How big is PE/HF in Asia?
A desired route for someone after a 2-year BB IBD stint in NYC would be to move to PE or HF.
I was wondering what the case is for analysts in HK? Is moving to PE/HF as big in Asia? If not, what do people tend to do?
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Anecdotally, from what I've seen in Hong Kong, local Chinese kids who graduated from local Asian universities (Places like Tsinghua University, Beijing University, etc.) in China and go into analyst programs at BB investment banks tend to stay at the banks, moving up to associate and then to VP.
Kids who graduated from schools abroad in the US, UK, etc. and then start their careers in Hong Kong tend to only stay for the 2-year stint before moving to the buy side. This includes ABCs as well as students born and raised in China who came to the US starting in high school or college. Generally speaking, this is the category of people who prefer to speak English vs. Mandarin (ABCs) or their English and Mandarin are perfectly bilingual (the latter category)
Thanks for your reply Deo. That's interesting.
Does anyone know if buyside activity is significant in Asia as it is in the states?
All I have heard is that PE was big in mainland China, not sure if that is still the case. Also, how is the HF landscape in Asia?
I'm ABC. I've always wondered whether ABCs are generally looked upon favorably by PE/HF/AM in China. And how they viewed American degrees, especially considering how important guanxi is in Chinese business culture.
Some US funds love hiring ABCs, which is understandable, especially if the fund also has a bunch of ABCs at the top level. As a junior PE professional, your top priority is deal screening and deal execution so some ppl are less concerned about your potential of deal origination in Asia.
There is a user here on WSO, NiuShi, who is working/has worked in PE in China. If you search for his posts, I think they would be helpful for you.
Japan has a pretty mature hedge fund industry, and I know that pre-crisis it launched hedge funds at a rate that made it third in the world (behind the US and EU). Asia ex-Japan might be a little less developed than New York or Greenwich, but it is growing fast. There have been some pretty high-profile tiger cubs and tiger grand cubs that have launched Asia-focused hedge funds (with offices in Hong Kong). I personally knew someone (an alum of my school) who ran a $5bn+ fund out of Hong Kong and used to be a PM for the Soros Quantum Fund.
The HF world is TINY compared to the in the US, size and sophistication-wise. And the funds don't really outperform in general either. PE has grown a lot, but is a very localized business... You'll have to be a native speaker of some sort to get in.. or stay in and move up.
Good Luck
HFs aren't as great as the west.You don't want to work for some small fund that could easily lose half of its AUM overnight at anytime
As for PE, its a lot bigger. But for HK, I believe a past WSO user said it best: How much opportunity you have in the PE world is directly proportional to your Mandarin ability (English goes without saying since you're posting here). Can you listen to an entire conference call, note down the entire thing and do a write up in Chinese? After that you may need to translate all of it. I noticed a lot of time, even HK office guys need to travel back and forth to the Beijing office so much that its like a second home. Maybe there are exceptions but that seems to be the trend right now. Guanxi probably plays an important part too.
Thank you for all your replies!
That's quite informative, boredviewer. Do you know if there would there be more PE positions in Beijing than in HK? My Chinese is OK, but could definitely improve further. Also, do you know if the degree of technical analysis is close to the level that PEs in NY engage in?
guanxi is everything in order to really get promoted and move up. Not just gor government contacts but to be able to source deals in China and fend off or compete with the competition, much of which is established and/or well connected. Capital is a commodity for good companies...
Language is definitely a requirement unless you're a senior. Some funds just have their ops guys and maybe one trader sit in HK, and the rest of the team is in Beijing... meaning the PMs don't have patience/tolerance for non-mandarin speakers (unless they were educated in western countries).
There are a ton of HFs but not very many that are established with a good track record and AUM. Strategies are definitely less sophisticated than what you have in Europe or the US. Any rich person with some extra cash from himself + HNW friends could start a $20m eq L/S fund... you do see some ex-traders or bankers doing that, but PM is different from banking, so you'll also see a lot of HFs fail/never get external capital because they can't achieve even 2 good years of performance.
There's also a lot of relationship based/insider stuff going on for China based funds, but you can't escape that in Asia.
Cant really comment on North Asia, but in singapore the PE industry is the largest across the ASEAN players and is still pretty small...mostly REPE with some F&B/lifestlye PE thrown in..Hedge Funds are well represented in Sg, as MAS made it a priority to draw them in..again, its pretty small if you compare it to Japan.
I've been working in one of the PE funds (AUM US$5bn+) in HK for more than three years now so think I can share a bit of my understanding on the PE industry here in HK/China.
It is true that IBD to PE is a less common route in Asia. Two key reasons IMO: less available opportunity and more importantly, the pay structure. In Asia, BB analysts gets about US$25K for housing allowance. So as a 2nd year and 3rd year analyst, your base comps package will hit US$105K and US$115K respectively. If you move to PE, your housing allowance is taken away so your overall base comps (typically at around US$120K) is not meaningfully higher. For bonus, PE in Asia typically pay 12 mths, so less than the peers in US. Again your bonus is not meaningfully higher than that of your peers. Megafunds typically pay better than regional and local funds although there are always exceptions.
So all in all, your comps package in PE not meaningfully higher than that in banking in Asia. Hours, on the other hand, can be as bad or even worse if you join one of the slaughter houses, such as MSPEA, KKR and Silver Lake.
In terms of the availability of the positions, more opportunities in China than in Hong Kong, especially in Beijing and Shanghai. Language skill is very important if you are facing China based clients. Technical skills are not as important because deal structure is typically simple and most deals are growth equity deals so pure equity financing and no debt components.
Megafunds such as KKR, TPG and WP typically prefer kids with US education background and BB banking exp although the team is getting increasingly localized. There are funds specifically looking for kids from Peking University and Tsinghua University those days as they realize that 1) these two are better brand names than Harvard and Yale in 2nd and 3rd tier cities in China; 2) alumni base is so much larger so easier to expand your network which will help you find deals.
Activities for funds vary quite a bit. In general, very active in India but less so in China. In terms of different funds (am only talking about more established funds here, so ignoring the new funds such as PAG, Primavera and RRJ; or new entrants such as Apax; or more VC type funds such as Sequoia and IDG), IMO, KKR, WB and GSPIA are the most active. Hony, CDH, Affinity, Unitas, Bain, FountainVest, MSPEA, Baring, TPG and Carlyle were fairly active but less so these days. For Blackstone and Silverlake, I can't remember when is the last time that they did a deal in China. Reality is, too much capital but not enough attractive deals.
Hope this info helps a bit. If anyone has any question, feel free to post here or send me a PM.
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