Hedge funds building up manpower in Asia
Global headhunting firm Whitney Group says the demand for new hires among hedge funds is increasing exponentially, and many are for firms setting up offices in Hong Kong.
Whitney Group is a global executive search firm focused exclusively on financial services, with offices in North America, Europe and Asia-Pacific. Its Hong Kong office, headed by managing director Niall MacDonald, recently enhanced its focus on the wealth management industry by hiring Russell Kopp as a director in October. MacDonald and Kopp spoke with AsianInvestor about the major trends in the job market in AsiaÆs asset management industry. For an in-depth look at the overall job market environment, see the February 2008 edition of AsianInvestor magazine.
Is wealth management a new focus for your company?
MacDonald: We have always worked on the asset management, hedge fund and private banking businesses, all of which fall under wealth management for us, but in the past, we did it more reactively. The demands have changed, as hedge funds continue coming to town and new wealth is driving a need for private bankers. As a result, we decided as a firm that we really need a team with a wealth management focus, which Russell heads. Robert Jones was also added as a middle office specialist and he focuses on risk management and compliance positions as well as the more junior private banking appointments. We also have several people within our research team who are focused on wealth management.
Why are you seeing a huge potential from the hedge fund market in particular?
Kopp: Quite simply, there are around 20 investment banks out there, 100 long-only accounts, and 1,000+ hedge funds. The alternatives space is very fragmented but should continue to grow rapidly. When I first came to Asia in 1990, there were only a few hedge funds that operated here. Now, the firms with strong prime broking desks indicate that hedge funds can make up over 50% of their revenue versus 5-10% some 10 years ago.
In the initial phase of build-up, a lot of the hedge funds that came to Asia started small, with one or two people initially. Many relied on friends and family and existing business relationships for contacts. But as the number of hedge funds has grown, the talent pool has become stretched, and it has become more difficult to do that. Also, as they grow in size, they will incur more business risk if they just take someone off the street. Over the course of the past year or two, alternative funds have started to mature and have started to look more closely at the benefits of retained search.
It is pretty clear that a lot of these hedge funds are built up in the US and Europe, but are not yet properly built up in Asia. From a flow of funds and a return standpoint, when they look at it in terms of where they are going to invest in bodies, itÆs going to be in Asia.
What is the job market like right now?
Kopp: The whole financial industry is very seasonal. Usually, we see a lot more activity in the first five months, because bonuses are largely paid in the first quarter and thatÆs when people change jobs. This year, budgets were delayed by subprime issues in the US and the need for some major firms to focus on balance sheet solvency in December. So, many search mandates, which are typically awarded late in the fourth quarter, were only approved after year-end. But, net-net, Asia is still hiring.
What kind of growth are you expecting from the private banking side?
Kopp: We have seen very strong growth in the private banking business over the past few years. 20%-30% per annum increases in headcount have not been uncommon among the private banks recently. I expect that to continue. There is a substantial need for private bankers and an even stronger demand for the middle-office, settlements and back-office positions to keep up.
Where do you see the demand for hedge fund positions coming from?
Kopp: There are very many parts to these businesses. To the point that you build up your front office, you will eventually have some middle office, distribution and marketing requirements. They also get to a certain size and then suddenly they need a compliance person. Probably over 80% of Asian hedge funds are made up of less than 10 people. Around 300 to 400 are probably one-person offices. Employee numbers are concentrated on the larger hedge funds. Across those larger institutions, effectively you will see the same sort of demand that you will see from traditional long only accounts for fund managers, analysts, asset gatherers, CIOs and marketing people. Most importantly, most of the larger ones are still growing.
MacDonald: As a whole, the search industry serves Asia-Pacific clients out of Hong Kong. This is because mandates are driven primarily by clients centred in Hong Kong. We have found that whether the search is in Korea, Hong Kong or Southeast Asia, we can manage the process best from here.
What are the challenges you face when placing hedge fund candidates?
Kopp: Clients are looking for people with the same breath of experience and platform as the candidates in the US or Europe. China is clearly the major driver of Asian growth, so the number one requirement for this market is Mandarin. The language issue is a stumbling block. There are a lot of good Mandarin speakers without the requisite industry experience and a lot of candidates with excellent market experience, but no Mandarin. The key is finding good candidates with both skill sets.
Where are you finding these people with international experience and Mandarin skills?
MacDonald: The financial meltdown in Asia, followed by Sars, chased out many experienced people from this region. These people have moved to New York or London and have relocated their wife and children and settled well there. Many of them donÆt want to come back. This means the existing talent pool in the region is the primary source, but it is becoming more difficult to find good experienced people, which is why retained search and its focused efforts should benefit.
Kopp: In addition, for much of the financial services industry, the beginning of the food chain is the sell side. The sell side is a pyramid and hires and trains large numbers of graduates every year. It is the base talent pool for the whole financial services industry. But, between 1997 and 2003, larger firms were hiring maybe 20 instead of 100. This resulted in an hour glass effect, as large scale recruiting only returned post-Sars. So, in the 30- to 35-year-old Mandarin speakersÆ group, not very many are in the financial system.
