Jay:  I am here sitting in the offices of Edward Chin. I always enjoy doing in-person interviews. I don’t have an opportunity to do very many of them, but for people that come through visiting into Hong Kong or are based here, which you are, I always enjoy doing it face to face because I find it more engaging. Let me just introduce you to the show, Ed. Thank you so much for your time, again.

Today’s show guest is Ed Chin. He’s a partner at MDE Hedge Center and is the executive director of a multi-billion-dollar hedge fund portfolio. He’s a keen believer in impact investing and is active in Press Freedom and the democratic movement in Asia. He advices on hedge fund startups from both a regulatory and connectivity standpoint.

So we’re going to have a very interesting discussion today, and it’s going to focus around a lot of issues about Hong Kong. I’ve actually been looking forward to having this conversation, so thank you again for taking the time. And we’ll talk a little bit about investing at the end, but I want to focus today on what you’re most dedicated and passionate and working on right now.

So for the audience listening in, perhaps you could just give us a brief background explanation of who you are, where you’re from, and what you do now.

Ed:  Sure. I was educated in Hong Kong. I went to high school here at a school called Diocesan Boys’ School and then left for Canada. I briefly studied in the US at U of Minnesota. At first I was studying speech communication, and I found out it’s difficult to get a job as a broadcaster if I moved back to Canada. So I switched back to business and did my MBA at the U of Toronto. That was way back 20 some odd years ago.

I did full-time run the Chinese section of a multicultural radio station in Toronto called CHIN, it stands for Canadian International Network before the handover and then switched back to finance running US and global long-short at TDS Management and then Nesbitt Burns, which is part of Bank of Montreal, and then came to Hong Kong in the year 2000, joined a publicly listed hedge Fund called Man Investments, part of the FTSE 250.

And I’ve been back for 19 years now. I guess, just like what you alluded to earlier, I’m involved in a lot of other things other than long, short, or arbitrage. But I’m very much concerned about what’s going on in Hong Kong on the human rights front and also on the press freedom front. So that’s where I spend some of my time.

Jay:  Right. So that’s quite interesting. You kind of referred to the fact that your initial passion or motivation was for something in publishing or radio or media, but then, because it was difficult, then you just kind of took the safety backstop of finance, which I have a background of finance as well. What originally excited you about broadcasting or radio or media? What caused your interest, from a young age, to want to pursue something in that field?

Ed:  Yeah. I remember back in high school, I was involved in drama and debating in the British system. So that keen interest kind of blossomed into something that I thought, hey, if you go to the US, when they say “liberal arts education,” it’s really liberal. I even took modern dance and ballroom as my minor, so it’s quite different from what a traditional Chinese family would expect their kids to do…something more safe.

But when I relocated to Canada, I guess I had to face reality. Liberal arts can be too liberal, so better stick with something that’s more practical in the colder climate.

Jay:  Yeah, right. Well, DBS obviously is one of the best schools in Hong Kong, and I guess they had a program there that you were able to explore this sort of thing? I imagine most traditional Asian parents are quite conservative with this sort of thing. I know my parents would probably urge me not to even pursue anything or explore that interest. Right?

Ed:  Yeah. Way back in the ’80s, we had a choice. Back in form four, either we choose the science stream or the arts stream. So I choose the arts stream. So definitely I could not be a doctor if you choose the arts stream. And when I went to Canada, of course, you studied grade 11 and 12 again. So you have the option. But then I’m never really too much interested in going into the medical profession even though my dad and my mom, they were both medical doctors. But it’s not something I really enjoy doing or think of doing.

Jay:  This brings us to an interesting point here. I just want to dive right in. Thanks for giving us the background. And as someone with a background of finance, I find it refreshing every time I meet people that try to do things outside of the realm of finance. I know you’re very involved still within the financial world, and you’re also active within media, particularly within finance. I know you write for the Apple Daily, and you have a radio show here in Hong Kong.

But we’re at a very interesting point in history right now with regards to Hong Kong and what’s happening in China. For the audience listening in and also for my own edification and learning — because I’m not from Hong Kong originally. I moved here 14 years ago. It feels like home to me, but perhaps you could give us a little bit of the background of what happened in Hong Kong in ’97 during the handover subsequently till now, and give us a little bit of the backdrop of the social unrest that we’re seeing. Because I think that mainstream media, what they portray, particularly to people not living here and to the west, they don’t really get the full picture, or maybe they are confused. And a lot of people don’t really know about what’s actually happening here on the ground and the true issues that people are basically fighting for. So maybe you could start with a broad backdrop, and then we can narrow the focus.

