you give the same manager more capital
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and try to make it make 20, he's going to fall.
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So for us, the core of our business
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is go hiring these best people
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and try to work with them.
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We position ourselves, not as an employee,
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we position ourselves as a partner
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to our portfolio managers,
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to help them grow, to help them scale
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into larger P&A production.
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It's like it's their business.
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That's language we use.
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It's your business.
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How do I work together with you
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to scale your business from 10 million to 20 million
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to 30 million to 50 million or 200 million?
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And we do that manager by manager.
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So that's the reason we're constantly in this market
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looking and hunting for the very best talent,
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the very best to ask for it.
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And then try to invite them to join our platform,
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try to grow with them.
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Jay, where do you get your talent from?
spk_0
Like, is it other hedge funds?
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Is it traders on like at investment banks?
spk_0
But you know, they've been sort of cutting
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a lot of their trading book over the last few years.
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Is it like long fund or mutual fund managers?
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Maybe Steve is calling you and saying,
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got this applicant, maybe you'd be interested too.
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In 2007, in the earlier days, a lot of these talent
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were from the investment banks.
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But as you know, post GFC, most of the investment banks
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have reduced their risk taking activities.
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So that school of training, unfortunately, has been shut down.
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I recall, in 2015, maybe it was the last year,
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one of these large global competitors
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that you mentioned previously,
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they took out a very large prop desk in Japan.
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That was the last large prop desk
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acquisition I could think of.
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So today, half our hires, about 50% of hires,
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but more are from these other platforms.
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Other platforms has now become these new training schools.
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So in the pursuit of these larger platforms in Asia
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for these big whales,
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and when because there was a lack of whales.
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So what they do is once they hire someone has potential,
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then they throw enormous double resources
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to this prospective whale
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and help the individual grow into a whale.
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In the process, a lot of newer people get trained in the process.
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And some makers, some not make it.
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Sometimes a brilliant junior felt his potential
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would be capped by the senior pro-phonal manager.
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And choose to leave those were the opportunities we have.
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And then there's the other half of hiring
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are from these Asia multi-strats.
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So people tend to use multi-strat and multi-PM potchup
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a bit interchangeably.
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The key difference to me is that in our type of multi-PM model,
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PM is at the center of our activity.
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All the investment decisions are made by the pro-phonal managers.
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Versus most of the traditional Asia's multi-strat,
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there's still this single CIO model.
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So if you are a pro-phonal manager working at these multi-strat,
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you have a CIO boss who's going to tell you why you're so long
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on China and Bergen China.
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So these groups collectively tend to be a training shop
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where their best pro-phonal manager at some stage
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when they're mature, they tend to want to leave
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to have their own portfolio.
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It's either us or one of those scalable platforms.
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So let's say that there's someone out there
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that you really want.
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You know, you have your meeting
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and all of the team decides that we want this guy
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or we want this girl.
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Tell me a bit about, you know, just I'm personally curious,
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what is the courting process for this individual?
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Is it simply, you know, you reach out on LinkedIn
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or you send them an email
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or is it something a bit more intercal?
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Like I imagine these people are very busy.
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You also probably want to stand out, you know, as a company.
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So how do you kind of go about that?
spk_0
The courting process probably have started two to three years ago.
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Two to three years ago.
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Oh, well.
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Oh, well, okay.
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They tier one players in this platform business.
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Have their in-house business development team.
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These tends to be individuals who are fairly experienced,
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fairly senior.
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A lot of them have previously came from a buy side,
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came from sales side.
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They're able to have the dialogue
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with portfolio managers, risk takers,
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even when the risk managers are not looking for a job.
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So our philosophy is that we're not looking for people
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who's looking for a job.
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If I just do that, I can sit here all day long,
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wait for the resume to show up.
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And unfortunately, there's a negative selection processing there
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because better individuals, they're not looking for a job.
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They're never looking for a job.
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So it's a research-driven reverse process
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of figuring out who is good in which sector
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and the systematic go court,
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introduce ourselves to the individual.
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Before the individual's looking for a job.
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How do you introduce yourself?
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Dinner,
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champagne, sushi?
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A lot of coffee and used to be a lot of drinks too.
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I don't do drinks anymore, but I know my teams do.
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It's about marketing your firm.
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It's about sharing with the perspective of Canada.
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You believe one day you may want to work together.
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What is our position?
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The question you asked me earlier, why diamond?
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If one day you were getting an offer from diamond
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and one from 0.72, from millennium, from Citadel,
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why we think you should seriously consider diamond,
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despite our fund is 3.5 billion and they're found it's 60 billion.
