Hedge funds fight for Asia talent with bonuses, training

Hedge funds have poached from rivals, sweetening compensation packages for star performers and committing more resources to younger employees.
Hedge funds have poached from rivals, sweetening compensation packages for star performers and committing more resources to younger employees.PHOTO: ST FILE

Dearth of experienced managers as firms expand in the region

HONG KONG • In a glass-walled room at Point72 Asset Management's outpost in Hong Kong, five fresh-faced graduates pore over spreadsheets and give tentative answers to questions about cash flow and the cost of capital.

They are the first participants in Point72's Asia Academy associate programme, the hedge fund firm's latest salvo in an intensifying war for regional talent.

As more big hedge funds expand in Asia and the region's assets under management grow at a faster clip than in the United States and Britain, industry executives say the number of qualified candidates has failed to keep up.

Hedge funds have responded by poaching from rivals, sweetening compensation packages for star performers and committing more resources to younger employees.

Firms such as Mr Steve Cohen's Point72 and Balyasny Asset Management are investing in extensive training programmes, betting that some of their new hires will develop into portfolio managers who stay loyal.

"There aren't as many ready-made, experienced portfolio managers in the Asia-Pacific region" who gel with Point72's investment style, said Mr Howard Man, who oversees its equity-focused investment teams in Asia.

Point72's 10-month training programme for the region, modelled after one that it introduced to the US in 2015, had its first Hong Kong class in March.

While the global hedge fund industry has faced a rocky few years as investors rebelled against high fees and lacklustre returns, Asia has proven a relative bright spot, thanks to stronger economic growth and expanding capital markets.

SHORTAGE

The challenge isn't finding a portfolio manager, it's finding a portfolio manager with the experience first-hand of investing in Asia while being based in Asia. Anyone who's been here for the last five, six, seven years is in a good role and to move them is tough.

MR NILAY KHANDELWAL, managing director of recruiting company Michael Page Singapore.

Combined assets under management at funds based in Australia, Hong Kong, Japan and Singapore have climbed over 20 per cent since 2016 to US$192 billion (S$262 billion), according to research firm Eurekahedge. That compares with a 5 per cent increase in the US and a 6 per cent drop in Britain.

Hedge fund "platforms" such as Point72 - which allocate money to multiple internal portfolio managers each responsible for his own slice of the firm's overall assets - have been a notable source of growth in Asia.

New entrants include ExodusPoint Capital Management, Schonfeld Strategic Advisors and Polymer Capital Management.

The region now has at least eight major hedge fund platforms - twice as many as in 2013 - that oversee a combined US$100 billion globally. Polymer is among those that have poached from rivals in Asia, hiring portfolio managers from both Point72 and Mr Izzy Englander's Millennium Management.

Growing demand for talent at platforms has coincided with a drop in supply from proprietary trading desks at banks, a long-time training ground for hedge funds that has been whittled down by post-2008 regulations.

The resulting shortage of available managers often surprises international firms when they look to expand in Asia, said Mr Nilay Khandelwal, managing director of recruiting firm Michael Page Singapore.

"The challenge isn't finding a portfolio manager, it's finding a portfolio manager with the experience first-hand of investing in Asia while being based in Asia," he said. "Anyone who's been here for the last five, six, seven years is in a good role and to move them is tough."

Compensation packages in Asia are increasing as hedge funds pay to attract top candidates, said people familiar with the industry.

In-demand managers can now secure more attractive terms for the performance component of their pay, which typically accounts for the bulk of their remuneration and is expressed as a percentage of the profits generated by their investments.

One person who has worked in the hedge fund industry for more than a decade said he was aware of recent bonus payouts in Asia of 25 per cent of profits, up from 23 per cent a few years ago.

Top portfolio managers in Asia can take home US$15 million to US$20 million a year once performance bonuses are included, while junior portfolio managers can command US$2 million to US$3 million, people familiar with the matter said.

Compensation in the region is still likely lower than in Europe and the US, but that is because Asia-based portfolio managers typically oversee fewer assets, said Mr Will Tan, managing director at recruitment firm Principle Partners.

In the US, star managers at big funds can make upwards of US$50 million in a good year, he added.

Balyasny has a two-year programme called Anthem for senior analysts and newly hired portfolio managers. Mr Scott Schroeder, the firm's co-founder, said Asia lacks portfolio managers with the experience and belief in a market-neutral investment style that balances bullish and bearish bets - the bread and butter for hedge fund platforms whose clients are looking for smooth returns.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on October 30, 2019, with the headline 'Hedge funds fight for Asia talent with bonuses, training'. Print Edition | Subscribe