Mark Wong, Dymon Asia
Episode 4 of Perspectives our dedicated series where AIMA, in partnership with KPMG, speaks to alternative investment industry leaders from around the world continues with Mark Wong, Co-CEO, COO and CRO of Dymon Asia.
Mark recalls the defining moments of his career and the decisions he made that led to him spearheading a multi-billion dollar investment management firm. He underscores the invaluable role of seeking out and wholeheartedly trusting mentors on his journey. Mark also outlines his anticipation for the battle for top-tier talent in the industry to rage on and expresses his unwavering readiness to confront it head-on.
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Co-CEO, COO and CRO of Dymon Asia
5 Lessons from Mark Wong
In our careers, decisions, big or small, mould our trajectory. As reflected in Mark’s experiences, embracing change, seeking advice from experienced mentors, and having confidence in our choices are essential. Mentors, with their wisdom and guidance, can illuminate our path, helping us recognise opportunities and navigate challenges. Mark walked the well-trodden path of moving from sell-side to buy-side, a significant career shift for someone who had long been entrenched in a major financial institution like Deutsche Bank. But as Mark fondly recalls, he had close friends whom he could call upon for advice before making the move and he never looked back. Leaning on your network and trusting their insights can be the key to unlocking our potential and finding success. His journey also encompasses the pivotal decision to relocate from London to Singapore, marking his entry into the Asian market. This move not only underscores the need for bravery in embracing change but also underscores the importance of recognising opportunities in unfamiliar territories.
Mark discusses the evolving demands for talent in the financial industry, describing how challenges in sourcing compliance personnel have changed to a war for talent in the quant and data space.
Overcoming these challenges requires staying agile and adapting your talent acquisition strategies to match your evolving needs. Mark also acknowledges the aggressive competition for talent, especially in the professional investments space, and attributes it to global multi-strategy funds expanding into Asia. A reminder of the need to be prepared for intense talent competition and focus on creating an attractive culture to retain the best professionals. "We expect this war for talent to continue, and we're ready for that."
If the hit TV show 'Succession' taught us anything, it was the importance of leadership development for the future. Mark echoes this with his commitment to grooming the next generation of leaders and provides real-life examples of recent promotions within his firm. "The focus on developing leadership potential and preparing successors for key roles has been a fundamental aspect of our overall growth strategy." Investing in leadership development ensures a sense of security for everyone in an organisation, and a smooth transition of roles to secure the firm's future.
Mark passionately delves into the transformative potential of generative AI within the finance sector, emphasising its remarkable capacity to elevate efficiency and productivity in any organisational context. "I believe AI, generative AI, could become game-changing", highlighting the need to ensure you are not left behind as the world evolves. Yet Mark declares with conviction that "it should be used to augment or enhance human decision-making, but not replace it." A reminder of the need to critically consider privacy and bias concerns that are inherent to any emerging technology, especially within the realm of AI.
Dymon Asia's success lies in its specialisation and expertise in the Asian market. Mark explained, "We employ what I call a specialist model, where every PM (portfolio manager) has a special area of focus...creating a diversified portfolio that generates high-quality and uncorrelated returns." This underscores the importance of developing expertise in a particular domain to excel in the finance industry or any field.
Read the transcript
Tom Kehoe, AIMA 00:05
Welcome back to The Long-Short. Over the coming few months, we'll be bringing something a little different, the ‘Perspective’ series, in partnership with KPMG. This podcast series will feature conversations with leading CEOs and founders of alternative investment firms from around the world. And today, we're excited to share with you one of a series of conversations we've had with them. Our guests share their visions in a variety of areas, including how to attract and retain top talent in the context of the fierce war for talent, as well as how to navigate the increasingly complex operational scaling challenges and much, much more. The discussions are being led by myself, Tom Kehoe, co-host of AIMA’s The Long-Short podcast, and John Budzyna, Managing Director and US national leader for market development for alternative investments at KPMG. So, sit back, we hope you enjoy the show.
