In this episode, we talk to Desmond How of Gembridge Capital Management about the crises that influenced his investing, from packing up at Lehman Brothers to China property, and why he struck out on his own after three decades at top-flight institutions.

I. All about timing

AUGUST 2026, SINGAPORE – I am five minutes into a cup of flat white when Desmond How pushes through the heavy teak door at Chip Bee Bistro. It’s a fitting venue to feature the veteran hedge fund manager. Sitting in an old British army enclave, it’s only four kilometres from the housing estate he grew up in. Yet, much like the man, the connotations are undeniably global. Bentwood chairs sit under cream tabletops and half-height curtains on brass rods. If not for the palms crowding the glass, the bistro could easily be mistaken for being in Paris or New York.

Very little about How announces 30 years spent investing in distressed environments, betting on indebted companies on the verge of collapse. He’s sporting a light purple polo, his sunglasses are pushed up into shoulder-length hair, worn longer than men in his trade tend to wear it. The smile arrives before he does.

How is the founder, Chief Investment Officer and Chief Executive Officer of Gembridge Capital Management, a long-short credit hedge fund that opened in Singapore about a year ago. His universe is debt in emerging markets, which is to say he’s spent his working life forming opinions about the least predictable governments and companies on earth – and putting real money behind those views. His track record was forged in the most turbulent part of economic cycles, when most investors flee: Jakarta in 1997, Wall Street in 2008, everywhere at once in 2020.

His first lesson in cycles took place right after graduating from National University of Singapore, the country’s finest (and about a 10-minute drive from where we sit), where he finished a four-year honours degree in three and a half. His father had been out of work for some time and his mother had borne the brunt. “I wanted to work hard so my mum could retire as soon as possible.”

“But that was to my demise,” he leans forward, reliving the weeks that followed as if it was yesterday. He came out into a calendar with no recruitment drive in it. Four months and four offers later he took the one at a Japanese bank, in the one subject he had been worst at – and will spend the rest of his career in: debt.

In his line of business, which involves betting on companies not paying their creditors, timing is paramount.

Short sellers have to pay to borrow securities and for leverage to fund the trade. Those costs could pile up while the market is detached from fundamentals. Wrong timing could burn even the short sellers who get the thesis right.

“The moment you start shorting, it costs you. To buy is the easiest thing. To short stuff, you need double the guts.”

“Some investors only short to play the change in sentiment. We’re different. We’re fundamentals investors. We have the guts to say: despite paying 1% a month, I’m convinced you’re going down, and I’ll pay and I’ll borrow to short you until you’re down.”

A waiter arrives with How’s piccolo, unaware of the stakes of the trades being described, and sets it down in a glass small enough to disappear inside his hand. I buy us a little more of a break while How takes a sip of water and adds an order of fries, knowing that we’re headed to another diner for lunch in an hour and this is the lightest thing on a menu built around steak.

It is not yet 11 o’clock. At the table next to us a party of four has ordered large plates of what look like shakshuka and steaks and fries and shows no intention of going anywhere, and somewhere behind me a hot iron plate sizzles. The room is full of buzz by now – everybody else in light-hearted chit-chat, while we work through the last three financial crises, and the one that’s about to hit.

II. The anatomy of a crisis

Long before he made his name in crisis investing, How had lived one from the receiving end in the Asian Financial Crisis of the late 1990s. He was a credit analyst offering third-party opinions on corporate loan and project finance deals in Southeast Asia. A decade later, he would experience another one as a trader. Through these episodes he developed a framework about financial crises – and how to profit from them every single time.

“There are always two parts to a crisis,” explains How. “In the Global Financial Crisis, the fundamental problem was a US housing problem that led to a US recession. But what eventually wrecked the market was the collateralised products that packaged complex risk to everybody, including retail investors.”

When the pandemic came, he recognised a similar pattern — and he claims to have spotted COVID’s impact early, jokingly, because he’s a germophobe (“I kept a bottle of Lysol at my desk and sprayed it whenever my colleagues coughed”). “A health crisis became a mobility crisis, and what broke the market was a family of strategies built on the assumption that different things fall on different days.”

“Correlation became one. Everything got a margin call and had to unwind. Had the Fed not stepped in, I think it would have been the end for many banks.”

The fries arrive between us, too hot to touch. He nibbles at one and gets to the part he has clearly been waiting for – the next crisis, which he believes is already on the horizon.

