Hedge Funds Fight for Asia Talent With Bonuses, Training
(Bloomberg) -- In a glass-walled room at Point72 Asset Management LP’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.
These would-be masters of the universe are the first participants in Point72’s Asia Academy associate program, the hedge fund firm’s latest salvo in an intensifying war for regional talent.
As more and more big hedge funds expand in Asia and the region’s assets under management grow at a faster clip than in the U.S. 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 like Steve Cohen’s Point72 and Balyasny Asset Management are investing in extensive training programs, betting that some of their new hires will develop into alpha-producing 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 Howard Man, who oversees the Stamford, Connecticut-based firm’s equity-focused investment teams in Asia. Point72’s 10-month training program for the region, modeled after one that the firm introduced to the U.S. in 2015, had its first Hong Kong class in March. The firm has yet to roll out a dedicated program for Europe.
While the global hedge fund industry has faced a rocky few years as investors rebelled against high fees and lackluster returns, Asia has proven a relative bright spot thanks to stronger economic growth and expanding capital markets.
Combined assets under management at funds based in Australia, Hong Kong, Japan and Singapore have climbed more than 20% since 2016 to $192 billion, according to research firm Eurekahedge Pte. That compares with a 5% increase in the U.S. and a 6% drop in the U.K.
Hedge fund “platforms” like Point72 -- which allocate money to multiple internal portfolio managers each responsible for his or her own slice of the firm’s overall assets -- have been a notable source of growth in Asia.
New entrants in recent years include ExodusPoint Capital Management LP, Schonfeld Strategic Advisors LLC and Polymer Capital Management, which was founded by former Point72 Asia chief Angus Wai. The region now has at least eight major hedge fund platforms -- twice as many as in 2013 -- that oversee a combined $100 billion globally. Polymer is among those that have poached from rivals in Asia, hiring portfolio managers from both Point72 and Izzy Englander’s Millennium Management LLC.
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 Nilay Khandelwal, managing director of Michael Page Singapore, a recruiting firm.
“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,” Khandelwal said. “Anyone who’s been here for the last five, six, seven years is in a good role, and to move them is tough.”
|Asia’s Hedge Fund Platforms|
|Balyasny||Has 10 portfolio managers in Asia, including three currently in a training program. Two of its largest portfolio managers globally sit in Asia|
|Dymon||Set up an equity platform with Temasek funding in 2014. It now has seven equity portfolio managers|
|ExodusPoint||Founded by Millennium alumnus Michael Gelband and Hyung Lee, who previously worked for Lehman Brothers in Asia. Firm now manages $8.7 billion. It employs 21 investment professional in Asia, where it has offices in Singapore, Tokyo, Hangzhou and Hong Kong|
|Millennium||Has more than 80 people on its Asia investment team, according to a person familiar with the details. Established a presence in the region in 2008. Has more than doubled the size of its regional investment team since 2010|
|Point72||Has around 180 people in Asia. Has boosted the size of its Asia investment team by 50% since 2016|
|Polymer||Set up by former Point72 Asia head Angus Wai. Plans to double PMs to 12 by mid-2020. Has already hired from Millennium and Point72|
|Schonfeld||Took over Folger Hill Asset Management’s Asia operations last year. Hired a quant team earlier in 2019|
Compensation packages in Asia are increasing as hedge funds pay up to attract top candidates, people familiar with the industry said. 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’s worked in the hedge fund industry for more than a decade said he’s aware of recent bonus payouts in Asia of 25% of profits, up from 23% a few years ago, while noting that there can be significant variation across the industry.
Top portfolio managers in Asia can take home $15 million to $20 million a year once performance bonuses are included, while junior portfolio managers can command $2 million to $3 million, people familiar with the matter said.
Compensation in the region is still likely lower than in Europe and the U.S., but that’s because Asia-based portfolio managers typically oversee fewer assets, said Will Tan, a managing director at recruitment firm Principle Partners Pte. In the U.S., star managers at big funds can make north of $50 million in a good year, Tan said.
At Point72, recruiting in Asia starts early. The firm sweeps university campuses across the region -- including the University of Hong Kong and the National University of Singapore -- to find students for 10-week summer internships. The most promising are offered spots at Point72’s Asia Academy associate program.
Attendees spend four months in the U.S. before returning to Asia for an additional four months of training, followed by rotations with portfolio managers.
“If somebody has just done financials in the U.S. and you ask them to cover banks in Asia, it will be a long learning process,” said Jahanzeb Naseer, Point72’s head of academy for Asia Pacific. “You need to understand Korea, you need to understand China, Thailand, Indonesia. You’re looking at 13 markets.”
|The Path to Portfolio Manager at Point72|
|Title||Skills required||Time to next level|
|Research analyst||Analyzing industry dynamics and securities fundamentals||2 to 4 years, including the Academy associate program|
|Senior analyst||Generating ideas, understanding how market may price securities differently from fundamental analysis||at least 4 to 6 years|
|Developmental portfolio manager||Combining stocks to form a portfolio, assessing and managing portfolio risks||1-year program|
Balyasny has a two-year program called Anthem for senior analysts and newly hired portfolio managers. 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.
Balyasny started to bring Asia staff into the Anthem program two years ago to address the shortage, said Sachin Kewalramani, the firm’s head of Asia in Hong Kong. About 60% of Balyasny’s portfolio managers in Asia were promoted internally or hired into the Anthem program.
Once a person graduates, “the highest risk is usually in the first 12 months, when we’re still figuring out if they have the aptitude, and they’re figuring out whether they want to do this,” he said.
The progression from an entry-level analyst to a fully fledged portfolio manager can take more than a decade at the typical hedge fund platform. It’s a long and uncertain payoff period, but firms like Point72 and Balyasny are willing to commit resources to a region where they see strong growth potential.
“We find ourselves in a situation where the ecosystem is young,” said Marc Desmidt, the head of Point72’s international business. “We’ve got to take a two-fold strategy -- develop our own bench as well as hiring.”
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