China funds scramble for pros
HONG KONG/SHANGHAI (Reuters) — Poaching and job hopping is rampant in China’s $64 billion fund industry, making it a struggle to hire and retain ace money managers.
With markets rebounding from a four-year slump and money pouring in, analysts say salaries are jumping to Hong Kong levels while the shortage of fund managers is likely to last for at least the next few years.
“Everyone is screaming for better professionals. What has happened is that there’s been serious poaching between the fund managers,” said Joseph Ngai, an associate principal with management consultants McKinsey & Co. in Hong Kong.
“Managers have told us they’ve had a lot of their lower level staff poached to fill senior positions at other funds, which they are clearly not qualified for. But for lack of better talent right now, there’s nothing they can do about it.”
A Chinese fund manager, on average, will run a fund for just about one year, with more than 30 percent of funds managed by one manager for less than half a year, according to a recent survey conducted by the official Securities Times.
“Every Chinese fund house is struggling to obtain and retain skilled fund managers. The fund industry is a very young industry in China, and we did not have proper training programs to keep up with the demand,” said Jeanne Zhen, an investment consultant with Watson Wyatt.
“That’s why you’ve seen a lot of joint ventures in the fund management industry, because the government realized the shortage of skills.”
Pay nears Hong Kong levels
China now has more than 20 joint ventures with global fund management firms, which are keen to lure China’s $2 trillion in personal savings into fee-rich products such as mutual funds.
While the foreign players have brought much-needed expertise, industry watchers said their deep pockets have also helped fuel turnover and drive up salaries.
“(Pay packages) are reaching Hong Kong levels at this point. For the joint venture mutual fund companies, the joint venture asset management companies, they’re definitely getting close to Hong Kong territory,” said a Hong Kong-based partner with an executive recruitment firm.
“The local firms are no dummies either. They know what it takes to keep and attract good quality people.”
Industry sources said a junior manager at a mid-level Hong Kong firm could make from $130,000 to $190,000, while a chief investment officer could make more than $1 million. But a pay package of $200,000 to $400,000 is typical, they said.
Analysts said rising salaries will eventually curb the shortages as financial professionals are lured away from industries such as insurance, but the process will take time.
Fast growth
The fund industry’s overall outlook is bright, with assets from both mutual funds and pension funds likely to reach almost $1 trillion within a decade, said McKinsey’s Ngai.
“On the talent pool catching up, to be honest, we’re not as worried because it’s proven to be a very attractive industry,” he said.
“The talent imbalance will be there for a few years. But we think it will get to more of a state of equilibrium given another three years or so.”
The mainland Chinese fund industry had 54 firms managing 511.4 billion yuan ($64.4 billion) in assets at the end of the first quarter, according to data from regulators.
These include joint ventures with global fund powerhouses such as UBS AG, JPMorgan Chase & Co., and HSBC Holdings Plc.
While small when compared with most developed markets, the industry has made a huge increase from 1998, when six firms managed just 10.74 billion yuan ($1.35 billion).
The rapid growth has put fund management talent at a premium, and spurred many managers to jump to larger state lenders and foreign brand-backed fund companies.
Industry sources cite the case of Merchants Fund manager Du Haitao, who left for larger rival ICBC Credit Suisse Fund in the first half of this year.
“The turnover in China has been relatively higher than at Western firms,” said Frank Yao, executive vice president with Huaan Fund Management Co. Ltd. in Shanghai.
“In some Chinese fund firms, a fund manager could only work for up to half a year and then he or she hopped to a rival firm,” added Yao, whose firm manages nearly 40 billion yuan.