Demand for experienced portfolio managers in Asia is increasing, claims Mark Francis, a recruitment consultant with headhunters Carrington Fox in Hong Kong, with event-driven strategies the current favourite.
“Our offices in New York and London are seeing a huge number of talented individuals with Asian connections who want to return,” says Mr Francis. Even with salaries starting at $200,000 for portfolio managers, significantly below what they can earn in the US or Europe, many traders are crossing the globe or moving back to their Asian roots to be part of a new and expanding alternatives marketplace.
Typically, as long as they have some experience trading Asian or global portfolios, they will be able to join either smaller, algorithmic trading shops setting up in Singapore, to take advantage of government incentives, or larger multi-strategy houses operating out of Hong Kong, he says.
There appears to be no shortage of innovative alternative players operating in Asia. One example is Cube Capital, a global $1.2 bn asset manager whose Hong Kong office runs a platform for investing in Greater China and other Asian markets with both dollar- and renminbi-denominated onshore products. The platform invests in special situations, distressed and credit strategies in the private markets throughout Greater China, and supports Cube’s direct and fund of hedge fund efforts globally.
Cube’s Onshore China ABL Fund, which focuses on non-performing asset-backed loans, is gaining increasing distribution power in Asia. It was recently approved by the private wealth management division of China Merchants Bank, the largest such operation in China. Cube’s Asian special-situations platform, which raised money from high net worth individuals, has focused on specific opportunities such as distressed Malaysian collateralised debt obligations and distressed property investments, including commercial premises in Vietnam and a Chinese cable car theme-park.
Currently, the group is seeing its best opportunities in Mongolia. Immediately after the crisis, Cube took advantage of huge price dislocations generated as property developers, seeking liquidity to address their debt problems with the banks, sold property portfolios “at crazy values”, says Thomas Holland, a Hong Kong-based partner with Cube Capital. Now, however, he says the opportunity is in the “enormous growth potential” of “a $5bn GDP economy sitting on over $1,300bn in commodity reserves”, a great deal of which are close to the Chinese border.
Investing in Chinese assets has proved particularly tricky due to the politicised nature of judicial decisions, says Mr Holland. “The priority of the state is social stability. While great strides have been made to open up the market, after the crisis there was a notable re-centralisation and courts became less commercial. There is no current focus on developing a market economy from the judges perspective.”
Cube Capital was also forced to introduce “side pocketing” after a heavy wave of post-crisis redemptions followed Cube’s positive performance run. Since then, many investors were turned off the type of illiquid investments which local groups are involved in, he says.
This is one reason why Asian investors, always looking for the comfort of a liquidity cushion and often wanting to make fast bets, appear reluctant to place money with local hedge funds, while strategic allocations from European and US institutions tend to be higher.
“Alternatives, in terms of pure hedge funds, are on the back foot,” states Arjuna Mahendran, head of Asian investment strategy at HSBC in Singapore, where clients are concerned by side pocketing, which restricted the opportunity to liquidate investments during the crisis. Poor performance since the crisis has also swung the investment pendulum towards long-only and exchange-traded funds.
“The case for hedge funds still needs to be made. There is still no groundswell of interest in them as alternative investments,” he says.
SPECIFIC REQUIREMENTS
Large institutional investors based in Asia can find it difficult to locate suitable underlying managers, according to Judith Posnikoff, one of the founders of US fund of funds group PAAMCO, which runs $10bn and has had a subsidiary in Singapore since 2006. “To meet the specifications of an institutional investor, you need good research and a proven operational infrastructure,” says Ms Posnikoff. “There are some quirks in Asia. You might have two brothers, where one is managing the portfolio and the other running the back office or a husband and wife team. That will raise some issues.”
Asian managers in particular are reporting a much stronger level of scepticism among clients considering investments. The “onboarding” process between a client visiting a fund and actually investing used to take three months before the crisis, but can now be closer to eight or nine months, due to the degree of due diligence undertaken, reports Goetz Eggelhoefer, portfolio manager at the Rohatyn Group in Singapore. “I can’t begin to tell you how many times I have been investigated by Kroll Associates looking for my skeletons, although they haven’t found any yet,” he says.