MacDonald: Fortunately, we see a minimum half a dozen to a dozen resumes every single week from our US and European offices of Chinese nationals, who are in their 30s and want to come back to Asia. TheyÆve seen things slowing in the US and Europe, have had great experience in major markets and now want to build a career here.
Is wealth management a new focus for your company?
MacDonald: We have always worked on the asset management, hedge fund and private banking businesses, all of which fall under wealth management for us, but in the past, we did it more reactively. The demands have changed, as hedge funds continue coming to town and new wealth is driving a need for private bankers. As a result, we decided as a firm that we really need a team with a wealth management focus, which Russell heads. Robert Jones was also added as a middle office specialist and he focuses on risk management and compliance positions as well as the more junior private banking appointments. We also have several people within our research team who are focused on wealth management.
Why are you seeing a huge potential from the hedge fund market in particular?
Kopp: Quite simply, there are around 20 investment banks out there, 100 long-only accounts, and 1,000+ hedge funds. The alternatives space is very fragmented but should continue to grow rapidly. When I first came to Asia in 1990, there were only a few hedge funds that operated here. Now, the firms with strong prime broking desks indicate that hedge funds can make up over 50% of their revenue versus 5-10% some 10 years ago.
In the initial phase of build-up, a lot of the hedge funds that came to Asia started small, with one or two people initially. Many relied on friends and family and existing business relationships for contacts. But as the number of hedge funds has grown, the talent pool has become stretched, and it has become more difficult to do that. Also, as they grow in size, they will incur more business risk if they just take someone off the street. Over the course of the past year or two, alternative funds have started to mature and have started to look more closely at the benefits of retained search.
It is pretty clear that a lot of these hedge funds are built up in the US and Europe, but are not yet properly built up in Asia. From a flow of funds and a return standpoint, when they look at it in terms of where they are going to invest in bodies, itÆs going to be in Asia.
What is the job market like right now?
Kopp: The whole financial industry is very seasonal. Usually, we see a lot more activity in the first five months, because bonuses are largely paid in the first quarter and thatÆs when people change jobs. This year, budgets were delayed by subprime issues in the US and the need for some major firms to focus on balance sheet solvency in December. So, many search mandates, which are typically awarded late in the fourth quarter, were only approved after year-end. But, net-net, Asia is still hiring.
What kind of growth are you expecting from the private banking side?
Kopp: We have seen very strong growth in the private banking business over the past few years. 20%-30% per annum increases in headcount have not been uncommon among the private banks recently. I expect that to continue. There is a substantial need for private bankers and an even stronger demand for the middle-office, settlements and back-office positions to keep up.
Where do you see the demand for hedge fund positions coming from?
Kopp: There are very many parts to these businesses. To the point that you build up your front office, you will eventually have some middle office, distribution and marketing requirements. They also get to a certain size and then suddenly they need a compliance person. Probably over 80% of Asian hedge funds are made up of less than 10 people. Around 300 to 400 are probably one-person offices. Employee numbers are concentrated on the larger hedge funds. Across those larger institutions, effectively you will see the same sort of demand that you will see from traditional long only accounts for fund managers, analysts, asset gatherers, CIOs and marketing people. Most importantly, most of the larger ones are still growing.
MacDonald: As a whole, the search industry serves Asia-Pacific clients out of Hong Kong. This is because mandates are driven primarily by clients centred in Hong Kong. We have found that whether the search is in Korea, Hong Kong or Southeast Asia, we can manage the process best from here.
What are the challenges you face when placing hedge fund candidates?
Kopp: Clients are looking for people with the same breath of experience and platform as the candidates in the US or Europe. China is clearly the major driver of Asian growth, so the number one requirement for this market is Mandarin. The language issue is a stumbling block. There are a lot of good Mandarin speakers without the requisite industry experience and a lot of candidates with excellent market experience, but no Mandarin. The key is finding good candidates with both skill sets.
Where are you finding these people with international experience and Mandarin skills?
MacDonald: The financial meltdown in Asia, followed by Sars, chased out many experienced people from this region. These people have moved to New York or London and have relocated their wife and children and settled well there. Many of them donÆt want to come back. This means the existing talent pool in the region is the primary source, but it is becoming more difficult to find good experienced people, which is why retained search and its focused efforts should benefit.
Kopp: In addition, for much of the financial services industry, the beginning of the food chain is the sell side. The sell side is a pyramid and hires and trains large numbers of graduates every year. It is the base talent pool for the whole financial services industry. But, between 1997 and 2003, larger firms were hiring maybe 20 instead of 100. This resulted in an hour glass effect, as large scale recruiting only returned post-Sars. So, in the 30- to 35-year-old Mandarin speakersÆ group, not very many are in the financial system.
MacDonald: Fortunately, we see a minimum half a dozen to a dozen resumes every single week from our US and European offices of Chinese nationals, who are in their 30s and want to come back to Asia. TheyÆve seen things slowing in the US and Europe, have had great experience in major markets and now want to build a career here.
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