Asset Management Market Update 2018
The following report reflects our insights on the Asset Management employment market in Asia. It highlights the key trends we observed in 2017 and pinpoints emerging themes across the industry for the next 12 months, including identifying the major factors impacting hiring and talent movement. We expect to see the pace of recruitment activity in 2018 continue along the same upward trajectory as it ended last year. With strong fundamentals fuelling financial markets, there is no reason to think that the increasing human capital demands that we saw in asset management in Asia in the second half of 2017 – and that we still see this year – will slow. This is a breath of fresh air in the wake of 2016, when fee compression and lagging performance dictated a tough year for the markets and industry alike. But since the landscape turned more positive in Asia around mid-2017, nobody has (yet) looked back. We are busier now than at any time since the pre-2008/2009 crisis – across each of the front-, middle- and back-offices in both the wholesale and institutional sides of the asset management business. With over 40 staff onshore, we have big ambitions for our growing China business, in line with the ever-increasing demand for both inbound and outbound expertise. BUILDING ON MOMENTUM A look at the key trends in 2017 can help us to understand what is likely to influence talent movement this year. Strong performance meant most managers were better-placed than during the previous 12 months, with notable appetite for multi-asset, more sophisticated fixed income, passive strategies and alternatives solutions. Broadly, the last 12 months saw asset owners – ranging from insurance to sovereign wealth funds to corporates – look to strengthen their own investment capabilities. China was the other big theme for the year, shaping firms’ strategic planning around hiring. Regulatory changes in terms of WFOE structures and joint venture ownership has led to a significant amount of interest among foreign asset managers, luring them to invest time, money and people power in the domestic market. In short, their onshore recruitment efforts have hit unprecedented levels. In demand in 2018 Multi-asset and structured solutions professionals, plus people with alternatives expertise across all sectors Compliance officers and operations practitioners – with an ability to navigate China are important, especially for WFOE and China-facing businesses Experience in China inbound investment – as foreign firms look to establish a foothold in the vast domestic market, to manage Chinese instruments onshore Specialists in China outbound transactions – as onshore players seek a slice of the action globally Individuals with a solid institutional sales track-record Expertise and knowledge in private credit and special situations FRONT OFFICE – INVESTMENT & PRODUCT 2017 Yield was the buzz-word last year. With stock markets rallying for the full 12 months, investors were drawn to Asian and global stocks, along with other equities products. Although fixed income took a bit of a back-seat, multi-asset funds maintained their strong momentum from 2016. The industry had strong appetite for individuals across several roles. For example: Multi-asset product specialists had a stellar year over last 12 months – we expanded our book of business in this area by 20% to 25%, ranging from asset allocators to quants, with experienced portfolio managers sought after too Factor-based and passive investment specialists benefited from the impressive volume of capital pouring into ETFs – in turn, this highlighted the shortage of quality candidates with the right experience to fill the gaps In the alternatives space, hedge funds became as prominent as they have been for a long time On the private side of the business, the priority moved to private credit and special situations Further, from a skills perspective, last year saw a notable move by asset managers away from their focus in 2016 on product specialists and client portfolio managers who performed a more narrowly-defined role, and towards individuals with the capability to also perform a client service function – as a conduit to business development and sales. 2018 The trends we saw during the last 12 months are likely to maintain their momentum this year, assuming markets remain robust. In particular, we foresee demand in 2018 in several key areas: For equities specialists, with a specific need for A-Shares analysts and portfolio managers For individuals with multi-asset expertise, especially experienced asset allocators and quants For senior client portfolio managers, with the pecking order being: multi-asset, then fixed income, then equities FRONT OFFICE – DISTRIBUTION 2017 The multi-year war for talent across Asia in the wholesale asset gathering space (retail and private wealth) continued over the last 12 months. However, the demand shifted towards those with the investment product content knowledge combined with the intellectual horse-power to switch strategy and asset classes seamlessly. This reflects subject-matter expertise being valued above and beyond “connections” and old-school sales skills. This was evident as new entrants in the asset management space as well as established players looked to further strengthen their teams – especially in terms of dedicated private banking distribution expertise. Institutional sales roles also saw a marked comeback in terms of demand, as several strong houses sought to expand or upgrade their teams. Many firms