After several years of pedestrian performance in Asia, hedge funds are starting to rally, and compensation is adjusting accordingly, says professional services firm Heidrick & Struggles.
According to the firm’s second annual Hedge Fund Compensation Survey (Asia 2013), base salaries for hedge fund staff are starting to be adjusted.
“In both 2012 and 2013, 40 per cent of respondents reported increases in base salaries, indicating an upward trend. The rises are skewed in favor of junior analysts and execution traders whose salaries have been worst affected over the past few years.”
Some 37 per cent of respondents reported increases in their 2012 bonus, compared to only 26 per cent in 2011. Even more hedge fund employees expect larger bonuses for 2013 – 48 per cent of respondents expect an increase in 2013, up from 45 per cent last year, and more significantly, only 11 per cent expect their bonuses to shrink, down from almost a quarter one year ago.
The firm says that the high levels of unemployment in the industry are slowly disappearing as people find jobs or move to other industries.
“Employers are finding that they hold less sway over the market than they did just a year ago. Although the market is still employer-led, it is rapidly approaching a balance. About 50 per cent of respondents reported that their funds are looking for staff, with 10 per cent actively hiring and 40 per cent taking an opportunistic approach.”
Hedge funds had their third straight month of performance gains, but total assets under management still fell in November as investors started pulling money out, according to Eurekahedge’s monthly report.
“After four consecutive months of positive asset flows during which the industry witnessed net allocations of USUSD64.4 billion, the month of November saw a sharp detraction from this trend with investors withdrawing a net of USUSD3.96 billion from the hedge fund industry,” says the Eurekahedge report. “Meanwhile all regional mandates registered their third consecutive month of positive performance-based gains raking in USUSD2.51 billion during the month.”
More Asia hedge-fund industry employees are expecting increases in bonuses this year as they delivered returns, a survey by executive recruitment firm Heidrick & Struggles International Inc. showed.
As reported by Bloomberg, the share of respondents anticipating their bonuses to increase climbed to 48 per cent in a survey carried out in September by the Chicago-based executive recruitment firm, up from 45 per cent in last year’s poll. By contrast, those anticipating a decline in their bonuses shrank to 11 per cent from about 25 per cent last year.
The survey’s findings highlight growing optimism among Asia’s hedge funds, which are heading for their strongest annual growth since 2009. The Eurekahedge Asian Hedge Fund Index has risen 15 per cent this year, compared with a 7.2 per cent gain by the Singapore-based data provider’s global gauge and the MSCI Asia-Pacific Index’s 9.8 per cent advance.
After several years of hiring staff at below market compensation, hedge funds are now finding that new employees are less willing to accept salaries they perceive to be low, the survey showed.
The share of respondents reporting an increase in their base salary was 40 per cent this year, unchanged from last year’s survey, it showed. The increases are skewed in favor of junior analysts and execution traders whose salaries have been worst affected over the past few years, according to the survey.
About 50 per cent of the respondents said that their funds are looking for staff, while 10 per cent are actively hiring, according to the survey, which didn’t provide figures for last year’s responses on hiring.
The California Public Employees' Retirement System (Calpers), the biggest U.S. public pension fund, has invested about USD100 million in Asian credit hedge fund Double Haven, a fresh sign that investor interest in Asia-based managers is rekindling.
Although the hedge fund industry in Asia suffered net outflows of more than USD4 billion in 2012, an average 15 per cent return through the end of November this year has drawn investors, helping the industry raise more than USD10 billion this year, according to data from Eurekahedge.
Calpers will invest in Double Haven's long/short credit hedge fund and the investment will boost the firm's total assets under management to more than USD710 million, the hedge fund's chief executive, Greg Donohugh, told Reuters.
Asia's USD141 billion regional hedge fund industry is almost entirely reliant on U.S. and European investors for capital and the Calpers investment represents a significant win for Double Haven. The fund managed only about USD160 million at the end of August last year.
"Large institutional investors are recognising the growth potential in the Asian credit space," Donohugh said.
He said that Asian investment grade issuers have an average duration of 4.92 years, which is nearly two years shorter than their counterparts in the US, and they offer a 90-100 basis points spread over U.S. debt, making them attractive bets.
As investors move savings out of low yielding bank deposits, Morgan Stanley estimates that the Asia ex-Japan market for bonds issued in US dollars, yen and euros will grow to USD1 trillion by 2017 from USD482 billion at end-2012, creating opportunities for fixed income managers.
Double Haven, which was spun out of Sparx Group Co Ltd in 2011, said its long/short credit hedge fund has provided a 6.2 per cent return this year. By comparison, the Eurekahedge Asia Fixed Income index is up 0.6 per cent.