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It's about that process.
spk_0
That process does not happen after the Canada Assembly can for a job.
spk_0
The first part of the process is we call the business development process.
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It's a dating process that we're introducing ourselves to the Canada
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and through the process we're understanding the Canada
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of what is the person's edge, what is it careful,
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what is a career plan.
spk_0
It's a lengthy process.
spk_0
Sometimes it goes on for years.
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And then at some point something happens.
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In our industry, something always tend to happen.
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It can be many things called a catalyst.
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So I make Canada say, I'm ready to move.
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He's going to reach out to a few people
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that he felt comfortable with in the multi-year dating process.
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I'm ready to move.
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I like to come into interview process.
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Then we switch on the interview process.
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I think every firm does a bit differently.
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This is where he's seriously going to go down interview.
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We scrutinize number, we talk about winners and losers, etc.
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Then we make a decision, we really would like to work with this individual
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and let's see if we can cut a contract.
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How many more of those additions could we see this year?
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Potentially.
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Anywhere between probably 10 to 20?
spk_0
Oh, adding 10 to 20 more portfolio managers.
spk_0
Yeah.
spk_0
Oh, I mean, this industry, unfortunately,
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I thought you were already going to ask me,
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it's a performance-driven industry, which means that despite of a best intent,
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there's going to be a number of managers at any given year
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who's going to leave the platform.
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Right.
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It's the necessary nature of a performance business.
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We speak of that we're running a high-performance sports team.
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We're inviting all the team members to come to play.
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Everyone come to play for the team.
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And we do our job to support everyone and make sure everyone is well taken care of.
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But it's your job to perform for the team.
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At some junky, at some point, when you're not performing anymore,
spk_0
you may have to be asked to leave the team.
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So there's that attrition of a manager as well.
spk_0
Again, not us, but this is across all the platform models.
spk_0
We were talking about that yesterday, actually.
spk_0
Yeah. Look, I love this analogy of comparing a hedge fund manager to a sports star.
spk_0
And interestingly, the co-founder, Danny Young, step back, and he became a coach.
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That's obviously got like a sports analogy.
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Can you tell us what a coach does in hedge funds?
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So we have today's 75 portfolio managers.
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And that's 75 partners we have.
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That's 75 individuals who, by virtue of them being in the seat,
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have done something very fantastic and has achieved quite a bit in their career.
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That's why we invited them to them.
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Every single one of them has their own career development plan.
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And we position ourselves there.
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We're going to be your partner.
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We're going to help you.
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We're going to help you get into new markets.
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We're going to help you hire PMs.
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We're going to help you get through this mental hurdle of like every time you have more capital,
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you're performing starter drop.
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What's going on?
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That by itself is a full time job.
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And we're going to have to also defend our best people.
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When our competitors come to say, you should come to join us.
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I'm going to give you this package, you know, all those add up to a full time job.
spk_0
Okay.
spk_0
Like the sports industry, is there a period where you just become too old to your hedge fund manager?
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Do they have expiry dates?
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Because if you think of like, for example, like the NBA,
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if you've got a good career, you've got a 15 year career.
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What's it like in, you know, being a hedge fund manager in a pod job?
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We actually done a study.
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The correlation between age and the pro-fondamentator and the performance.
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Now, we know our larger global competitors also have down that.
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But of course, no one wants to talk about it.
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What we actually conclude is not as an age.
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We was a phrase called a vintage.
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It's like when you became a pro-fondamentator,
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the first futures you are in the industry, your first mentor, your second mentor, your third mentor.
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Someone taught you how to invest.
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There was a particular setting.
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It could be maybe it was an environment on equity side.
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Maybe that was an environment that was China was going to a hyper-gross phase.
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All you needed to do is identify the right sector.
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And the best company within the sector would be making money.
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And then that regime will shift or change.
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And nowadays, China is not a single one-way gross market anymore.
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A lot more new ones.
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So some of the managers are able to make that so that transition others could not.
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So it's a vintage concept that we believe that for some of managers,
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there's no definitive number of years.
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But for some of managers, when the market regime shift,
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when the environment where they were trained to make money changed,
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some of them may not be able to adapt.
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Then that's our shelf life.
spk_0
What else was in the survey?
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Were there any other interesting findings?