took several approaches to try to deepen the talent pool: Exploring candidates from peripheral businesses, including private banks, alternatives firms and investment banks Identifying individuals with strong investment knowledge as well as networks Seeking those people able to ‘up’ the stakeholder engagement – which is key in the current environment, since gone are the days of simply ‘wining and dining’ a client; salespeople must now be market-savvy; without the right knowledge base and narrative, their value is now hard to justify 2018 More demanding clients yet fewer approved support headcount leave asset gatherers with little choice but to adapt: indeed, the blurring of the lines between asset gathering and client servicing will continue this year. Working with “new wave” distribution partners such as Ant Financial and Tencent will be a theme which continues to both excite and confuse the space. Without doubt, everyone sees the opportunity to collaborate with these technology-based giants – however, the trick seems to be the “how” not the “why”. Some of the trends we foresee in 2018 include: Distribution continuing to dominate for the foreseeable future within wholesale, and especially private banking Growing demand for a hybrid combination of a product and sales candidate who can function between a product specialist (managing technical conversations on the one hand) and a business development executive (performing more of a sales-led role on the other hand) Those asset gatherers with proven experience and a record of success being able to command much better packages than was the case several years ago (this is an important impact of unabated demand for high-quality distribution candidates in the asset management space) FRONT OFFICE – MARKETING 2017 The most notable challenge for the role of marketers in 2017 was the need for them to be more digitally-minded. Experience in digital marketing, as well as the customer and user experiences, was – and remains – key. Love it or hate it, there is a perception that Asia has lagged on the digitisation of the asset management business. There was a prevailing feeling during 2017 of playing catch-up – and this has continued into 2018. However, we do not believe this should be considered a negative; indeed, there seems a very strong commitment to embrace change and push forward with real vigour into this newer reality of the marketing “seat at the table”. One of the major themes was the search for talent from outside the industry, and we do not see this slowing down. But the trick is inspiring digital talent to make the move into asset management from other “cooler” industries. 2018 Demand for digital expertise will gather pace this year. And as disruptive technologies dominate this marketplace, we see asset management firms adapting their hiring strategies in two main ways: Hunting for ways to improve and increase their market access and penetration via various social media and by leveraging smart tech to deliver their brand and raise their profile Importing digital marketing talent – both in terms of bringing people to Asia from overseas markets, such as the US and Europe, as well as from outside the financial services sector, including technology, media and consumer goods businesses One thing is clear: those players that have not aggressively adopted digitalisation strategies will continue to need to play catch-up. A definite trend we are observing is that companies are putting more senior or high-profile employees and leaders into this space. Marketing and digital alliances are possibly the future of many firms and this is reflected in the rising importance of the function. INFRASTRUCTURE At Profile we concentrate on the following sub-sectors within Infrastructure: Operations (Ops), COO & Business Management (COO), Accounting & Finance (Fin) and Technology (Tech). 2017 The second half of last year saw a marked pick-up in hiring needs across infrastructure, with a real focus on meeting the needs of the growth and success of the business lines. However, the excitement was tempered by the fact that, in many instances, companies have certainly been careful not to over-hire and over-extend. The mantra of “doing more with less” has held true in most cases. Within Ops and COO functions across asset management, some of the most notable trends in 2017 included: A growing number of roles require fluent Mandarin capability, amid efforts by foreign firms to build relationships with Chinese clients, including domestic banks Increasing demand for project management expertise, especially for China-related work in line with the focus on WFOE structures More need for very specific product knowledge, mainly reflective of the continued expansion of fixed income and multi-asset teams More specifically, our hedge fund client base stepped up the need for COO roles. These have tended to be generalist positions, targeting candidates with an accounting background to support the need for greater stringency around financial governance. We also saw a resurgence – after a few subdued years – in client services and operational positions in prime broking. 