John Budzyna, KPMG 00:56
Mark, this is John Budzyna. Good morning. Thanks for joining us today. You know, you currently run an investment firm out of Singapore. Tell us a little bit about your background and how you came into finance to start with.
Mark Wong, Dymon Asia Capital 01:11
Thanks for having me. Yeah, I was born and bred in Singapore, attended a local school, I went to the UK for my university degree after spending two years in the Singapore army as national service. I did a degree in accountancy and law as I couldn't decide which profession I preferred. But my mind was quickly made up when I landed an internship with JP Morgan Global Markets in my second year, summer holidays. And during that time, my exposure to the markets was so enriching that I decided to pursue a career in finance. So, I spent my final year at university applying to various banks and landed a job with Deutsche Bank in London. I spent my initial years there and relocated to Singapore with Deutsche Bank shortly after the Asian financial crisis broke out. And as they say, the rest is history. I spent 17 years at Deutsche Bank trading foreign exchange interest rate derivatives, and I was overseeing the trading business in Asia, before moving to the buy side with Dymon in 2013.
John Budzyna, KPMG 02:45
How did you come to join Dymon (Asia)?
Mark Wong, Dymon Asia Capital 02:48
Yeah, there’s a little story to this. Dymon (Asia) was founded in 2008, and founded by Danny Young, we happened to go to the same primary school together at a primary school in Singapore. We attended primary school from the ages of 6 to 12, and I met Danny there, and we were really good friends in primary school. We studied at the same schools all the way till my pre-university days, and then we sort of lost touch with each other. And then our paths crossed again when we both entered financial markets at the same time. And we kept in touch, you know, during the course of our careers, and then in 2012, Danny, by then had founded Dymon (Asia) for 4 years, and he approached me and said, hey, you know, we're looking to grow the business, would you join and help us grow the business together? By then, at that point in time, having spent 17 years at Deutsche Bank, I thought it was the right time for a change, and then decided that it will be fun to work with a friend and decided to make the switch.
John Budzyna, KPMG 04:31
Of course, I'd say it's a remarkable career. Is there any specific defining moment for you or defining moments that you can cite as being extremely important to get you where you are now?
Mark Wong, Dymon Asia Capital 04:44
I'd say a few, right at what would be at the very beginning, in making the decision to relocate from London back to Singapore, which really got me started in the Asian market. That would be one. And then two is, I'd say, midway through my stint at Deutsche Bank, I was actually contemplating leaving the bank to do postgraduate studies, and upon speaking to a few close friends, a few people I would regard as your my advisors or mentors, I essentially decided to not move and stay in the bank. And with that, you know, came more opportunities and career growth. So, I am really happy to have decided to stay on. And then the third defining moment, I'd say would be 10 years back when I decided to make this switch from the sell side to the buy side with Dymon (Asia), and it's been a great, enjoyable journey so far.
Tom Kehoe, AIMA 06:16
Mark, in 15 years at Dymon (Asia), it has grown to be one of the biggest hedge funds in the Asia Pacific region. For the benefit of our listeners, could you provide an overview of the firm's hedge fund strategy?
Mark Wong, Dymon Asia Capital 06:30
Yeah, sure. I’ll talk about the flagship fund, our flagship fund is the multi Strategy fund. It is a multi-strategy Asia-focused hedge fund, which invests across asset classes. The main investment strategies in this fund include equity, long-short, macro, and relative value. The bulk of our risk and returns are expressed and generated from markets within the Asia Pacific region. And I'd say the biggest areas or regions of focus for us would be Greater China, Japan, Korea, India, Southeast Asian countries, and last but not least, Australia and New Zealand.
John Budzyna, KPMG 07:30
So, it's interesting, because many firms now or across the globe are embarking upon multi-strategy type structures, as they roll out their investment strategies, and obviously, yours is focused on the APAC region, what was the decision to just focus on APAC as opposed to other parts of the world? Then, maybe, you could just reflect on the multi-strategy platform itself in terms of its ability to provide success to your investors?
