Chapter 237: Riding the Wave

Simon arrived at the Johnston estate by the Yarra River on the outskirts of Melbourne around noon. The morning call was from Anthony Johnston, but the lunch was hosted only by Raymond Johnston and his wife. Having visited several times recently, Simon was already treated like a son-in-law by Jennette's parents, and any initial awkwardness had long since dissipated.

After lunch, Raymond Johnston led Simon to the study.

Seated on the sofa by the window in the study, the servant left after serving coffee, and Raymond Johnston got straight to the point: "Simon, I know you're busy, so I'll cut to the chase. Can you bring in more capital for this investment?"

Simon had already guessed the old man's intention and nodded readily: "Yes, I can. But Ray, due to the recent events, I'm a bit uncertain about the situation. I can't make any promises, so it's best to only use surplus funds and avoid raising capital through loans."

Raymond Johnston seemed a bit surprised by Simon's response but soon laughed, "I understand, Simon. I'm pleasantly surprised by your prudence."

Simon also smiled, "The entertainment, technology, and fashion sectors have enormous potential. I don't intend to spend too much energy on the financial market. This time, I just feel the timing is right to raise some funds. The amount doesn't matter much, so I won't be betting big."

Raymond nodded and asked, "So, how confident are you now?"

After thinking for a bit, Simon replied, "Profiting should be no issue, and the various restrictions imposed by the Japanese government after the '87 crash will prevent any extreme fluctuations in the financial market. Even if the market turns, we can withdraw in time."

The Japanese stock and futures markets had strict limits on price fluctuations, so replicating the miracle of the S&P 500 futures in '87 on the Nikkei 225 was impossible. However, these limits also meant that investors wouldn't suffer major losses if they exited the market in time when the trend changed.

Raymond Johnston liked Simon's use of 'we' in his explanation. Still, he composed himself and said, "Actually, it's not just me. Some business partners also want to contribute funds for you to manage."

Ever since the preparation phase of "Batman," Simon had sensed the deep-rooted influence of the Johnston family in Australia. The social gatherings hosted at the Johnston estate had clearly revealed a vast network before Simon.

Maintaining such a network required more than just good relations – interests were the strongest bond.

Simon never considered breaking up with Jennette, and her attitude was the same. Hence, Simon was inevitably tied to the Johnston family. He had enjoyed the benefits of this network during "Batman's" production and naturally needed to help maintain it.

However, just as he was about to agree, Simon thought of something and asked, "Ray, how much money are we talking about?"

Raymond Johnston replied, "I need your consent to calculate the exact amount, but it should be no less than 1.5 billion Australian dollars."

Simon was taken aback.

Living in Australia, Simon knew the recent exchange rate between the Australian dollar and the U.S. dollar was around 1 to 0.7. 1.5 billion Australian dollars equated to about 1 billion U.S. dollars, double what he had planned to use.

In the late '80s, there were no hedge funds operating at the hundred-billion-dollar level.

George Soros's Quantum Fund, after being hit hard by the '87 crash, had only recently reached a size of less than $2 billion, which was already a giant in the industry. Most hedge funds operated in the tens of millions.

If Raymond Johnston had only proposed three to five hundred million Australian dollars, Simon would have readily agreed. However, jumping to a billion dollars made him hesitant to commit.

"That's too much, Ray. I'm not planning to run a large-scale hedge fund."

Simon's understanding of the financial market was limited to the knowledge he acquired from the '87 operation and a macroeconomic perspective from his memories.

Operating a smaller sum, he could put all his chips into stock index futures, a financial derivative he understood. But managing capital in the billions required diversification beyond a single financial product, which he had little knowledge of in areas like foreign exchange and bonds, and he didn't have the time to learn.

"I think I understand your concerns, Simon," said Raymond Johnston. "But commanding an army doesn't require excellent horsemanship or sharpshooting skills. You just need to use your strategy to command thousands of soldiers skilled in these minutiae to win the war. The problem you face now is similar. You have unparalleled foresight and a big picture view. Leave the specifics to others while you control the overall situation."

Simon smiled at Raymond's words, seeing where Jennette got her 'leaders delegate' trait.

"But Ray, I don't have anyone I trust with the skills to manage this amount of money right now. James can only help me oversee the existing teams, and he doesn't know much more than I do in this area," said Simon.

Raymond replied, "If you agree, I can recommend some people to you."

In the '80s, Australia's economic scale was still small, but the Johnston family's deep roots made finding reliable financial talent no issue.

Simon leaned back in the sofa, pondering.

Accepting the 1 billion dollars meant managing a total of 1.5 billion dollars.

The larger the hedge fund, the harder it becomes to achieve high profit rates – a downside of accepting external funds.

However, while he hadn't discussed commission, Simon wouldn't manage such a large sum for free. Hedge funds charge high fees, typically 2% management fee and 20% profit share. With his influence, Simon could even increase the commission rate.

Regardless, managing over a billion dollars in the financial market was exciting.

As for success or failure.

If Simon's memories were right, the Japanese stock market was on a 'wave' – anyone could succeed if they caught the right direction.