Ed:  Okay. I graduated in ’89, which is 30 years ago. I flew down to L.A. around June time. At that time, there was the Tiananmen protest. The university students, they were fighting for more freedom of speech and then fighting for democracy in general. I was watching on CNN, and I saw what happened on June 3 and also June 4th. They were gathered near the Tiananmen Square area. And on CNBC, you see the tanks that crushed the students. So that was the time when I was thinking you could learn a lot about all the Markowitz model, all the finance theory, but then what’s more important is how to be a human being and how to appreciate how government works and whether a person can live safely and speak freely under different governments.

And being born in Hong Kong, we were under the British rule. It was a borrowed place at a borrowed time for almost 150 years. And then a lot of people back in the ’80s would realize that this so-called 150 years of colonial rule would end in 1997. And at that time, back in the ’80s, a lot of people were thinking what would happen to Hong Kong after 1997, because some of the people from the older generation understand the Cultural Revolution that happened in the ’60s. Millions of people were killed and persecuted under the Communist regime. The Communist Party, they took over China in 1949. So this also embarks the 70th year of their ruling under the Communist rule, under the CCP.

So a lot of things have changed in the last, I would say, almost 20 years or so. Now the handover was 1997. And then we also witnessed, there were like five different Chinese leadership from Mao Zedong to Deng Xiaoping and then Jiang Zemin, Hu Jintao, and now Xi Jinping. And then when we saw this Tiananmen crackdown back in 1989, we didn’t know how we should analyze Deng Xiaoping because he seems to be like a liberator, a reformer. But at the same time, he crushed the dreams of democracy. And then it’s estimated more than 3,000 students were killed at that time.

So I was thinking, hey, would I one day be ever coming back to Asia, to Hong Kong, to contribute to the place where I’m most familiar with because I was educated, born under the colonial rule. But I left for US and Canada for 16 years after 1984.

So I had a decision to come back, actually had an opportunity when that one big hedge fund was looking for a country head in Hong Kong, and I took the plunge, so to speak, and I never looked back, in the year 2000.

Now the first ten years of the handover from 1997 onwards, it was fine. A lot of people might remember in 2003, we had the SARS outbreak, and then the real estate prices, they dropped a lot. Most foreigners, they would know Hong as a very opportunistic place, where you make money from the real estate and also from the stock market. But not a lot of people talk about democracy, human rights, and whatnot.

But fast forward a bit. In 2013, there is a Hong Kong U law professor by the name of Benny Tai who wrote an article at Hong Kong Economic Journal, talking about civil disobedience might be the last resort to achieve true democracy in Hong Kong.

I got interested. I called Apple Daily which is the highest circulation Chinese newspaper daily in Hong Kong. So I asked the news reporter to introduce me to Benny Thi, because Benny also had another feature in the Next Magazine. So it was like concurrently at Hong Kong EJ and Apple Daily. So I connected with Benny, and I realized that he also went to the same high school, same alma mater, except he was four years my senior, same house too.

So we ended up having a conversation. I had, hey, maybe we should form the Finance and Banking Group to support your cause. So that’s how this Occupy Central with Love and Peace Finance and Banking Group got started in 2013. That’s before the Umbrella Movement. That happened on September 28th, which lasted for 79 days which a lot of people remember.

Jay:  Yes, okay. So before we get into the Umbrella Movement, which I think is probably what most people around the world have seen and would recognize or remember, what was the catalyst for Benny Tai to write this piece, position paper, if you will, in 2013? This was 15 years after the handover. Things seemingly were going okay, smooth. I remember I moved here just after the start of 2005. Everything seemed fine. I didn’t really feel… Of course, I wasn’t that in tune with the political environment, so I wasn’t… Probably back then I was much younger. I didn’t really know or was aware of what was going on behind the scenes. But there must have been something that happened to urge him or to push him to write this. Or was it just something that he had brewing inside that he had to just get out on paper?

Ed:  He was a law student first at Hong Kong U, and he went for his higher education in law in the UK. He was a student leader at Hong Kong U, and he was one of the student representatives who sat in the drafting of the basic law, from my understanding. So he was deeply involved in the process. He also, I think, has a deep understanding of the CCP, like how after they took over, there was a big starvation period and also the so-called Cultural Revolution in which a lot of people were persecuted. And then, of course, he was also, like me, born under the colonial days, under the UK British rule.

I guess that urged him to… And then he was involved in many different things regarding trying to bring the democratic movement of Hong Kong that hopefully after 1997, we could have one person, one vote without pre-screening, which we failed.