Mark Wong, Dymon Asia Capital 08:06
Sure. Yeah, I mean, for us, the decision was, I guess, an easy one, right? I'd say the DNA of the firm is Asia. The founders, the partners, you know, our experience and expertise have all been gained from our time investing in the markets in Asia. We feel that having an Asia-focused multi-strategy fund differentiates us from our peers or from our competitors. We employ what I call a specialist model, where every PM (Portfolio Manager) has a special area of focus and unique area of focus. And our goal is to assemble a world-class team of PM’s, who are specialists in a certain region or asset class or strategies that they trade in, thereby creating a diversified portfolio that generates high-quality and uncorrelated returns. That's our overall goal.
Tom Kehoe, AIMA 09:19
So, how then do the portfolio managers, and I read that you continue to recruit for the multi-strategy fund, how do they then decide about allocating to the fund? Is it a consistent approach month to month or is it impacted by geopolitical factors, the macro environment, a combination of all of those, or something else?
Mark Wong, Dymon Asia Capital 09:42
Capital allocation decisions are top-down by our investment committee. The investment committee meet every week to discuss decisions around capital allocations. via a country or strategy and/or portfolio manager level. Each portfolio manager is given a defined investment mandate and risk capital based on his or her area of speciality. The portfolio manager then needs to deploy capital within the risk parameters set by the investment committee and risk management team. As I mentioned earlier, we have a specialist model and every PM is selected because he or she plays a part or has a part to play in the overall fund portfolio. Now, what should be consistent is the PM's investment process. So, whilst PMs may adjust their exposures based on geopolitical macro factors, or even other exogenous events, the essence of each specialist PM's strategy doesn't change.
John Budzyna, KPMG 11:07
So, in each of the portfolios, I would imagine there's a different amount of leverage that is deployed. Is that stated at the outset? Or does that change on a week-to-week basis based on your risk management parameters? How does that risk management change within the course of, you know, a trading week or trading month?
Mark Wong, Dymon Asia Capital 11:28
So I mentioned earlier that the PMs would be given certain parameters to work within this risk management framework designed by, or has been designed by, the investment committee and implemented by my risk management team. This framework includes various forms of drawdown and risk limits. For example, we have concepts like the peak to trough drawdown limit, freak exposure limits, liquidity and stress test limits, you know, all that is stated in this framework that we assigned to each PM. Each PM has to adhere to the individual parameters assigned to them. We use in-house built systems to monitor each PM's performance and portfolio exposures and risks. And in terms of leverage, again, you know, that's also defined within each PM’s mandate, and again, monitored and consolidated at an overall funding level, as well.
John Budzyna, KPMG 12:46
So, obviously, your firm is very focused on the APAC region. But the global macro economy affects much of that trading as well. How would you compare that to when you look at the macro events taking place in APAC, versus the rest of the global economy? Maybe you could just sort of reflect on that and give us your perspective on what's going on currently.
Mark Wong, Dymon Asia Capital 13:10
Sure. I'd say the opportunity sets are ripe across the Asia Pacific region. Firstly, I expect there to be monetary policy divergence between Asia and the rest of the developed global markets. Maybe to illustrate further I expect, aside from Japan, I expect the larger developed Asian economies or countries to ease rates while developed countries like the US, Europe or the UK, either has interest rates that remain high or even continue to raise rates.
There are a few reasons for that. Firstly, the inflation trend in Asia is on the downturn compared to many of the developed countries in the West. Within Asia, the focus is on growth or rather switching to growth than compared to inflation. the only country that I think within Asia Pacific that stands out is Japan where I expect at some stage the normalisation of monetary policy. I expect the exiting of the yield curve control policy to be imminent. And aside from Japan, my expectation for the rest of Asia is for rates to come lower. In terms of opportunities, across the region, so I think Japan, coming out from yield curve control can result in opportunities across all asset classes, as global investors increase allocations to Japan. Within China, we are hearing lots of talk of continued stimulus from China. And I think the stimulus will come in a few forms, monetary policies or rate cuts, as well as fiscal measures, perhaps, fiscal measures in the housing market to try to improve the housing market situation in China. We are cautiously optimistic for China, especially in the second half of this year, on the back of the expected stimulus.