“You and I can already feel it. Consumption is down, production is down. The only thing that is up is investment, and the investment is into AI. But unlike most people, I think the main beneficiary is the consumer, not the investor.”

Instead of focusing on what he calls “AI capitalism”, US companies monetising AI, investors should pay attention to “AI socialism” – Chinese companies’ open-sourced models compressing costs. This means AI companies’ margins could be thinned.

“Where will the revenue come from that’s needed to justify these sky-high valuations?”

And the wrecking ball? He thinks it’s already set in motion. In the last four years or so, many companies shut out of public markets by high rates had turned to private lenders instead. The weakest ones won’t survive the coming recession. And their debt has already been packaged and sold to global investors, including individuals.

“Private credit is good until it isn’t. Because the mark-to-market is only good if the underlying doesn’t blow up.”

III. Faith and America

As we hit the hour-mark I begin to recognise a pattern. Faith is never far away. “God’s will” comes up a lot. Unprompted, he tells me that the Proverbs verse “Lean not on your own understanding” lives as header on his Bloomberg terminal profile. “It’s better to be lucky than good, which is to say it’s better to be blessed than good.”

While the Biblical verse asks believers to trust in the Lord, How has taken on a new interpretation of it in his investment philosophy. “You never get the full picture on your own. You have to go and ask.” Shandy, his wife for twenty odd years, led him to Christianity. Her presence is felt throughout our conversation, right from the get-go: “She’s my fashionista. She dresses me up every day.” The arrangement makes perfect sense to them. “I don’t see myself that much. She likes what she sees.”

Another trait is that his vocabulary, unlike his accent, is not recognisably Singaporean. His turn of phrase, like his investing, has traces from America.

Following stints in project finance and risk management, his talents were recognised by PGIM, the US asset manager, which had just been lured by policy incentives to set up shop in Singapore. As ever, How was eager to get on. When a seat opened up in PGIM’s headquarters, How did not hesitate to put his name forward.

The trading floor in Newark, New Jersey was built like a conveyor belt. Row after row of rowdy traders shouting to get their orders placed at the right price as billions of dollars changed hands every hour. But in the midst of the chaos there was order. Each row represented a group that was trading a particular kind of bonds: some did US mortgages, another high-yield corporate debt, and another emerging markets. And it was the last pod where How the starry-eyed trader not yet 30 now belonged.

Every morning How would walk past one trader in particular, whose heavy physique intimidated friends and foes alike. Every trade that went his way would be followed by unmissable pounding of his table. Only later did he find out that the guy was losing money most of the time. “As Singaporeans — in schools, they don’t teach you Toastmasters. They teach you how to get good grades. That’s it.” he says. “In the US, you need to shout. Otherwise, you wouldn’t get heard. It took me a while to understand that showmanship was a big part of the job.”

What was set to be a 12-month assignment became five formative years – and one man was responsible for the extension. David Bessey set up the emerging market debt division a decade earlier and was meticulous in risk budgeting — when to add, when to come down, how much pain to absorb on the way to a number.

“He doesn’t know how to pick the top. But his timing on buying the bottom is always right. One hundred per cent. If anything I learnt from trading, it’s this guy.”

Across the aisle sat Cathy Hepworth, an economist by training, who can read countries the way How analyses companies. “The numbers only tell you the ability to pay. The willingness to pay is the other half. That’s what I learned from Cathy. There are the things you can’t quantify.”

His opening came from the region nobody wanted: Latin America. “I needed to prove myself.” Brazil was his proudest trade. As the country stood on the verge of default in the early 2000s and the currency collapsed, How and the team stepped in – not just to snap up US dollar government bonds but also local currency ones – and were rewarded when the country escaped default.

How made good money for clients, but not enough for himself. “From January to May I was effectively working for the tax authorities, when friends in Singapore bought one property after another,” he chuckles. With encouragement from friends in the industry, he started putting out feelers for jobs in Asia.

The call came within weeks.

For the first time, he was offered his own book – a proprietary trading seat in Hong Kong with US$500 million to start with, a formula to align his incentives and the firm’s, and an analyst to assist him – sitting with the best traders in the region at one of the most prominent firms in the world.

“We talked for hours and we just got on. He liked my personality and I liked his. He joked I was his brother from another mother.”