Jay:  Yes. That’s interesting. So the history of Hong Kong has always been fascinating to me, and not just because I’ve lived here for a while now, but as someone that is an outsider, I think that it’s hard for me to actually understand someone like yourself who was actually born into this “free” society before, and then, all of a sudden, that gets yanked out from under you. And so it seems to me that this is the sentiment that a lot of people in your generation and prior share. So obviously there’s disputes and conflicts within the people of Hong Kong. And so this reached a tipping point, so to speak, within events that you just alluded to, which was the Umbrella Movement. And maybe you could walk us through what happened there just to refresh the audience of how we’ve gotten to the state of where we are today.

Ed:  Now in 2014, August 31st, Beijing announced that Hong Kong basically is under full control by Beijing. That’s the ultimatum. And then a lot of people were really flabbergasted by what they announced. Prior to the Umbrella Movement, we called Occupy Central. Now Benny was thinking the middle-age people could take more risk because they already have their certain net worth. They could go to the streets and been block the streets for a day or two. It’s more like a symbolic thing. You sit down the Chater Garden, which is in Central near an area which is now the old Mandarin Hotel. So you’re not really blocking the traffic. So it’s more like a symbolic thing.

But then the youngsters are the ones who are really concerned that, hey, if there’s no fair play in Hong Kong, and if the so-called top jobs and whatnot and also the upward mobility is limited, how can they see there is a brighter future, because they were… This is the younger generation. We’re talking about the high school kids and also those at university. They think that with the princeling from mainland China who is overruling Hong Kong now is even more terrible than the so-called old Hong Kong tycoons who are mostly the developers — real estate developers and the families who control Hong Kong are being replaced by the princelings.

And then, of course, if you take a look at the market capitalization of Hong Kong stock exchange, 70% of the market cap is controlled by Chinese-related companies. And out of the 2000-something listed companies in Hong Kong, a hundred-something of those, they are so-called China-related. And then they have party members who oversee these publicly listed companies, overruling the privilege of the shareholders, which is quite unprecedented. So these are things that the finance and banking group that support Occupy Central is something that we fight about. We fight against these things.

Jay:  So corporate governance is a huge issue within Chinese corporates, especially the ones that have listed here that you just spoke about. And just for the audience, when Ed was talking about princelings, you’re alluding to, basically, the second generation of the previous Communist Party leaders. Right?

Ed:  The kids of the party members. Those who are in control, mostly in their 50s to late 60s. Those are in power right now. And if you talk about CCP, it’s huge. Now, out of 1.3 billion population in China, you’re talking about 90 million Communist Party members. And those few hundred at the top, they really pretty much control a lot of things. They control China.

And then if you talk about fair play, it’s difficult. And also, a lot of these so-called princelings, they are already Hong Kong residents. They control the real estate. Those who live in the A4 area, which is like the peak area, a lot of them you see two different places. One is the Hong Kong plate. One is the plate that gives you entry to China. These are like the so-called untouchables.

Jay:  Yeah. You can see those cars driving around the streets here of Hong Kong.

I jumped around a bit, but before we continue, I think it’s quite important to touch upon the one-country-two-systems agreement that was set back in ’97 and what is the basis for that, because this is a point of contention, I think, because a lot of people argue that the way the arrangement was initially laid out is not actually how it’s being played out at this point.

Ed:  No, not really.

Jay:  Could you explain what exactly is “one country two systems”? What does that mean? And how are you seeing that actually play out today?

Ed:  Even though the paramount leader, Deng Xiaoping — that’s the second generation paramount leader under the CCP — made, I would say, a mistake of having this Tiananmen crackdown in 1989. A lot of people still respect him as a reformer. Definitely China right now is quite an economic power. Otherwise, there is no US-China trade war.

But at the same time, if we rewind the clock back in 1084, there was a joint declaration that was signed between the UK and China. Briefly, what is the says is, other than diplomacy and military, Hong Kong people would have full autonomy. That means the Beijing government would not interfere with Hong Kong affairs. But after 1997, after 19 years of handover, especially in the last few years, from the third chief executive to what we have now, which is the fourth chief executive, we see a long arm from China interfering with the Hong Kong affairs.

Basically, you have to kowtow to the regime, the so-called technocrats. They don’t really have… They cannot make their own decision in Hong Kong affairs. So it’s like George Orwell in 1984. Big brother is watching you.

Now, I have to touch on the 1984 joint declaration. It’s quite similar to the 1951 17-point treaty that was signed between Tibet and China now, because the Communist Party, they took over China in 1949, and afterwards, they had war with Tibet.

Now, of course, China claimed that Tibet, since the beginning of time, it’s part of China. But if you read history from outside, meaning… Normally, if you read history, if you’re inside mainland China, there is no Tiananmen crackdown in 1989. It’s not even mentioned. So Tibet, in their history book, it’s always part of China. But from what we read and also from history and also… I mean, it’s in the public domain too.