In terms of the asset classes that could potentially benefit from this overall divergence of Asia monetary policy to the rest of the world, I expect equities to benefit, I expect strategies relating to macro and relative value to benefit as well.
In terms of tail risk, we see El Nino as, as a potential inflation tail risk for Asia. As of now, just looking at some of our research, and the data that we have, the probability of El Nino is quite high, starting around the latter part of this year, and lasting through to 2024. And depending on how severe the effect is, the potential higher temperatures, and reduced rainfall, could cause you countries within Asia, Southeast Asia and India specifically, to experience higher inflation as a result of that. But again, you know, that's a potential risk to the scenarios that I described.
Tom Kehoe, AIMA 17:49
Very comprehensive mark. If you were to bring your lens out and bring it wider into the global economy, I suspect what your answer is going to be, but looking at the US, the UK and the EU, what we've had in the last 12 to 18 months is this higher level of inflation. Asia Pacific not immune to that and have experienced it probably in the first round when it comes to global inflation picking up. So, what do you then think will be the new norm for inflation in these regions? Are we likely to see a harder or a soft landing in these economies?
Mark Wong, Dymon Asia Capital 18:33
I think, generally I expect a soft landing. That said, we expect inflation in these regions to be structurally higher, and over the long run, structurally higher versus pre-COVID levels. A few reasons for that. We all know that the world has been going through what I call regionalisation and de-globalisation. The effects of this are actually inflationary. For example, we see this shift to high resilience supply chain, policy or practices, that’s are going to cause firms to shift away from cost-efficient Asian-manufacturing sites. Setting up factories, for example, moving factories away from Asia, setting them up in the US will involve increasing costs. The onshoring of businesses back to the US or even the developed countries or developed markets will involve hiring workers with higher wages and all of this is going to lead to higher inflation, because costs get passed through to the consumer.
Furthermore, we also hear this free movement of labour being more restrictive, generally post-COVID. We have seen numbers, in countries such as the US and UK, seeing net immigration numbers fall post-COVID, contributing to labour shortages in sectors specifically such as trucking and hospitality, right. So, quite a few structural changes that will cause long-term inflation to remain high. Governments have in some of these countries been trying to counteract interest rate increases through fiscal measures. And we believe that some of these measures are actually inflationary in nature, right. So, in the UK, we've heard Jeremy Hunt requesting for banks to offer mortgage owners some extensions of interest rate payments. In the US, we have an extension of student loan payment schemes. We have Biden talking about student loan forgiveness programs, you know, of all this gets through. These acts or measures are all inflationary in nature. I mean, even in the manufacturing sector, in the US, we have the Inflation Reduction Act, or the Chips Act, that's caused this manufacturing construction boom, and that is also inflationary. So, some of these examples I've mentioned, to me, indicate that specific to these regions, the US, UK, and EU, we expect structurally higher inflation over the longer run.
Tom Kehoe, AIMA 22:22
Mark, you can't have alpha, you can't have outperformance without having the best people, right. So, how do you then attract and retain the best people for your firm?
Mark Wong, Dymon Asia Capital 22:33
Yes. In addition to competitive payouts, which everyone is dangling in front of the PMs, right? I think it's about creating an environment that makes everyone feel a strong sense of belonging and belief that they can make maximize that potential being with Dymon (Asia). Some reasons and feedback that we've heard from our PMs, who have either chosen to join us or chosen to stay with us, include the following, right. PMs seem to like the fact that the decision-making autonomy is in Asia, as in, the whole management team is based here, and allows us to maintain a close relationship with our PMs, within our Asian locations. We have an experienced Investment Committee and because we understand our markets and our people well, we have the ability to customise risk mandates to cater to the individual needs and styles of our portfolio managers.
