By Aradhna Dayal
As the world mourns
the loss of Steve Jobs - an iconic human being who, with his
vision and creativity, changed the world - I cannot help but
think of the visionary characters that revolutionised the
investment world with the concept of hedge funds.
Names that come to mind are those of pioneers such as
Benjamin Graham and Jerome Newman, Bernard Baruch or Alfred
Jones - the legendary investors who introduced skills such as
shorting, leverage and performance-based fees to transform the
world of investing.
Much like Jobs, they were people who had the conviction to
follow their dreams and beliefs. They infused creativity,
foresight and technology to engineer investment vehicles that
enabled true alpha generation in what was primarily a
beta-driven investment world.
Hedge fund managers were probably also the first investors
to realise the power of Black-Scholes and similar quantitative
tools to hedge away market risk and offer true alpha products -
through funds that were market-indifferent or absolute return
in nature, allowing investors for the first time to preserve
capital and make money in both up and down markets.
So it is perhaps not a complete overstatement to say that
hedge funds did to beta products what Apple did to the world of
computing and phones.
A look at the present global economic and market conditions
shows how hedge fund managers are still to a large extent doing
what Jobs preached and practised. In his famous 2005
commencement address at Stanford, Jobs talked about two key
points: connecting the dots; and love and loss.
In many ways, hedge fund managers the world over today are
indeed connecting the dots. In my travels I've met managers who
are using their early forays into once-impregnable markets like
China and commodities to run Sino-Western metal arbitrage
funds; managers that are applying rocket-science maths and
cutting-edge research to create sophisticated and innovative
trading models; and managers that are using their experiences
from the Mexican peso crisis to the 1997 Asian crisis to create
smart 'black swan' strategies.
In short, these are people who are leveraging upon their
life experiences to form strategies that aim to go beyond the
normal, mundane investment boundaries and to protect capital
amid what are probably the most volatile market conditions this
The second point Jobs highlighted was love and loss - which,
in case, related to his exit from Apple and subsequent
triumphant comeback. Since the 2008 financial crisis, it would
be fair to say that a large number of hedge fund managers - who
were so passionate about their craft - have tasted the bitter
pill of significant negative returns and redemptions.
The Asian hedge fund industry is a testament to that, having
seen its overall assets under management plummet from $192
billion at the end of 2007 to $119 billion in June 2009.
However, much like Jobs, hedge funds have not lost faith. In
fact, I believe that the Asian hedge fund industry has come out
of the crisis much more institutionally and systemically robust
And it is this new-found strength - based on solid
operational infrastructure, alignment of interests and the
development of long-term investor bases - that will go a long
way towards making the Asian hedge fund industry a mainstream
asset allocation class for major international investors in the
A final point that Jobs made in his inspirational Stanford
address was to stay hungry and stay foolish. I believe that in
truly testing times such as these, when hedge fund managers
globally are struggling to sustain returns and their
businesses, the only way forward is to continue reinventing
themselves and looking at newer ways to produce alpha - from
areas such as renewable energy or even social investing.
As we mark the 10th anniversary of the AsiaHedge Awards, I
cannot help but reflect on the history and development of our
own business. In our own small way, and one that is clearly a
very far cry indeed from Apple, our business also started off
in a garage (metaphorically speaking at least - it was actually
a spare bedroom).
When HedgeFund Intelligence created AsiaHedge back in 2000,
the aim was to create a kind of 'family' via a single platform
- unifying for the first time as an "Asian hedge fund industry"
a previously disparate group of managers that were trading
Asian markets from widely scattered locations across New York,
London, Hong Kong and Tokyo.
Ten years on from the first AsiaHedge Awards, much has
changed in the Asian hedge fund industry - and there are big
challenges ahead again. But what remains the same is the
philosophy and the pioneering spirit that inspire and drive
this entrepreneurial business of hedge funds.
So here is hoping for a world that continues to be inspired
by the likes of Steve Jobs. May we all stay hungry, may we all