Simon wasn't afraid of failure.

He didn't think being an outsider precluded him from managing a hedge fund – there were many outsiders in the industry. Compared to them, the real experts were usually working for others. As Raymond said, leave the specifics to professionals while controlling the big picture.

Timing-wise, Melbourne was only an hour behind Tokyo, allowing Simon to keep tabs on the Japanese stock market while filming "Batman" in Australia.

If the Japanese market followed Simon's memory and peaked at the end of the year, he planned to relax and step back from company affairs after "Batman," giving him more time to focus on this venture.

Having made up his mind, Simon looked up at Raymond Johnston.

Raymond had been waiting patiently and looked back when he realized Simon had decided.

After gathering his thoughts, Simon said, "Ray, we can merge our funds for joint operation. But for outsiders, if they want to join, my condition is 20% commission on profits up to 30%. For profits between 30% and 100%, the commission rises to 30%. For anything over 100%, I require 50% commission. Unlike other long-term hedge funds, this operation in the Japanese market is a one-time deal, maybe a year or two. Once it's over, I'll liquidate the funds and return them to the investors."

Hedge funds often signify huge profits to the public.

However, most only aim to outperform the market, with few achieving annual rates above 30%.

Raymond Johnston understood this, so Simon's terms weren't a surprise. He even thought it was reasonable.

1.5 billion Australian dollars, even just doubling it in a year or two would satisfy everyone.

In fact, the entire Johnston Holdings conglomerate had a net profit of less than 200 million Australian dollars last year, and the annual profits of other investors' companies were similar.

Normal investment methods yielding 20-30% annually were considered excellent.

Doubling would mean everyone effectively earned an extra year's profit. Under such circumstances, no one would mind paying higher commissions.

As for profits over 100%, Raymond didn't expect much, knowing the larger the fund, the harder high profit rates were to achieve.

Financial opportunities are limited – small funds seizing opportunities could multiply in a year, like Simon's '87 operation. But large funds had to diversify, inevitably leading to mixed results and lower profit rates.

Raymond hadn't indiscriminately accepted external funds. He set a minimum investment of 100 million Australian dollars for this venture, excluding anyone who couldn't afford such an amount or risk, not wanting to burden his future son-in-law.

Hence, when Simon proposed these terms, Raymond immediately agreed.

As for Simon not discussing commission for the Johnston family's funds, Raymond didn't refuse this gesture of goodwill. They had already accepted each other as family, so there was no need for formalities.

However, he wished Simon would marry his daughter sooner.

He sighed, sending Simon off and calling his son to help find capable people for Simon, also asking if his younger daughter, who took a break after the New Year due to feeling upset, had returned from Europe.

That was another worry.

The financial department was busiest at the start of the year, and the company hadn't been doing well these past two years. As the CFO, she had just stopped working.

If her break brought back a son-in-law, it would be a different story. But she always traveled alone.

He recalled his father's concerns about her future before his death. How could he face his parents with this situation?

Frustrated, Raymond dialed London, but his growing anger led to a stern order for his daughter to return to Melbourne next month, threatening to fly to London himself to fetch her.

He repeatedly warned, "I'm serious this time."

Simon returned to central Melbourne, and Asian stock and commodity exchanges had ended the day's trading.

Influenced by Simon Westeros's bullish stance on the Japanese market, the Singapore and Osaka exchanges saw a significant increase in stock index futures trading volume, stimulating even unrelated futures.

Meanwhile, the Japanese stock market saw an overall surge, with many stocks hitting the upper limit. The Nikkei 225 index rose by 613 points to 31,992, a 1.9% increase. Without the market's limits on fluctuations, the index's daily gain would have been even higher.

The Nikkei 225 index futures, launched less than three years ago and priced higher than many other futures, were typically traded by powerful institutional investors. But with the high growth of the Japanese stock market, the trading volume of these futures had increased rapidly.

Analysts initially predicted a total trading volume of 5 million contracts for the Nikkei 225 index futures this year, involving over $100 billion. However, due to the storm sparked by The Wall Street Journal article, the day's trading volume in Singapore and Osaka alone exceeded 60,000 contracts.

Some followed the trend to build positions, others went against it to short, and some fled the market.

Simon, the catalyst of this storm, remained inactive, only checking the day's settlement report after the close.

After the 'Black Monday' margin crisis, exchanges had adopted a daily no-debt settlement system, preventing investors from settling final gains or losses only upon buying or selling, as with stocks.

Now, exchanges calculated the profit and loss of each investor's contracts at the end of each trading day and performed cash transfers.

Simon held 6,000 Nikkei 225 index contracts at the Osaka Securities Exchange, earning him 3.678 billion yen (about 29.9 million USD) just for the day.

With a capital of 200 million USD, a one-day profit of nearly 15% was impressive, but Simon wasn't overly pleased.

A 613-point single-day rise in the Nikkei 225 index was almost a month's worth of gains in the past. If the market peaked at 38,000 points as Simon remembered, his additional funds might not be in place before the market peaked.

If this trend continued, it would be quite unfortunate.

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