We've also invested a lot in creating what I call market access solutions across Asia, which allow our PMs to trade or access onshore markets where there's higher liquidity and breadth of instruments to trade. Accessing some of these local markets essentially allows our portfolio managers to fully deploy their trading strategies and extract more alpha from the markets. And in line with what I mentioned earlier about our specialists model, we've actually set up office locations across some of the key markets that we trade in. As of now, we have offices in Singapore, Hong Kong, Japan, China and India as well. Again, having the ability to allow our PMs to be based across some of these local markets, allows them direct access to the network, to their local contacts, which again helps to develop an edge for them.
Finally, we've also heard that our PMs really like our collaborative culture and environment where we encourage a lot of sharing of information and ideas as well.
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John Budzyna, KPMG 26:40
So, Mark, I mean, in the environment that you just described, you do have teams working in different locations, nonetheless, the multi-strat approach, by definition, is going to allow for that, how do you match your culture to enable that to go over the various regions and enable to embrace these folks wherever they are?
Mark Wong, Dymon Asia Capital 27:14
Sure. So, we have regular meetings, yet virtual because when the meetings are, I guess, across the region, but we have weekly meetings where PMs get together to share views. We have the management team regularly travelling across the various locations to ensure that there's a lot of connectivity between the PMs and the management team. And also in terms of establishing or fostering stronger relationships across PMs and across the teams, we even hold PM, off-site meetings, whereby we create opportunities for PMs to all travel to a country to ensure that there is face to face physical interaction.
John Budzyna, KPMG 28:19
And what about other positions besides the portfolio teams, maybe the research analysts, the technology folks, what are the most difficult positions to attain these days?
Mark Wong, Dymon Asia Capital 28:32
Yeah, it's changed over the years, I'd say up to as recent as 3-4 years back, we had a challenge in sourcing for compliance talent. We had this whole slew of global regulations that financial institutions had to adhere to, and suddenly, you know, there was this whole shortage of compliance talent. We pass that now and I think that's moved to now a war for talent for, I'd say, quant data and quant specialists or quant developers. And it's, again, I guess in line with some of the big global themes across the world, right and there is a big demand for the data and quant specialists.
Tom Kehoe, AIMA 29:34
Can you give us a sense of how aggressive, because we read about it, and we hear about it, and John tells you about it, particularly in the US, and I hear about it from our members who are headhunters in the industry on what's happening in Europe and the UK is, how aggressive the war on talent is. Is it the same in the Asia Pacific region? You talked about those areas of focus being an area that is being keenly sought after, but can you give a sense to the listeners of how aggressive that war for talent is?
Mark Wong, Dymon Asia Capital 30:06
Yeah, I think it's very pronounced already. It's more pronounced in the professional investments space. It's been heating up over the last few years and continuing. Essentially, we're seeing a lot of competition from global multi-strat funds expanding into Asia. And, you know, it's a topic that we spend a lot of time discussing on the best ways and ideas to hire and retain our best people.
Glad to say that we're more than holding our own against our larger competitors. Essentially, to the few points I mentioned earlier, to us, the belief is that as long as we're able to create an environment that fosters a strong sense of belonging, and that when PMs join us, they are able to deploy their strategy and maximise the alpha generation. At the same time, we create an attractive culture that we believe would help us differentiate ourselves from the competition. But we expect this war for talent to continue and we're ready for that.
Tom Kehoe, AIMA 31:38
So Mark, why did Danny (Young – Founder at Dymon) decide to make a leadership change at Dymon? Is this part of a wider succession plan that has been put in place there?
Mark Wong, Dymon Asia Capital 31:47
Yes, we have indeed taken significant steps to put a robust succession plan in place. This strategic plan has been in the making for several years now. Danny (Young) had a clear vision to groom or bring up the next generation of leaders. And this initiative took shape, I believe, shortly after he co-authored that (Perspectives) piece with AIMA I think back in 2018. The focus on developing leadership potential and preparing successors for key roles has been a fundamental aspect of our overall growth strategy.