There was a treaty that was signed in 1951. Basically, the Tibetans were being held at gunpoint to sign this treaty. Same thing other than military and diplomacy. They would not… Meaning, the CCP would not interfere with the Tibetan way of life, their administration, with their autonomy, because they kind of lost to the Chinese Communist Party from ’49 to ’51. So they were forced to sign something.

And in 1959, the CCP Army went to Lhasa, and then at that time, the very young 14th Dalai Lama was forced to leave in exile. And now the government in exile, it’s located in Dharamshala up in India. So this is 60 years of exile.

And I understand and I empathize the situation very much, because a lot of these Tibetans who are descendants from the old Tibet, they live in Toronto — around 10,000 of them. And just a few hours ago, I was having a radio show with the students for Free Tibet, the national director. Because it was also big news in Canada just two weeks ago. The U of Toronto Scarborough Campus, they elected…the next student president is of Tibetan descent. But then the so-called 50 Cent Army, they wrote a lot of angry letters trying to revoke that decision, trying to not let her swear in as next student-union president. So it became like national news too just less than 10 days ago.

Jay:  This situation happening now in Hong Kong has some striking parallels with what happened previously with Tibet. Obviously we would hate to see something like that materialize. And I suppose this is one of the reasons why you’re an advocate for your cause, so to speak.

Like you said, China’s had long arms or extended arms into Hong Kong’s affairs, oftentimes where they shouldn’t. You can scan through the news and recently history of Hong Kong, and there’s certain events that have happened, such as a bookseller that got taken back into China, various things such as this. And then, of course, the Umbrella Movement.

Going back to the Umbrella Movement, how did that end up being resolved? How many days did that last? And what was the eventual outcome of that movement.

Ed:  They occupied the streets from Central to where the old Mandarin Hotel is. It’s quite long. They blocked the streets. Actually, I would think more than 1.2 million Hongkongers, they went to that occupy site and also a little bit of Mong Kok as well. It’s not just Central. A lot of Hongkongers, they were furious. They were angry because the second paramount leader, Deng Xiaoping, promised we would have a one person, one vote, and we’re almost halfway. By 2022, it’s a halfway of the so-called “One country, two systems.” But this experiment, to a lot of us, has failed miserably.

It ended in December 2014. I can’t remember what day, but lasted for 79 days. So Hongkongers, they don’t get what they want, and also, a lot of these so-called more outspoken and at-the-forefront protesters, including professor Benny Tai, they will be on trial. And then for Benny and nine others, the verdict will come out on April 9th this year, which is on a Tuesday. I believe it’s a Tuesday morning. So I don’t know what time this will be broadcasted, but very close to that time.

Jay:  Yeah, very close. So they got arrested then. Or what happened?

Ed:  Not arrested. But for Benny, they went to the police station and said, hey… He reported the case that he was basically one of the leaders who talked about civil disobedience. He didn’t break any rule. Like in France, you would set something on fire if you see a riot. This is not a riot. This is a peaceful protest. A lot of people call it the Umbrella Movement because even the police, when they use the baton to beat up the so-called protesters, a lot of them, they just sit and let themselves be beaten with blood shedding. So it was quite a scene at that time because it’s a nonviolent disobedience movement.

Just think about Gandhi, what happened even years ago. So this is what a lot of us want to achieve, because it’s important to have a clean government and also to have Hong Kong people choosing Hong Kong’s chief executive without Beijing’s interference, which we don’t have.

Jay:  Yeah. We saw that with the last elections. That’s an interesting point you bring up. How do you feel about Hong Kong government and their stance and the leaders of this community? Do you feel like they’re predominantly just talking heads of China and elected that way? Or are there some grassroots true Hongkongers that are trying to stand up for this cause?

Ed:  If you talk about the Hong Kong government, a lot of them are technocrats, bureaucrats, and then you have something called the legislative council. The LegCO, there are 70 seats. Some of them are functional constituencies. Some of them are directly elected. Unfortunately, two-thirds of the seats are pro-Beijing. And then, because the way it is set up, it’s almost impossible to win these functional constituency seats, for instance, if it is in finance, because a lot of the brokerage firms, first of all, it is the owner of the brokerage could vote. And then a lot of them are pro-Beijing. And then if you talk about the smaller brokerages… There are some bigger brokerages too, but if you count the number of brokerage votes, it’s impossible for someone who is pro-democracy to win enough seats to bring to LegCO.

