Yong’s Rise to Peak of Asia Hedge Funds Left No Time for Pity
2012-03-27 16:01:00.0 GMT
By Tomoko Yamazaki and Netty Ismail
March 28 (Bloomberg) — As a 10-year-old boy, Danny Yong
got advice after his father’s death from cancer that drives him
to this day.
“My mother told me then, ‘Don’t let anyone look down on
you just because your father died,’” he said in an interview in
his office in Singapore, where he was born and raised. “Her
words spurred me on and made me determined not to give anyone a
reason to pity me for having lost my dad at a young age.”
Yong, now 40, is the envy of Asia’s hedge-fund world, where
he outperformed all managers last year. His Dymon Asia Capital
(Singapore) Pte, started in 2008 with $100 million from Paul
Tudor Jones’s Tudor Investment Corp., has expanded to $2.85
billion, including $2.5 billion in its main macro fund.
The next challenge for Yong, who learned to trade at firms
including Goldman Sachs Group Inc. and Citadel LLC, is to avoid
the investment slump and client defections that are common among
Asian hedge funds that grow quickly after posting a year or two
of strong returns. Instead, he seeks to emulate Jones, who has
posted average gains of 20 percent a year since 1986.
“It has been our experience that undisciplined managers
easily become victims of their own success,” said Peter Rup,
chief investment officer of New York-based Artemis Wealth
Advisors LLC, which invests in hedge funds for clients. “We
have found that the sweet spot in size is in the range of $1
billion to $5 billion, with caps in place to limit fund size at
those levels, irrespective of investor demand.”
The Dymon Asia Macro Fund — which seeks to profit on
macroeconomic trends by wagering on bonds, currencies, stocks
and commodities — has stopped taking new money to focus on its
investments. The fund returned more than 20 percent after fees
in 2011, the most in Asia and seventh worldwide among hedge
funds with assets of more than $1 billion, according to data
compiled by Bloomberg.
Yong’s fund made money by short-term trading in the days
following Japan’s March 11, 2011, earthquake, helping his fund
gain 8 percent that month, Yong said. The fund covered its short
positions on March 14, the first day of trading after the quake,
and went long the Nikkei 225 index futures four days after the
quake, he said.
Being long Chinese yuan for six months through August and
turning long U.S. dollar and short equities in September as
Greece’s debt problems deepened, also contributed. In a short
sale, a manager borrows the security and sells it in the hope it
can be bought back later at a cheaper price.
Asia-focused hedge funds lost an average of 8.4 percent
last year, according to Eurekahedge Pte. Global investors pulled
$1.04 billion from the region’s hedge funds in the fourth
quarter, the first net withdrawals since the first quarter of
2010, according to Chicago-based Hedge Fund Research Inc. Total
estimated capital invested with Asian hedge funds was $82.1
billion at the end of 2011, Hedge Fund Research said.
“The number one challenge for us is to continue to
demonstrate that on our larger asset base, we can still produce
the same quality returns,” Yong said in his 16th-floor office
overlooking the Fountain of Wealth in the Suntec City complex,
one of the island’s business districts. “Hedge-fund investing
is like a marathon. I intend to do this for at least the next 20
Twenty years ago, Yong was serving his compulsory military
service, becoming operations officer of the 24th Battalion of
the Singapore Artillery. Back in civilian life, he went on to
study as an undergraduate at Singapore’s Nanyang Technological
University, getting first class honors in banking and finance.
After a stint in the financial engineering department of a
local bank, Yong took a job in 1997 at what is now JPMorgan
Chase & Co., where he was a trader on the Asian markets
derivatives and fixed-income desk. It was here that he met his
wife, Hsin-Li, a Cambridge graduate working in the economic
research department. Today, she has left banking to look after
their three children, ages eight, five and three.
A holiday to Hong Kong where he met up with a friend at
Goldman Sachs turned into a job offer from the Wall Street firm.
He moved on to Goldman’s derivatives trading desk in Hong Kong
in February 2000, where he sat near Adam Levinson, who is now
chief executive officer at Fortress Investment Group (Singapore)
Pte, the local arm of the New York-based hedge fund and private-
“It was pretty intimate and there were significant risk-
taking in the hands of select few individuals in every region,”
Levinson said in an interview of the time he and Yong shared at
Goldman Sachs. “That culture is what I remember — that was an
era where you were very professional about the way you
approached markets and took risks.”