So, in January 2021, Danny made a significant promotion by appointing Shawn Yuen as deputy CIO (of Dymon Asia), recognising his talent and leadership capabilities. And then recently, in September 2022, Shawn was further elevated to co-CIO, assuming an even more prominent role in shaping our investment strategies and decisions.
Similarly, I've been working closely with Danny in the running of the firm over the past few years, and our collaborative efforts have resulted in a strong partnership. In January, earlier this year (2023), I was appointed co-CEO alongside him. We believe this step solidifies our joint commitment to steering Dymon (Asia) towards a more successful and longer-term future. With the formation of this new management team, we bring in fresh perspectives and innovative ideas to lead the firm into this next phase of planned growth. And I am happy to say the transition has been seamless, thanks to regular engagement, and a clear delineation of our roles and responsibilities.
Each of the members of our management team understands our specific roles. Thereby, we're able to contribute to a well-coordinated and cohesive leadership approach. Danny with his vast experience and expertise now plays a crucial role as an advisor to this leadership team. He provides invaluable insights, sharing his views on how he would approach various aspects of the business and highlighting potential risks and opportunities as he interprets them. We've adopted this approach across various parts of our business, as we believe having a strong succession plan and fostering a culture of mentorship will allow us to ensure continuity and stability within the organisation as we continue to grow into the future
John Budzyna, KPMG 35:00
I would also assume that the stability in succession and what is occurring there at Dymon is helpful to your PMs around the globe, in knowing that there's stability at the firm?
Mark Wong, Dymon Asia Capital 35:15
Totally agree, totally agree. Essentially, the message we want to send to our PMs and the other PMs in other firms is that there is deep bench strength. We are very easily accessible to our PMs.
John Budzyna, KPMG 35:37
Mark let's just pivot for a moment and talk about some of the industry megatrends that are affecting investment management. In particular, open AI, and the focus on technology and the impact that's going to have on the business, on investments, and the economies in general?
Mark Wong, Dymon Asia Capital 36:00
Sure, I mean, this is the big buzzword, right, and it's something that we've been looking into as well. I'd say that there are arguments for and against the idea of generative AI. The pros include improved efficiency and productivity because we believe AI can streamline operational processes and crunch large amounts of data. Some of the disadvantages, of course, and cons include things like privacy violations and AI bias, because you know, the AI algorithms are built by humans. So, maybe there are built-in biases. But overall, I believe AI, generative AI, could become game changing. I think it's here to stay. I believe that it should be used to augment or enhance human decision-making, but not replace it,
John Budzyna, KPMG 37:12
Is that something that Dymon (Asia) has a strategic view on right now and is working toward it or studying it?
Mark Wong, Dymon Asia Capital 37:19
Yes, I can share that. We've actually started an experiment or proof of concept on this. Literally, this trial experiment is expected to end later this month. We're doing this firstly, in our day to day non-investment operations processes, where I believe there is most of the low-hanging fruit. But for now, on the investment side, we can see use cases, particularly in research, but as for using AI to generate trade ideas or trade signals, more work needs to be done here. We're just starting out, and I think this project or initiative will have legs, but it's going to take a while for us to work through the various ideas that we have. But for now, the target area is using AI or deploying AI on the non-investment side of our business as a start.
Tom Kehoe, AIMA 38:36
And you referenced the pursuit of data scientists and people who have a skill set in quantitative engineering and advanced maths. So, when you think about generative AI and the impact on your firm, are you looking to people in that industry to help you to understand generative AI, thinking about maybe using the platforms that are out there or looking to have some sort of proprietary platform, which leverages off the open source? What's your thought process? Or is it still too soon? Are you still very much in the exploration stage?