2018 We have seen the pace of activity from the latter part of 2017 continue. In fact, we are getting even busier across several areas of Infrastructure. For example: Ops and COO functions continue to require extra headcount, with the same product skills and project experience as in 2017 still in high demand Tech is seeing increasing appetite across the board in people with experience in technology and digital, especially including big data and analytics – some of our buy-side clients are even looking to build-out their capability in artificial intelligence and robotics Also in Tech, cybersecurity is a front-of-mind, in-demand area of expertise, given recent data breaches Within Fin, the landscape remains broadly stable among senior finance executives; there are only a few hires at the chief financial officer level, although this is more common at the moment in the alternatives space. Internal controls, however, is seeing some movement. Internal audit and operational risk professionals are in demand – from vice presidents upwards. LEGAL & COMPLIANCE 2017 We were not surprised to see increased demand for legal and compliance professionals across asset management and insurance, in line with the ever-tighter regulatory environment. MiFID II has, for example, been a key driver of financial institutions adding resources to deal with the extra reporting requirements – plus, of course, the China WFOE demands. As a result of these trends, and despite budget constraints in several industries, we saw steady hiring within legal and compliance teams. Some of the specific skills and roles in high demand included: Technology/data privacy Regulatory compliance and financial crime Product advisory Compliance testing and assurance Across all roles, there was a trend towards more of a hands-on approach to employee management, with greater investments in training and internal processes to ensure standards and staff are in line with best practice. This was also influenced by heightened awareness about issues around discrimination, harassment, whistleblowing and occupational health. Meanwhile, China-focused roles dominated the attention of many asset management and private equity firms. Fluent Mandarin language skills continued to be a focus for many employers. 2018 Across all types of organisations, we expect many employees to remain focused this year on several areas to drive either retention or departure. These include: career development, performance management and enhancement, work/life balance and job security. Some of the specific legal and compliance-related trends we predict in 2018 include: China continuing to feature prominently in planning, driven by market dynamics such as the introduction of new WFOE licenses and growth in new industries such as fintech An increasing need in the insurance industry to add resources and upskill, in order to tackle challenges from digital disruption The growing importance of senior leadership positions – such as general counsel and chief compliance officer – to help manage ever-expanding legal and compliance departments amid the brighter spotlight on these roles HUMAN RESOURCES 2017 A relatively subdued first half of the year saw comparatively fewer roles available within financial services compared with other industries. From October, however, asset managers and boutique investment houses started to make their mark. In particular, there was a focus on senior HR practitioners as well as specialist roles, such as: HR business partnering Talent management Compensation & benefits Operations – including HR information systems and analytics Technical HR – including strong business acumen Although individuals seeking new roles seemed to be motivated by an increase in compensation, we saw more and more candidates leave firms due to other reasons, including: a lack of opportunities internally to develop; a limited work/life balance; and under-appreciation by their managers. Smaller asset managers were also increasingly capitalising on a loss of appeal among many HR professionals for traditional banking roles. 2018 The market has already accelerated again this year, with a number of new hires approved across a range of roles. Some of the notable trends we expect to see in the year ahead include: An uptick in front-office roles in expectation of increased market activity Changes in the senior HR business partnering space within asset management that will create more movement and opportunities Growing confidence within the candidate market, with many more people open to a move A focus among candidates on holistic offers that include benefits plus a work/life balance, rather than an increase in base-line salary Insurance companies continuing to hire, therefore attracting good talent away from banking and investment houses Below is our placement history in Hong Kong, Singapore, Shanghai and Beijing for 2016 and 2017 – based on Client Type, Position Type and Gender. Placed Asset Management Professionals by Client Type Placed Asset Management Professionals by Position Type Placed Asset Management Professionals by Gender MARKET FOCUS – CHINA China continues to grab a lot of attention from asset management firms globally. Yet expanding with the right headcount in the Mainland to capitalise on the unprecedented scale of the opportunity that is coming from multiple avenues is much more challenging than many players realise. At the same time, the number of highly-motivated and ambitious Chinese managers vying for talent further accentuates the demand/supply imbalance. Inbound We are seeing more China-related searches at the moment than we have in recent memory. Certainly, the focus among foreign firms to set up a WFOE is playing a key role in this. Yet although predictions among market observers are that the number of investment management WFOEs could well more than double from the current 25 to over 50 by the end of 2018 (15 WFOEs were established in 2017) – staffing them will prove