Yong then spent 2 1/2 years with Goldman Sachs in Japan as
head of trading for South Asian derivatives, fixed income and
In November 2005, he joined Kenneth Griffin’s Citadel,
where he set up and ran Asia currencies, interest rates,
relative-value and macro trading.
Then, the next step toward independence: in February 2007,
he became chief investment officer and a managing partner of
Abax Global Capital Ltd., an asset manager part-owned by Morgan
The Dymon Asian macro fund started trading in August 2008
with $113 million from Tudor as well as partners and employees.
The next month, Lehman Brothers Holdings Inc. collapsed and the
worst financial crisis since the Great Depression ensued.
The fund started accepting money from outside investors in
August 2009, as he separated from Abax.
Yong, now a fully fledged hedge-fund manager, slept in his
office about 20 times a year in those early days running Dymon,
he said in the interview. He had to reassure his mother he
wasn’t “crazy” working such hours. Weekly jogs around
Singapore’s MacRitchie Reservoir, where monkeys pester visitors,
helped keep him fit, he said.
His fund returned 16.4 percent in 2009, trailing the
average 26 percent gain of Asian hedge funds as equities
strategies led gains amid a stock-market rally. The next year
was much better as he returned 15.2 percent, beating the
industry average increase of 8.5 percent.
Assets swelled to about $500 million in March 2011, doubled
to more than $1 billion by mid-2011 and doubled again by
February to $2.5 billion.
In the midst of Dymon’s expansion, Yong’s friend and former
colleague Levinson returned to Asia as a competitor.
“We’ve demonstrated that you can do macro from Asia, which
really hasn’t been done with a lot of success before,” said
Levinson, who moved to Singapore from New York in January 2011
to lead Fortress’s Asia-specific macro-trading activities. “We
operate in the same arena, but we do things differently enough
by style so I don’t think about it as competition.”
Macro funds are rare in Asia, making up 5 percent of hedge
funds in the fourth quarter, compared with 22 percent globally,
according to Hedge Fund Research. Equity-focused hedge funds
accounted for 76 percent of funds in Asia, compared with 46
percent in the global industry.
The region’s hedge fund industry has been more focused on
equities because most managers that emerged from the Asian
financial crisis, which followed the July 1997 devaluation of
the Thai baht, came from investment firms that bet on rising
stock prices, a strategy known as long-only.
The Fortress Asia Macro Fund, which was started March 1,
2011, gained 3.6 percent in the 10 months ended Dec. 31,
according to a Feb. 28 statement. Macro funds on average lost
1.2 percent last year, according to Singapore-based Eurekahedge.
Levinson says it’s tough to maintain performance along with
the growth of the funds, a topic of conversations with Yong he’s
had over the past six months. That challenge can be even greater
for Asia-focused funds, where smaller and shallower markets can
constrain managers’ ability to wager on their views, he said.
“Three years from now, I think the markets will deepen and
you can grow accordingly, but you don’t want to be bigger than
the market would bear, otherwise you run the risk of performance
degradation,” Levinson said. “That’s happened to some of the
large funds here as well.”
Asia’s hedge-fund history is littered with firms that took
off like Dymon, only to stumble. Artradis Fund Management Pte,
which made $2.7 billion for investors as markets seesawed in
2007 and 2008, said in January last year it would close and
return money in its AB2 Fund and Barracuda Fund. Artradis, based
in Singapore, managed about $800 million as of Dec. 31, 2010,
compared with almost $5 billion in 2008.
Sparx Group Co. is a Tokyo-based hedge fund that was once
Asia’s biggest. Its assets have dropped by almost 90 percent
since a 2006 peak of 2 trillion yen ($24 billion) as performance
“Many hedge funds grow well above their optimum size,
which makes it much harder to generate strong returns,” said
Don Steinbrugge, managing partner of Agecroft Partners LLC, a
Richmond, Virginia-based firm that advises hedge funds and
investors. “Many investors view size as a measure of quality
which gives the largest hedge fund firms that are open to new
investments a large fundraising advantage.”
Yong attributes much of his success to Paul Tudor Jones,
who declined to comment for this article.