Mark Wong, Dymon Asia Capital 39:21
Yeah, I mean, we are in our exploratory phase for now. But that said, I imagine that if and when we do embark on this properly, the type of talent that we'll be looking to bring in would be the ones you've described. People who have got strong coding, quant, numerical, backgrounds, who will be able to help us translate a lot of our ideas and to incorporate AI into our ideas. And the way to do that, we will need talent to come in and help us do that integration
Tom Kehoe, AIMA 40:17
mark, looking at another mega trend, thinking about ESG and sustainable investment, if I was to ask you as to how you view that through the lens of your firm's investment strategy, and what investors expect from you, what thoughts have you got on that?
Mark Wong, Dymon Asia Capital 40:34
Sure, at Dymon (Asia) we take ESG seriously. We've integrated them into our investment process where practical to align with our firm's strategy. I think, like everyone else, it's been a journey of learning how to incorporate investment ESG in a practical manner, that does not lose sight of helping our investors achieve the best risk-adjusted returns for the capital that we manage on their behalf. Our primary approach across all asset classes and strategies is the integration of material ESG risks and opportunities as one of the factors in our overall investment process where relevant. I'll illustrate this by sharing a few key points on how we approach this ESG integration.
Firstly, we prioritise awareness, which is to ensure all our investment professionals are well informed about our ESG integration, and each one of our investment staff receives a copy of our comprehensive ESG policy. Next, we've got an ESG assessment for new joiners. New team members are required to complete an ESG assessment form when they start with us. And additionally, our existing portfolio managers will fill out this form on an annual basis. We believe this practice allows us to continuously gauge our ESG focus across our whole investment team.
Next, is tailored training, where we provide specific training on what constitutes material ESG factors and their relevance based on the investment strategies of our PMs. So, for instance, PMs focusing on FX and rates trading might have shorter holding periods and as such may have different considerations from other PMs who trade corporate securities with longer-term views, and we tailor make the training accordingly. We also have a concept of portfolio ESG scorecards, more relevant to equity PMs, where they will receive their portfolios' ESG scorecard to track and measure ESG performance, enabling them to make informed decisions with a sustainability lens. Last but not least, commitment to ongoing learning. We believe that staying informed about the latest developments is crucial. Therefore, we conduct annual ESG training for our investment teams to deepen their understanding and expertise.
John Budzyna, KPMG 43:46
Obviously, ESG factors are going to come into play more in some strategies versus others, right? So, maybe you can just describe the disparate impact that it has across the firm and how you get all your portfolio managers to concur on the ESG strategy that is nevertheless transparent across all portfolios?
Mark Wong, Dymon Asia Capital 44:11
Yeah, it's not a one size fits all approach that we take, right? So, for example, there are certain challenges or approaches that we take, which might be more reasonable in certain asset class and not so practical in another asset class. For example, when you trade foreign exchange, how do we even apply any ESG framework to trading foreign exchange, which is quite different from when let's say, you trade single name equities, right, we will be able to have an ESG score at a company level and that can be easily incorporated in a PMs investment process. So, how we to approach it is to take a practical approach, whereby where possible if we're able to implement an ESG framework to an asset class, a strategy or an instrument type we would then do so where in certain markets or in certain strategies or products where is impractical to do so, then we would say, hey, you don't need to incorporate ESG factors when making investment decisions around, let's say trading foreign exchange, right. So, we didn't want to take the generic approach, across all our plans and all our strategies.
Tom Kehoe, AIMA 45:44
So, moving to the last couple of questions then Mark, and this has been fascinating. It's been a fascinating conversation. Thinking now about your perspectives for the industry at large, we've been asking guests to rank on a scale of 1 to 5, with 5 being the most optimistic, how optimistic are you about the hedge fund industry over the coming five years when thinking about delivering for clients? What would your score be? And why?
Mark Wong, Dymon Asia Capital 46:17
Yeah, I'd say, 4, given what I shared previously about the opportunity set specifically in Asia, I think that there is lots of alpha-generating opportunities across the various countries in Asia Pacific. But that's a risk, I see the risk as if global interest rates continue to rise, that at some stage, it could become more challenging for certain types of strategies.