challenging. This is the case both for new players that are looking to fill leadership roles to set up the business from scratch, as it is for existing players that want to expand their China team from one or two people to between 10 and 20 on the ground. Any firms expecting to be able to hire less than 10 individuals focused on money management plus clients and relationship management need to realise that by doing so, they will lack both the manpower and expertise to effectively run a WFOE that manages private funds. Instead, our research indicates they would require one or two senior portfolio managers per asset class, and three to four analysts – and likely more. Some would argue, if one analyst covers 30 or 40 stocks, for instance, firms will need anything up to six or seven analysts for equities alone – and even then, their overall onshore coverage will be relatively limited. Added to this, a WFOE requires a suitable general manager, a compliance officer, people within infrastructure roles focused on operations and technology, and also salespeople. Another significant human capital issue is that, usually, sufficient English language skills are essential for individuals in senior roles. This applies to general managers and compliance officers, in particular, who will need to be able to liaise with their counterparts in Hong Kong, Singapore and further afield – and meet expectations that they can live up to international best practice to help colleagues get comfort in understanding the reality of the situation onshore. Further adding complication to an already-difficult task of staffing a WFOE is the fact that current structures all have subtle differences. This means the right model is not yet defined nor proven. Outbound Perhaps one of the biggest hiring needs, meanwhile, is the domestic one. Firms such as Ant Financial, Tencent, CreditEase and Noah, for example, are making real strides to expand with purpose into the international markets. They have the capital, the desire and the truly-global ambitions that make them extremely compelling. These types of opportunities are increasingly competing with the motivators to join a foreign firm, such as learning from global best practice. Working in a Chinese institution can appeal more to some local candidates, it seems. These individuals are more familiar with the corporate culture, plus feel they can contribute in a more meaningful way as a part of the core team rather than a satellite operation. In summary The talent shortage in China will increasingly impact foreign firms looking to take advantage of the easing ownership limits on foreign joint ventures across asset management, life insurance and securities. As asset managers either consider taking full ownership of their JV business or selling it, a lot of movement is expected from a recruitment perspective. Further, with QFII teams offering large incentives to retain their investment professionals, the talent market is becoming even more competitive. Local candidates are also able to be demanding, given the shortage. Further, if they tick all the boxes, they know they have choices that makes it even tougher for foreign firms to lure them. In conclusion, China is experiencing a “moment in time” within the asset management industry. It is an extremely exciting, complicated and difficult market to navigate from a human capital perspective, and 2018 will be no different. The race for talent in the short term is causing all the challenges one would expect, and the battle to keep true talent in the long term will not be an easy one. However, with almost eight years of operating onshore and with half our business based in China, we are very excited about what lies ahead and the prospect of success in the coming years in this industry. MARKET FOCUS – AUSTRALIA It was interesting to see that Trump and Brexit had no direct effect really in Australia in 2017. What everyone has been watching, instead, is the increasing dominance of China on the world stage. There are several major themes in asset management in Australia: Superannuation funds continuing to increase their direct investment capabilities – both in listed and private markets Increasing regulatory pressure in the banking sector, and an ever-increasing demand for debt exposure, leading to a growth in private debt funds Ongoing conversations around retirement and retirement product offerings – given the significant trend from accumulation to retirement, most organisations are looking at how to capture an ever-growing market share Growing appetite for non-passive products, particularly among HNW investors, who seem to have the biggest appetite for risk Increasing demand for great marketers who are readily adapting to the changing digital environment In wealth management, meanwhile, some key themes have been emerging in Australia: A Royal Commission announcement (read ‘independent investigation’) into the financial services industry – the terms of reference are broad, as are the institutions that may be reviewed, leading to a potentially nervous year for many players Continuing digital and fintech disruption – even the Australian Stock Exchange is moving to blockchain technology Increasing use of data analytics and big data to create highly-personalised and targeted marketing strategies Significant M&A activity in the sector – with Superannuation funds merging and the larger financial institutions divesting themselves of both wealth and insurance businesses * This view is provided by Susie Moore, Founder, East Partnership
Read More