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If you were to survey all of the population of the professional manager across all of the industry,
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if you were able to have that data,
spk_0
you probably find most of the managers fall into the relatively younger bracket.
spk_0
Maybe the mid-serties to mid-forties.
spk_0
You probably see the most of that.
spk_0
So that's your starting observation.
spk_0
So then that begs the question of why is it age?
spk_0
Is it like sports?
spk_0
Like past some stage, past some age,
spk_0
you just maybe your brain doesn't work.
spk_0
Has fast anymore?
spk_0
Or maybe we speculate it.
spk_0
Maybe it was a hunger level.
spk_0
Maybe when you're younger, you're just more hungry.
spk_0
And we used to have children.
spk_0
When you've made money already, you're no longer.
spk_0
But then we look at some of the very successful managers.
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They don't need money anymore.
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They still work the same part.
spk_0
They just like it.
spk_0
So when we end up concluding, it's not age.
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It's not the money factor.
spk_0
It's not a burnout.
spk_0
It is the vintage that the most important.
spk_0
J.U. started this career in the early 2000s.
spk_0
What's the big difference between the attributes of a successful hedge fund manager now versus say like 2008 or 2005?
spk_0
I think specifically for Asia, before Asia financial crisis,
spk_0
Asia was by and large a emerging market.
spk_0
That the stock price was largely driven by the flows coming from US, coming from London.
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Those are the flows typically were directed by a discretionary fundamental manager,
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worked for one of the larger global houses.
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So to be a good Asia portfolio manager, to be a good Asia head for manager,
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a lot of what you need to do is to be there when that tide started coming
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and be able to pick the best companies within the sector within the country where the growth is.
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And we can largely make it.
spk_0
Heaging was quite challenging at a time.
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So you can probably be forgiven if you can just lose less money when that tide receives.
spk_0
Asia's market is very different now in the last five or eight years.
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Like most other managers I mentioned earlier, today runs market neutral, runs country neutral, runs sector neutral.
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That was just not possible in 2007, in 2008.
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If you look at the flow, today the international flow is still important.
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But equally largely the amount of domestic participants, some of these markets, well known in China,
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is still more than 70% of the turnover is still driven by the retail.
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Korea, the number is roughly seven already here.
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But if you look at 2007, 2008, Korean retail participation was maybe about 20 to 30%.
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So you need to be a lot more tuned in into the nuance of what's going on in your local market.
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Which also brings in one important update on the machine here.
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I think even in 2012, where you call there was a paper by one of the famous H1 Consultant,
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very, very well known H1 Consultant in industry, making observation that back then it was still
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quite popular for the CIO or investment team of a Asian hedge fund to be based in London and to
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be based in New York. In fact, if you go back to the media back then, you can find quotes where people say,
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that's where it's how supposed to be because Asia's as a price is actually driven out of the West.
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Nowadays, it's a non starter to have an investment team who's not based in reaching.
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If you're not here, you're just not in the game anymore.
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And what has that been like? I mean, you're an Asia-focused company.
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You also have been here for many years now. What are you noticing? Are you noticing more competitors
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coming in? Are you seeing more capital flowing to the region?
spk_0
We're noticing a lot more competitor coming in. I think all of these larger global potchaps that
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you were mentioning earlier. Five years ago, they were starting to have some substance in here.
spk_0
Ten years ago, most of the competitors started here. We're picking up a huge amount of interest
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from the Alpha Hunting community, both from the allocator site and from the hedge fund manager site,
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that recognizing Asia has been going through the transition from a market where you only come when
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you think there's growth. Wow, even when growth is in question, it's still a bound to four Alpha Harvesting
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market. Who's coming in? Like anyone in the past year that everybody, everybody, I don't want to name
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my competitors, but talk to your broker friends. At one point, I was told there were 50 potchaps
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hiring. I'm like, I cannot make that count. But a lot of I know it's ridiculous isn't it? I
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didn't know if I could believe the number, but I do hear, you know, so and so large potchaps are
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starting to hire one Asia percent to a here percent. The heart is very, very high. If you look at
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I think Goldman in their 2023 survey labeled global potchaps number at somewhere between
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50 to 80 in that number. Most everyone wants to have Asia exposure, but the ones really have Asia's
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presence and can't effectively compete in hiring, probably can count with a single hand.
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It's not for lack of demand. It's the lack of talent. Jay, this, you know,
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Cartier and I had this discussion yesterday and she was saying like, why is it so hard to find
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really good fund managers? There's a lot of smart people up there. There's probably a lot of
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people listening to the show that have had good returns on their stock market returns the investment
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portfolio. Why is it so hard to get a good star manager? You need to have some bit of mentorship
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teaching you how to do this type of investment where it's largely the scale-based
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you try to filter away anything that you don't feel you have a strong edge on. Now market
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neutral and short equity, what you do is you filter out the beta exposure to the market. Then you
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filter out the country exposure. Then you filter out the sector exposure. You need a bit of mentorship.