John Budzyna, KPMG 46:57
Where would you see the biggest opportunities for the industry at large and, maybe some of the headwinds that we're also about to face whether they be investment related or non-investment-related?
Mark Wong, Dymon Asia Capital 47:09
Yeah, I mean, for us, I'd say, Asia continues to be the region, which I see as very interesting and exciting. Again, for the same reasons I mentioned earlier. But, I'd say the headwind or perhaps risk is East-West political tensions resulting in either regulatory or policy changes, that might have negative effects on our ability to invest or generate alpha. And by that, I think that's a real tail risk. A tail risk of Asia becoming un-investable. It's not my base case, it is a very small tail risk.
Tom Kehoe, AIMA 48:06
So, what advice then would you give to any industry new commers that might want to set up a hedge fund in this climate? Don't do it? Go ahead?
Mark Wong, Dymon Asia Capital 48:16
Good question. It's not easy. Investing is very different from running a business and it's not easy to do both well. The skill set that's required to set up and run a fund is very different from a typical portfolio manager skill set that's focused on investing and generating alpha. There is a lot of work and very high cost when it comes to setting up a fund and running the business in the first two years. You will need to spend a lot of one's time on non-investment-related work like hiring staff, fitting out an office, you know, drafting policy, or at least reading the drafts if you've got the luxury of hiring a very good legal and compliance officer.
You need to read enormous amounts of emails that are not related to investing, right, like emails from regulators, from accountants, auditors, and the landlord. You need to spend time fundraising. Meeting with prospective investors who might be based in various parts of the world. And of course, that will take up a lot of one's time, which means that you're not focusing on your investment process and all these distractions will invariably have a negative impact on performance. This is why multi-strategy funds or platforms have teams of people taking care of all of that so that our PMs can focus on investing. And we tell our PMs that we provide a setup that allows them to focus only on investing. They leave all the non-investment-related stuff to us to take care of.
Tom Kehoe, AIMA 50:23
And clearly, you're enjoying it, Mark, every success with it going forward. Just one last question from me. I mean, you're at the top of your field, still clearly working very hard and delivering for your clients. What's still then on the do list for you professionally, and you know, outside of work, what sort of pursuits do you have outside of work?
Mark Wong, Dymon Asia Capital 50:45
I'd say on the professional front, my focus is on continuing to enhance our offering, so as to deliver higher quality and consistent results for our investors.
On the personal front, I'm passionate about and have been involved in causes relating to education, the youth and the elderly. I would like to continue to contribute and make a bigger impact in these areas.
John Budzyna, KPMG 51:21
Any chance of relaxation, read a good book? What's on Mark's reading list these days?
Mark Wong, Dymon Asia Capital 51:30
I'm actually rereading The Untethered Soul by Michael A Singer. This book describes how to unchain ourselves from our ego, harness our inner energy and connect with our inner self. The idea here is with disconnection we expand. We're able to expand our awareness and achieve spiritual growth. My mum passed away earlier this year and our family is still coping and grieving in our own ways. I'd say reading this book, rereading this book, has helped with my grieving process, and it's reminded me about the values imparted to me by my mother and my life purpose, which is to make a positive difference in everything I do.
John Budzyna, KPMG 52:25
Well, Mark, this has been a fascinating conversation. We applaud you for joining us this morning. Thanks for sharing all your views. Tom, your thoughts?
Tom Kehoe, AIMA 52:38
Every good wish, Mark. Thanks again. And hopefully we'll speak to you again soon.
Mark Wong, Dymon Asia Capital 52:42
John Budzyna, KPMG 52:46
Thank you for listening to today's episode of Perspectives. Done in partnership with KPMG and part of AIMA’s The Long-Short podcast. We trust you found the discussion both interesting and insightful. You can get the latest episodes by subscribing to Spotify, Apple podcasts, Google podcasts, or Amazon music or streaming directly from aima.org. Thanks for listening.