So anything, honestly, the democratic legislator is wanting, they can do before, now they cannot do. There is a term called DQ in Hong Kong, meaning disqualify. They disqualified, I think, at least six pro-democracy legislators in the last three years. So there is not enough votes to overrule anything.

Jay:  So the odds are really stacked against people that are pro-democracy in Hong Kong, which is quite sad. I mean, if Hong Kong’s own government is rigged in such a way that it’s virtually impossible to influence the decision making, then, well, that’s why, I guess, people like you have to do what you have to do.

Ed:  And you mentioned about the Causeway Bay, which is an area in Hong Kong, the bookseller’s case. Some publishers, they wrote books which is like the National Inquirer in the US — some gossipy stuff, talk about whether Donald Trump has an affair. Of course, it’s gossipy. And the booksellers, they were abducted from Hong Kong to mainland China. One person, Gui Minhai, was abducted from Pattaya, Thailand to mainland China. And then they were confessed for front of national TV. It’s like a confession session.

And Gui Minhai right now, we don’t even know where he is. It’s scary.

Jay:  It’s very scary. I think it’s scary for anyone that really wants to be associated with democracy in Hong Kong. As someone that is basically a public person, as yourself, someone that is in the media and journalist field, you are on the forefront of that. So you’re actually putting yourself all the way out there.

I know that you wrote a letter of request to the Communist Party addressed to the president, Xi Jinping. Please tell us about that letter and what prompted you to write this letter. What was in the letter? And did you get a response? And did you feel afraid or scared during this process when you were writing, because I certainly would.

Ed:  Well, the Finance and Banking Group, now inside the group, 120, 130 0 us, now I’m the kind of figurehead, of course. And then some people work as a regulator. There’s the Hong Kong stock exchange and also something similar to the SCC. But they are more low-profile. And then in the highest profile person other than me, it’s the former director of HR at Hong Kong stock exchange. He took early retirement at the age of 51, and then he joined me to start this campaign, so to speak.

We placed an ad in Financial Times and also, I believe The Wall Street Journal and also local Apple Daily as well. Basically it’s the ten requests to the Communist Party asking Xi Jinping to honor “one country two systems” as prescribed in the basic law.

Now, of course, they say even now when they have these so-called meetings in Beijing, they would say, hey, the “one country two systems” will remain intact in Hong Kong and Macau. Macau is another special economic zone, so to speak. They were close to China.

But then who believed them? These are still something that they would mark their words. I don’t think a lot of people believe in “one country two systems” anymore, especially when just not too long ago — maybe ten days ago — there is a proposed amendment to the extradition act, whatever it is called, that if you commit a certain crime in, say, Taiwan, if the extradition act, the amendment is passed, Beijing could say, hey, someone passing through Hong Kong from Taiwan, they could arrest them when they land, and then they would put them on trial in Beijing.

Jay:  Scary.

Ed:  It could be a commercial crime. They could cook up something and say, “Hey, you had adultery with three different women in Beijing.” And then one person die or whatever. They could cook up some story. And then we have seen those for the bookseller’s case and also for Hong Kong political activists. They are quite concerned about this amendment, if it comes into effect.

Jay:  This is pretty scary. And before I hit record, we were just talking about traveling to China.

Ed:  Have you been traveling?

Jay:  I have not. And we were talking about the Huawei case where the daughter of the chairman was detained in Canada. It’s a very tense time right now, especially with the trade negotiations going on and this sort of thing. For me, personally, I do some business in China, but it doesn’t require me to go, and so I’ve shut down the travel just because it is a tense time. And you don’t want to take risks.

But having said that, as a journalist yourself and someone out there in the public domain and quite outspoken, do you ever worry about your personal safety and this sort of thing?

Ed:  I’m a commentator; I’m not like a reporter, just like a lot of people have different columns. And I do host a radio program in Cantonese, but I could tell you on January first, just two months ago, when there was a rally asking the Hong Kong government to uphold different things, like social issues. And then, of course, a group of us, we were lifting up signs saying, “President Xi Jinping, please release the two Canadians now.” And then the other slogan was, “President Xi Jinping, please honor ‘one country two systems.'”

Now without going into specifics, some of these people who held up these signs got intimidated. Like think about a situation… And I won’t give you too much detail because this case, it’s still being handled by the right parties. They were intimidated at home and then someone went to their office.

Jay:  Wow.

Ed:  That’s all I can tell you.

Jay:  That’s incredible.

Ed:  So it’s like some sort of a threat saying that we know where you live. We know where you work. We know where your kid goes to school. Now that’s all I’m telling you, because I don’t want to scare your listeners, because they’re global. Right?