Chris Howe was the man on the other end of the line, the executive who ran credit flow trading from Hong Kong. “Obviously, I didn’t know what was about to happen. But the opportunity provided a path back to Asia – and I think it was God’s plan.”

The company was Lehman Brothers.

How would join in January 2008.

IV. Surviving Lehman

Ten minutes by cab and we’re in Rochester Park, at a dim sum house friends in Hong Kong told him is the best in Singapore. Legendary Classics occupies a black-and-white colonial bungalow under old rain trees, and the inside has been given over to a Hong Kong of a by-gone era: floor tiles in a faded jade green, laid in a pattern that runs to the skirting, black-and-white photos of Hong Kong’s buildings and pop icons from the last century. We take a table beside the balcony rather than on it.

“I’m practically a Hong Konger,” How says as he casually places his order without so much as to a minute of contemplation: cheung fun, rice sheets rolled around prawn and steamed until they slump, eaten under a sweet soy poured at the table, and siu mai, the open-topped pork and prawn dumplings every one of these places is quietly judged on. I follow up with a Hong Kong classic of my own: corned beef scrambled egg sandwich, toasted. We’d be remiss to skip the milk tea. His cold, mine hot.

For almost 17 years How called Hong Kong home. But it didn’t look that way at the start. Two months after his arrival, Bear Stearns went under. By September, his employer Lehman Brothers had filed for bankruptcy. How was about to be out of a job if the Asia business didn’t secure a suitor. “Packing was really quick. Two hours. The boxes sat there for six months.” His main pastime, he says, was playing bubbles.

For the second time in his career, a Japanese bank came to the rescue. Nomura eventually bought the Asian business for the equity franchise, and the credit desk came with the furniture. No matter, How got a second chance to start in Asia. He got to work. European banks, undercapitalised, were issuing new capital and using the proceeds to buy back the old at a premium. “I bought at 60 cents yesterday, and today I get 80. Instant gratification.”

The way he tells this story makes it sound so easy. I am sceptical. By his own account there were other traders and investors in the region at the time with billions of dry powder to deploy. Was there something that How saw the others didn’t?

Before How could answer, the siu mai arrive, four to a basket. The wrapper is a thin sheet of egg-yellow dough gathered into pleats and left ungathered at the crown, so that the filling shows: pork chopped coarse enough to keep its texture, a whole prawn set into each one, a bead of orange roe on top. He picks up his chopsticks and serves me one without breaking stride, then leans in over the other three in the basket.

“There are three things essential to be successful. First, you need capital. Second, you need a formula, so that when you make money for clients you also take some yourself, which gives you the alignment and the motivation. And the third is guts.”

“Yes, there were low-hanging fruit out there, sixty cents on the dollar. But many said: I don’t know, sixty cents can go to thirty. I’m not going in.”

The waitress interrupts us again, this time with the cheung fun, three rolls under a small jug of soy sauce that she pours until it stands in a shallow pool around them. I use the interlude to pivot to the trades that made his name.

V. Big Shorts

In 2017, How was poached by GaoTeng, a nascent joint venture between Chinese internet giant Tencent and Hillhouse, a venture capital and private equity firm, as the Head of Fixed Income. It was his first time working for a Chinese institution, and as it happens, his big short would come from China.

For years, the Chinese property bond market represented one of Asia’s best trades. Forbidden from borrowing from banks in the “onshore” market (mainland China) to buy land, developers turned to foreign investors in dollar-denominated debt in the mid-2000s. They paid up to compensate for the risk, typically at 12-13%, over a US peer of similar ratings, and attracted plenty of buyers.

“You got a lot of demand. And this demand begets supply.” So this became a self-reinforcing cycle – with one important fact overlooked. The bonds were issued by offshore shell companies, meaning investors had no claim to assets in a default.

“The rating agencies will tell you it’s senior unsecured. In reality they’re subordinated. You get one cent, you get nothing.”

Then, in 2020-2021, two policies arrived within a year of each other, one capping what a developer could borrow, the other changing how land was sold so that only the largest could bid. Since the whole business of real estate is about land and leverage, How saw the downfall as inevitable and began shorting.

“You don’t have land, you don’t have money. How can you survive?”

When an unknown virus started spreading in the winter of 2019, How once again turned to history, combing through market reactions to SARS, the Fukushima disaster, September 2001, asking which industries had been broken by a world that stopped moving. Transport. Commodities. Autos, because a car needs 30,000 parts and cannot be built without any single one of them. And, of course, airlines.

