After riding out a bumpy post-financial-crisis road for several years, Asia’s hedge fund management industry shows signs of finding its wheels again, with rising base salaries and a return to hiring activity.
The findings in the latest Hedge Fund Compensation Survey (Asia 2013) survey, conducted by professional services firm Heidrick & Struggles, indicate that the companies of about 50 per cent of respondents are looking for staff, with 10 per cent actively hiring and 40 per cent taking an opportunistic approach. Although the market is still employer-led, the survey reveals a turning point in outlook and attitudes that signal the direction the fund industry is likely to take in 2014.
As the Asia region sees fund houses expand their activities and attract new players, the combined fund management business in Hong Kong recorded nearly 40 per cent year-on-year growth to HK$12.6 trillion last year, according to the latest Securities and Futures Commission Fund Management Activities Survey.
“Five years after the global financial crisis, Asia’s hedge fund industry is slowly finding its way back to a state of tempered optimism,” says Harry O’Neill, managing partner of Heidrick & Struggles in Asia-Pacific. He also notes that base salaries for hedge fund staff are starting to be adjusted upwards.
The firm’s survey showed that 40 per cent of respondents reported rises in base salaries – an indicator that balance is returning to the fund management sector. Notably, salary increases are tilted in favour of junior analysts and execution traders whose salaries have been most affected in recent years. The trend, O’Neill says, has been brought about after several years of hiring staff at below market compensation rates. He says hedge fund employers are now finding that new employees are less willing to accept salaries they consider low.
With bonuses often seen as a state-of-health guideline for the fund industry, 48 per cent of respondents expect to receive larger bonuses based on last year’s performance – a 3 per cent rise increase on 2012. At the same time, bonus deferrals are becoming more common, along with larger lock-ups for longer periods.
“At the very least, the industry is moving away from the highly volatile environment of a couple of years ago,” says Lisa Wong, Heidrick & Struggles’ head of hedge funds for Asia. “The industry is stepping on solid ground that is powering steady growth.”
Tim Pagett, financial services industry leader at Deloitte China, says that the expanding fund management and private equity sectors provide attractive career prospects for experienced, financially intuitive people who are looking for a challenge. With the banking sector a common requirement ground for fund houses, this creates a situation where banks need to back-fill their talent loses. In the Asia region, he says, fund houses need to balance out technical and financial skills with market experience, local language capabilities and cultural insights.
“Finding the right balance of individuals and skills is critically important, and most firms realise this is something they need to achieve,” Pagett says.
Meanwhile, the continuing deployment of digital technology in the banking sector is another area where Pagett sees demand for a broad range of skills. He says an increase in employee mobility has been triggered by the emergence of technology and by non-traditional financial services providers working with financial institutions. He also says that as digital technology continues to shape the financial services industry, opportunities are being created for people to enter the sector and for existing practitioners to broaden and upscale their skills.
He adds that digital technology is also changing the way financial institutions manage expectations and interact with customers, regulators, staff and shareholders. Around the digital space, for example, he says there is a need for professionals with a clear idea of how to develop and steer awareness and capabilities.
“Strategies and business models need to align with objectives that push the processes forward,” Pagett says. “The use of digital technology is no longer just about the tools and enablers. It is about the different ways of engagement both internally and externally.”
In addition, he says, the advent of the cloud and access to a range of data provides a rich source of opportunities for organisations, but requires people that can design and guide strategies that ensure investment in technology delivers benefits.