But overall, I still think Hong Kong has been great, but Hong Kong has changed a lot in the last few years under Xi Jinping when he can have his term forever, honestly. He is 65 now. And some analysts, whether it’s political or just strict economic think that for him to keep in power, there could be a possibility for him to stay in power, to trigger something — to trigger something that’s out of the ordinary. It could be reunification with Taiwan. He announced on January 2nd he would not take away using military force as a consideration.

Jay:  That’s right.

Ed:  Which is a big thing.

Jay:  He would not rule out using…

Ed:  No, not ruling out that.

Jay:  I remember reading that and speaking to some friends in Taiwan about that.

Ed:  And then there’s Taiwan’s presidential election next year too. So a lot of things would heat up in the next year or so.

Jay:  Yeah, a lot of moving parts. Let’s go a little bit further out in the future, Ed. How do you think things are going to change? It sounds like things are actually changing for the worst for people that are pro-democracy in Hong Kong. Obviously 2047 is the end of that grace period. But it seems like far before then, they appear to be degrading.

Ed:  I would think 2022, halfway through the “one country two systems” things would change a lot. We have a thousand more days to go. I think so. Like with this extradition amendment, if it comes into effect, a lot of people that I talk to, they are thinking about leaving for the second time. Some of them already got passports from before, like before 1997, and then they came back. They already contributed to Hong Kong society. Thank about what happened in Tibet after 1959, the genocide. More than 1.2 million people were killed out of a population of 6 million.

I’m not saying a genocide would happen, but then, of course, the time is different because you’re talking about 60 years’ difference in time line. But then also think about what happened in Xinjiang right now, the Western Region of China. Now these, they are forced to eat pork. I don’t know whether you heard about that. These are like Muslims. And also, they are put in concentration camps. And then you would think, hey, why would I care as a Hong Kong person, because Hong Kong was a borrowed place, and why should we care about China, especially these different ethnic minorities?

To me and to a lot of people, it’s a “one world, same humanity.” And if something is evil, you have to really speak up and then…

I really think Dietrich Bonhoeffer, who was a theologian who was born during the Hitler days, he was of German descent, and then moved to the US. He was one of the guys who was planning to assassinate Adolf Hitler. Now he was saying, “Silence in the face of evil is itself evil. God will not hold us guiltless. Not to speak is to speak. Not to act is to act.” A lot of Hongkongers, they blindly believe that if you don’t say a word, you could be comfortable, but a lot things are changing. Just like you put a frog in boiling water. You don’t know until you are killed.

Jay:  That’s right. That’s a very vivid analogy that you leave us with.

Your view is that things are going to change rapidly and not for the better, which is why you are trying to do all that you can in your capacity. What sort of milestones or goals do you guys have in your advocacy group? Are there any certain events that you’re trying to basically come and let your voice be heard? Or is it just a general awareness campaign for the broader Hong Kong population? What are some objectives of the group?

Ed:  We just tell Beijing don’t use Hong Kong as a place for you guys to do all the money laundering stuff. Think about why is it so difficult for any businesses to open a bank account in Hong Kong. And also, all these so-called KYC and also cross-checks from banks, all the reviewing. Now a normal Hong Kong person doesn’t have half a billion US dollars sitting in the bank account. But when you talk about these princelings using Hong Kong as a gateway to money launder and even President Xi  talks about they have to clamp down on these corruption and whatnot. But actually, it’s the power struggle within the CCP. The normal Hong Kong business person, a normal lawyer, a barrister, is a proprietor. He cannot accumulate like a quarter billion in wealth. Unheard of.

So when you see all this so-called money flow that is in huge amount, it’s not from a normal Hong Kong person. Definitely it’s from someplace else. When you see all these fictitious, suspicious BVI accounts — like BVI accounts and also Cayman accounts — you have the shareholder level and also you have the director level. Sometimes — this is what we were told —the shareholders, they are not really the beneficial owners of the account. It’s owned by these so-called…the very powerful.

So these shareholders, if they do something wrong, they could be punished. That’s why you have Guo Wengui, who is in New York right now who is a billionaire who is a fugitive. And then they also say, hey, there is a lot of corruption within the party itself.

So in Hong Kong before we really believed in the rule of law. And also we believed that Hong Kong is safe. But as I mentioned to you earlier — and you also mentioned about the bookseller’s case, that someone could be abducted by the national security person and then to Beijing and then confess in front of national TV…

Jay:  That’s scary.

Ed:  That’s scary. I don’t know whether this could escalate into something even worse. But for us, all we really want is to just go back to what Deng Xiaoping promised, which is let Hong Kong people have true autonomy and don’t use Hong Kong as a place to do all these things that’s unlawful and that they pretend that they are trying to do something to uphold Hong Kong’s core values, which it’s not. Otherwise the kids would not be so upset. And then they don’t see a future.