Then, it all came full circle. A name from his Latam analyst days came back to him: GOL, a Brazilian carrier. “I turned around to Hara and asked where it was trading,” he says. Hitoshi Hara, one of the colleagues who would go on to join him at Gembridge, answered it’s still at par. “It was incredible. I sat up and said: ‘short it!’.”

VI. Gembridge and the business of money

The plates are cleared and we arrive at the destination: Gembridge Capital Management, the hedge fund How’s building from Singapore. The first three letters stand for Global Emerging Markets, which has been at the heart of his strategy for 30 years. Is this just the same product with a different shopfront? And why start now?

Throughout his career How has learnt that investing well is not enough. At PGIM he learnt that showmanship was necessary for a successful career. At Nomura he had the capital to trade but not the platform to make his name. “Every trader on the street knew me. The clients didn’t. For nine years I was a hermit.”

The last straw came during his time at GaoTeng. One of his most successful years also saw the biggest outflows from his fund. The fund was mostly backed by Chinese institutional money which, by that point, had lost interest in the asset class and started rotating to equities. He decided to strike out on his own, and pitch his decades-long strategy on emerging markets to a broader investor base.

He believes he’s got the timing right.

“The traditional mindset likes to delineate the world into two – EM versus DM. That line is getting blurred already.” Emerging markets were risky because policy was risky, he says, and then lists the countries that turned orthodox on monetary policy and disciplined on spending while the developed world went the other way.

“Today, you look at China — no longer poor. Brazil, I don’t think it’s poor. The policy risk of the last five years is all rising from Europe, from America.”

Other than institutional investors, he believes his long-short set-up is particularly beneficial to smaller, long-only investors, including family offices, that are not quite prepared for late-cycle markets. “Many of them only ever think of buying. They never think of selling. My strategy offers you the buffer in a recession.”

The strategy isn’t the only thing he’s taking with him. Two of his four co-founders have worked alongside him through Nomura and GaoTeng. Joe Charoensiddhi, his head of research, uprooted from Hong Kong. Hitoshi Hara moved with a family of four. Johnson Cheung, his Chief Operating Officer, and Terence Chia, Chief Marketing Officer, gave up plum jobs in high finance to join How in a co-working office no larger than 400 sq ft (though with a pleasant view of the Singapore Strait), which the Midnight Merchant visited ahead of the interview.

“I don’t think entrepreneurs are trained. I think they’re born. Either you have it or you don’t,” How says. “And I’ve felt I’m pretty good at it in the first year of running Gembridge.”

In the next three, he expects his flagship long-short credit fund to reach US$1.5 billion. In parallel he’s looking to add funds of different styles – macro, equities – all with a focus on emerging markets. To do that, he is on the lookout for portfolio managers who are aligned with his philosophy about emerging markets and will bring their clients – and he will insist on them joining him as equity partners. Buy-in will be required, so that there is skin in the game.

By laying out this vision, he is also defining what Gembridge is not – a multi-manager, multi-strategy hedge fund that divides its capital among many independent trading teams, otherwise known as “pods”. “Pod shops are traders’ hotel. There’s very little alignment in interest.”

Our time is almost up. As we get up, he brings up a subject close to his heart: competition between Hong Kong and Singapore. In June, Hong Kong proposed exempting carried interest across a wide range of funds. A few days before we met, Singapore answered with a similar exemption, along with a new hedge fund investment programme.

I had assumed this would be welcome news. Instead, for the first time in our conversation, I see a sense of conflict on his face.

“You know, I don’t need another tax break. What would be good is funding,” he says as we head towards the exit. “We’ve accumulated so much wealth here. And we’ve got an enormous pool of talent that’s good at making money in markets.”

There are, by his estimate, 20,000 Singaporeans working in Hong Kong, among them are many astute investing professionals, and nobody has yet written the right policy to bring them back.

The smile returns as he turns to the next generation of local talent. Though a young company, Gembridge has already been taking on Singaporean undergraduates as interns.

“I believe in sharing knowledge. I strongly believe in mentorship. My goal is to groom the next batch of credit specialists – local talents. I must say I’m quite impressed by the ones I interview, and if we don’t have a policy to nurture them, we lose them easily.”

He pushes the door open into the afternoon. “I’m doing my part here.”