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Then you need someone to be able to supply you that capital to try it out.
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In 2007, the only shop that was willing to give you this opportunity was a prop desk that was gone.
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And then in the last few years, you have a lot more of these Asia's homegrown multi-strategy
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funds on one hand and these large global multi-strategy on the other hand to continue to
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come in to provide that type of training. So the supply has increased significantly. The amount
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of talent available has increased significantly, but it's still not enough. There's still another
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50 or probably more pot shops are waiting to set up shops in Asia.
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So what do you look for then? Like let's say someone's listening to their university right now
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or just starting their career. What are you looking for in the personality? Is it just returns?
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Is it the track record? What are you looking for? What are they studying?
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Like we interviewed someone and they mentioned that Jane Street doesn't hire people with business
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degrees. They hire people with like science and maths. Is that where it's going?
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If I were to look at the career growth trajectory of a professional manager, most everyone
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typically you start from being an analyst. This is where you learn from one-ever mentors.
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By doing work, he doesn't have time to do. Manage a spreadsheet for him. Do the corporate
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conference call for him. This is how you typically get to learn what the good professional manager
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actually does. Then your career progresses through you become a senior analyst. Now you have a
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applied to your own coverage universe. Through that process, you gain this knowledge into initially
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typically a selective number of stocks, cluster around a sector around a country. That allows you
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to have better insight than everyone else who's okay at the same thing. We call this an edge.
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That's what's driving your alpha. At some point, we need a break. Someone need to give you this
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amount of capital to say, now you can try this professional manager on your own. From that point,
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you start having a track record. Every firm is specialized at different parts of this career
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progression of these pro-photo-tatton. Some are in an anarchist of a venture stage, training the
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cannon fresh from school. That requires a different skill set. Some firms in Asia are particularly good
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at it. We're not good at it. On the other end, I guess more anarchists to the PE, you just go pay
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the big price to hire someone who's already extremely mature. You say, I know you've made a lot
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of money elsewhere. Now I'm going to give you a billion dollars and please come to trade for me.
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We've seen the examples like this in recent Asia history. What we have been particularly good at
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is to identify and work with these talent who have already figured out how to make money. We're
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not very good at training people who doesn't know how to take risks, who does not know how to make money.
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But we're good at working with someone who have already learned how to make money from their
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previous mentors, but being a need of a partner to scale up from being able to make 10 million
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dollars to 20, 30, 15 million dollars. That's a lot of way focused out. What do we look for? Because
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of where we focused out, the starting point is a track record. Despite the past performance is not
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an indicator for future, it is really the lacking of everything that's the best indicator. We tend to
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start from there. Then we go a lot deeper, trying to understand what's the methodology behind the
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numbers, what the number comes from. Can we reasonably conclude that taking you out of your previous
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team, where you made that money to a brand new team, where we tend to set you to be fully independent.
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You no longer have a sale or tell you, oh, you should cut here, you should double down there,
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no longer have that crutch. Can we still reasonably assure the alpha source you previously had
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that can be replicated in here? That's where we make some of that. Where are to this study? Honestly,
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we don't care particularly much. I've worked with perform managers for English majors,
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for philosophy majors, as well as science majors. It comes down to the individuals themselves. It's not
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so much of what they learned in school. It's about everyone coming to field is already very smart.
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I'm probably already worked very hard. Then there's a chunk of that. Maybe 70, 80% of that is just
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you being passionate. You be focused. You'd be good at something. You'd be better at something than
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most everyone looking at the same thing. There's a bit of a, I call it almost a science part of it.
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If you're dedicated to it, you'll be able to get there. Then there's a sum element. I call it 10%
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20% almost like an art element of that. It's an art touch to be able to consistently make money
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and still be able to manage through a very tight, so-and-for framework. We don't particularly know
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how to identify that. I don't know. Maybe have a debate. Some people say it's trainable. Some people
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say not. That's where we rely on the track record. That's great. Thanks so much for joining us today.
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Thank you. It's been pleasure. You will listen to Asia-centric from Blue Rigg Intelligence and
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catch it in your tree, Van Hong Kong. I'm John Lee. Also in Hong Kong, you can listen to all our episodes
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on Apple Podcasts, Spotify or Revu Listen. This podcast was also produced and edited by Clarachin.
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Thanks for listening.
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Reporting sponsors YTL and Zetrix AI.
Topics Covered
hedge funds
investor interest
institutional investors
alternative investment manager
macro hedge fund
multi-manager platform
pod shop structure
portfolio managers
investment strategies
diversification
equity markets
Asia-centric investment
Bloomberg Intelligence
risk management in hedge funds
returns stability