Jay:  Yeah. You mentioned just now about people wanting to leave. I think I read a stat recently, an alarming stat about the number of people that are actually leaving or have left within the last five to ten years mostly because of these issues. They’re leaving Hong Kong, which is sad to see. And so I think it’s going to be interesting going forward. As the world changes, we see the world changing on a macro-level, a geopolitical level. The US is losing its prominence as the leader of the free world, so to speak. China is rising, the inevitable rise of China.

But then you have this, which has to be managed very carefully because I feel like if China wants to play nice with the rest of the world, they need to be particularly careful with how they deal with Hong Kong. And I don’t think that it would be in China’s best interest economically to continue down this path. That’s just my view, because I think that once you treat Hong Kong against how they want to be treated and against the way things were, you’re going to see a lot of Western foreign businesses pull out of Hong Kong. We’re talking about safety now. These are serious issues.

And I’m sure China is well aware of that.

I want to use this time to pivot the conversation. First of all, thanks for getting into all of that. I found this fascinating actually hearing a lot of the stories, the history that you gave. So thank you, Ed. I appreciate that, and I think the audience is going to find this episode particularly interesting.

I want to end on a lighter note.

Ed:  The hedge fund stuff. Let’s go back to something that we do.

Jay:  Yeah, talk about the finance industry in Hong Kong while it still exists.

Ed:  It does. Still vibrant.

Jay:  It might only be a couple more years, but let’s talk about the work you do here. MDE Hedge Center, tell us about that. I know that directly you would with hedge funds and setting up hedge funds. In fact, the way we met, I think it was a class that you were teaching for the regulator.

Ed:  I can’t remember. Trade like a hedge fund. Usually I have a few courses, which is like your New York Institute of Finance. You have to pass certain courses to get licensed. So I do teach these different courses. And then for MDE Hedge Center, basically I help people find something called responsible offices. You need to have an unconditional RO. I help them to pass exam papers, which is a silly exam. It’s not too difficult.

But back in 2003 when they had this hedge fund code get launched, it was quite difficult. The passing rate was very low, like 20-something, 30%.

Jay:  Oh, really? Wow.

Ed:  Quite low at that time. So MDE Hedge Center, it’s helping people who left an investment bank or some sort of asset management firm to do the proper setup so they could get the right regulatory approval, meaning if they don’t know how to write a proposal, how to submit to direct later. I help them to do it or to locate the responsible offices.

Because sometimes, one person is very good in trading. And then he wants to find a partner. You need two responsible officers at least to start a company.

Now just recently, less than two years ago, they also added another layer called Manager in Charge. So SFC wanted to drill deeper into how an asset management company is set up, who is really accountable to what — who is accountable to trading, to risk, IT, things like that. So I help them to think about the general picture — how they would foresee revenue if they have an asset management firm to be set up in Hong Kong, because it’s not easy. You definitely, I think, at least need 50 million US to stay afloat to cover all these different expenses. And Hong Kong’s rent is quite high still, even with all the challenges that we talk about.

So that’s one route. And usually when you have your license, either you set up a fund or you use segregated manage account, which is another route.

And, of course, another way to do it is you trade like a hedge fund, and then you become a prop firm, which a lot of people find it even more effective if you’re a true believer in extracting return, what we call alpha generation, then that could be a better route if you know how to trade. Some people are very good at asset gathering, and then they get compensated in the management fee and hopefully some incentive fee.

Now long funds, traditional long-only funds, you get compensated with a bigger asset under management. The bigger the asset, the more management fee you get. A hedge fund is different, as you know.

Jay:  Yes, as I know intimately. The hedge fund world is interesting. I’ve had a lot of conversations with both institutional investors — like investors into hedge fund — and the hedge fund managers recently. And just about how hedge fund performance has definitely lagged, has suffered in the past, really because of quantitative easing. I mean, it’s hard to beat the market in the last ten years. So I’m curious what your thoughts are of the future of the hedge fund industry, particularly in Hong Kong. Hong Kong has always been a rich haven or bed for rising hedge funds. It’s a global financial center. It’s the financial center of Asia. Do you still think that the hedge fund model works? And will it continue to work? Or are we just going to be overtaken by quants and algorithmic trading and systematic traders?

