To Danny Yong, the Middle East is still Asia.
The cofounder of $2.3 billion Dymon Asia, a multi-strategy fund with eight offices in different Asian markets including Japan, Hong Kong, and Singapore, said his firm’s planned ninth office in Dubai is still a part of the firm’s regional roots.
“It’s actually quite a conducive time zone to trade,” Yong said in an interview with Business Insider, especially for people trading European interest rates or macro moves. They can get exposure to Asian, European, and American markets, and Dymon Asia is also planning to invest in UAE equities.
But there’s also a market reality driving the decision to set up a shop further west.
“The office there is primarily for talent,” said Yong, who has been hiring roughly seven new portfolio managers per quarter since early last year. Current and prospective PMs are asking about opportunities in the Middle East.
“It’s primarily a talent business. If they’re telling you that they need this to do better, you accede to that request.”
The Asian hedge fund scene, in a sense, is booming. In particular, multi-strategy hedge funds, the industry subset that large allocators are desperate for thanks to their uncorrelated and consistent returns, are growing in markets like Hong Kong and Singapore.
Dymon, which launched in 2008, is fundraising and hopes to hit $3 billion soon, Yong said. New multi-strategy launches from former Millennium executives Kurt Baker and Jonathan Xiong will start with $3 billion and $1 billion, respectively, later this year, Bloomberg reported. Houston-based Pan Capital is planning to hire macro PMs in Hong Kong this year.
US-based bigwigs like Citadel, Point72, Millennium, and more have built out teams in the biggest Asian hubs as well as places like Tokyo and Sidney. Even Bobby Jain, whose hotly anticipated new fund has not yet begun trading, has built out an Asian team and just hired Amir Ravan, a former senior portfolio manager at BlueCrest based in Singapore.
These people-heavy firms need plenty of talent to make it all work, and the relatively small size of the Singapore market, coupled with political uncertainty in Hong Kong, puts a strain on the entire system. Already, several funds based in the region — such as Pinpoint Asset Management and Nine Masts — had to adopt pass-through fee structures to retain top people. The success of these managers might rely on westward expansion in growing hot spots like Dubai and Abu Dhabi.
“This increased demand for talent has led to higher competition amongst funds. There are not that many experienced buy-side investing professionals,” said Arun Singhal, a former Millennium portfolio manager in Singapore who now runs a crypto-focused investment firm.
Singapore, in particular, has gone from being a sunny tax break for asset managers looking to break away from Hong Kong or the United Kingdom to a crowded and expensive island full of funds. While the tax incentives are still there — and helped increase the island’s number of hedge funds to more than 250 — it’s no longer as appealing for mid-career portfolio managers and analysts to move to one of the world’s most expensive real estate markets.
Not just the Brits
The Middle East’s push for hedge funds so far has been centered on Europeans, with growing hubs like Abu Dhabi rolling out the red carpet for British traders.
For more developed markets like London, the pitch from the Middle East has focused on a lack of red tape and lifestyle changes, and the region is fast becoming the place for macro traders, in part thanks to the efforts of one of the industry’s biggest names, billionaire Alan Howard, who has moved dozens of people to the region.
For ambitious Asian funds, it might just be the next frontier in their growth, in the same way a London office or a Miami outpost might be the next step for a New York-headquartered manager. Hong Kong-based Segantii Capital Management, the $5 billion multi-strategy fund run by Blackpool Football Club owner Simon Sadler, beat Dymon to the punch and opened a Dubai office last year.
It helps that it’s a place that’s often literally invested in the success of the funds.
“Managers follow allocator trends, and the Middle East has been actively allocating while other regions have slowed their deployment. This prompted many who already had a sales presence to build out a trading presence,” said Samantha Rosenstock, deputy chief investment officer of external alpha at Man Group.
‘It’s a matter of choice’
The size of and politics in Asian markets are the region’s biggest limiting factors. The massive Western institutions that now makeup hedge funds’ main investor base are hesitant to put money to work in a region where China weighs so heavily on people’s minds, people fundraising in Asia say.
Asia’s future requires more than just a growing populace, said Craig Thorburn, the director of research and insights for Australia’s Future Fund, at a panel in March.
“It’s also defined by the policy choices that the various leaders of these very different countries are going to be making. That is crucially important.”
Thorburn’s organization, which has more than $270 billion in assets and is a prominent hedge-fund allocator, wants to increase its Asian exposure but puts the onus on policymakers to make it attractive to do so.
“One of my favorite quotes is: ‘Destiny is not a matter of chance; it’s a matter of choice,'” he said.
Joe Cheung, the chief investment officer of asset allocation for the Hong Kong Monetary Authority, said at the same conference last month that even his organization — which runs a de facto Asian sovereign wealth fund with more than $500 billion in it — has to make “quite an active decision to overweight Asia” compared to other, larger markets.
“It is still quite a small proportion in our portfolio,” Cheung said.
Protecting their turf
Asia-based managers, naturally, aren’t planning to slow their growth. At Dymon, additional barriers to entry in Asia can be a competitive advantage. The firm’s investor base, Yong said, is now mostly in the region, a shift from when they launched 16 years ago.
After a 12% gain in 2023, the multi-strategy fund is up 6.6% in the first quarter, besting marks from much larger American peers such as Citadel so far this year, which made 5.75% in the same period.
Yong said roughly half of their recent hires have come from large global platforms, which can offer larger payouts, but don’t have the regional advantages Dymon does.
“The risk team and the investment committee sit in the same time zone as the managers. They can get up and walk over and talk to us if they need to,” he said.
“We aren’t able to compete globally, but we can compete in Asia,” said Yong.
Right now, he views the Middle East as an accelerant to his firm’s growth, not a threat.
“I don’t expect any huge outflow of talent,” he said.