“We wouldn’t be here if it wasn’t for Tudor,” said Yong,
who wore an open-necked blue shirt in the interview. “In my
mind, Tudor is the best macro fund in the world. There’s a
culture of fairness and excellence. These values emanate from
Paul himself. It is good to see the good guys win.”
Like Jones — who runs the Robin Hood Foundation, a charity
he started in 1988 with the goal of eradicating poverty in New
York — Yong plans to give away a significant portion of his
wealth. He has set up the Yong Hon Kong Foundation, named after
his father, that will help children from challenging family
backgrounds and people who “fall through the cracks” of
Singapore’s social safety nets.
“Making money is just a means of keeping score, to know
how well you are doing as a trader and investor,” said Yong,
who has lost none of the competitive drive that saw him play
badminton for Singapore as a student.
For now, Yong says his number one focus is performance.
Dymon may seek more cash from investors next year if the fund
continues to return the 15 percent to 20 percent that it targets,
Currently, about 60 percent of its investors are from the
U.S., 30 percent from Europe, and 10 percent stem from the Asian
region. Most are large institutional investors such as sovereign
wealth funds, pensions and global asset-management companies.
Feeling China’s Pulse
Yong says the ability to understand China, the world’s
fastest-growing major economy, is “crucial” as it has enabled
Dymon to make the right bets on policy shifts months in advance.
Dymon Managing Partner Keith Tan, who previously oversaw
Standard Chartered Plc’s business in Shanghai, helps the team to
“stay one step ahead” with access to executives at more than
300 small and medium-sized Chinese companies as well as
government and central bank officials, said Yong.
“Chinese companies will have an idea of what they need to
deliver over the coming three to six months based on their
orders,” Tan said in the same interview. “By staying close to
the pulse of the corporates, we get a better sense of what may
happen two to three months down the road.”
Dymon isn’t betting on major policy changes in China,
although there is a chance for a small interest-rate cut mainly
because of recent weakness in manufacturing data, Yong said.
“We remain constructive on a China soft landing scenario
because if China is faced with a hard landing, the policy
response will be swift and effective,” he said.
Short Yen, Euro
Currently, Dymon Asia is mainly short Japanese yen and euro.
The eurozone situation will get worse later in the year with
Greek and French elections and a referendum in Ireland, while
the Bank of Japan seems to be committed to a much larger
monetization program and its fight against deflation, which
could lead to further weakening in the yen, he said.
“We are in a nimble and opportunistic trading mode,” he
said. “The long-term outcome is made up of snippets of short-
term events. So given short-term events are evolving, we have to
constantly refresh our long-term views and positions.”
His one enduring strategy: investors should seek scarce
assets and not paper money “as the supply of fiat currency from
global central banks can and will only rise,” he said.
Stephane Pizzo, founder of Singapore-based hedge-fund
investing firm Lotus Peak Capital Pte, who advised some clients
to put money into Dymon’s macro fund, says investors are drawn
to the firm because there aren’t many macro funds in Asia.
“Institutional investors are attracted to what Danny has
built in terms of the whole trading team, the back office,
compliance,” Pizzo said. “Danny is somebody who is always very
calm. His reading of the market is quite good and he’s able to
step back, not get excited, analyze the situation and draw the
While Asia’s hedge-fund industry remains smaller compared
with the U.S. and Europe, economic growth and rising affluence
in the region will help the industry grow, Yong said.
“Given the regulatory and social changes in the West, Asia,
and Singapore have the potential to develop itself into the
hedge-fund center of the world,” he said.
The total number of Asian hedge funds increased to about
1,100 at the end of 2011, according to Hedge Fund Research. More
managers are choosing to relocate to Asia amid increased
regulatory oversight in the U.S., including the so-called
Volcker rule to curtail banks from using their own capital to
make wagers on stocks and bonds.
Dymon is set to hire a chief executive officer and a
president to oversee the business within the next three months,
allowing Yong to focus on his role as chief investment officer,
Yong, who doesn’t boast the elaborate hobbies or
collections that occupy the time of some peers, said his life
revolves around his work, his wife, and his three children.
“The day you feel like taking your foot off the pedal a
little, you’d better pass the business to somebody else or give
investors back their money,” said Yong, who still keeps a
pillow in his office cupboard. “Otherwise it’s a recipe for