Ed:  Again, it is a matter of whether someone wants to form the fund, having a segregated managed portfolio or form a prop group. A prop group is, let’s say, four or five different traders who are very good in trading. And then you could negotiate with the prime broker or the broker of sorts to give you gearing or leverage. If you have five million, you could — with a track record, of course — negotiate and say, hey, you could have X number of times of leverage. It could be like a 20 times leverage. So suddenly, you are trading now five billion. You’re trading 100 million, if someone gives you as much as like 40 times leverage.

Suddenly there’s five million of initial capital becomes 200 million to trade. I have seen some people who thrive having a prop set up because they are not using other people’s money. They are just growing organically.

ThInk about George Soros. And some of you might know the original Quantum fund track record from 1969 to ’99. I don’t think they have a down year. It works out to like 34% compound rate of return. So 1 million, if you compound it 31 times, that becomes, I think, 6.7 billion. It’s quite amazing.

Jay:  Incredible.

Ed:  So that’s the trading absolute return model without extracting fees, incentive fees, and management fees.

So I think, honestly, if traders really believe in what they do, I think that would be a better model without having all these fees. But if you set up an asset management firm and you know what some of the partners are very good in fundraising, that could be a safer model. Start with 50. Two percent is 1 million. Suddenly, it covers a lot of expenses. It covers an office assistant. It covers… You might not be able to run a very big office at IFC which is a very tall building in Hong Kong, a nice view of the Victoria Harbor, but 50 million could become something big too.

Now I know like back in 2001, someone that I know of quite closely, one RO who controls the majority of the shares of an asset management firm and then the junior partner. They started a long-only focused hedge fund with 10 million US, and they grew to 1.1 billion.

And in 2006, 2007, calendar year return is in excess of 100% in those two years. So two years of over 100% return. So that makes these two founders very rich after the incentive fee you can think of, because it’s 20%.

And also, they capture something, what we call the Beijing Olympics Concept in 2008. That’s before the financial crisis too. They were at the right place at the right time doing the right thing.

And, of course, you have to time a little bit. But then I cannot say which model is better, but I have seen more people with more sophisticated skill sets think of a prop model instead of going through all these licensing hurdles and nonsense because there is a lot of regulatory filing you have to go through.

Jay:  And the only difference is basically if you’re proprietary, you can’t accept outside money.

Ed:  No, it’s your own money.

Jay:  And then the hassle, because of the fact that you are handling other people’s money, if you want to go the hedge fund route or the asset management route, that’s why you need the licensing. It’s really to protect the investors.

Tell us where my audience can find you if they want to connect with you. I know that I mentioned that you write a column in Apple Daily which is the most widely circulated Hong Kong publication.

Ed:  Chinese newspaper.

Jay:  You write a financial column. Is it every Friday?

Ed:  Every Friday. And also, I write something quite silly on health also, Next Magazine Digital, which is part of Apple Daily. I talk about how to lose weight, how to do ballroom dance, you know, something to keep you active when you’re over 50. I passed that 50 mark last year so I’m thinking more about health than anything now.

Jay:  That’s good. You also have a radio show, which I was on talking about the startup stuff. For you guys that were listening, for the audience members listening in, last year we did StartCon. We did a pitch competition. I don’t know if you guys remember, but we did a couple of episodes around that, and Ed was kind enough to be one of our judges for that event. Hopefully we’ll do it again this year. I think that was a lot of fun. And so we went on the radio. So your radio program is also weekly?

Ed:  Yeah. The radio program is every Sunday, 3 PM to 5 PM. Usually we pre-record it on Tuesday, which you went very early in the morning.

Jay:  That’s right. And it’s D100?

Ed:  D100.net. If they want to know more about me professionally instead of my democracy stuff, they could go into MDE Hedge Center. It’s c-e-n-t-e-r. Not the British spelling, and US spelling. They can find a little bit about what I do professionally.

Jay:  Great. We’ll have that all linked up in the show notes. If they do want to find or follow you on the other side, the advocacy side, I know you’re active on Facebook. Is that right?

Ed:  Yeah, they could find Edward Chin. I have a public Facebook. And then on the public Facebook, you could see my face being interviewed at, I think, Dow Jones. That public page, that’s me.

Jay:  Fantastic. Well, thanks so much for your time. We really appreciate it. Again, I think that we touched on a lot of good things here today, a lot of very serious issues about Hong Kong. But I’m optimistic. And I know that you are, because you wouldn’t be doing what you’re doing if you didn’t think that you were able to make some sort of an impact. So let’s hope that the Orwellian outcome doesn’t end up panning out.

Ed:  No, we shouldn’t give up yet. No. No, keep fighting. That’s the spirit.

Jay:  That’s right. Alright. Thanks a lot, Ed. Appreciate it.

Ed:  Thank you, Jay.

Jay:  Alright. Bye.