Hedge Funds Build Up Manpower in Asia

Global headhunting firm Whitney Group says the demand for new hires is increasing exponentially, especially for funds setting up offices in Hong Kong

by Rita Raagas De Ramos

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 Asia's 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, it's 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 that's 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.