Paul Smith moved from London to Hong Kong to work in Asia’s hedge-fund industry almost 17 years ago, and he rode the boom to its peak. Last year, like other industry veterans, he quit.
“I decided not to wait the cycle out but to do something more productive with my time,” said Smith, 53, who remains in the city heading the Asia-Pacific office of the nonprofit CFA Institute, the global association of chartered financial analysts. “The hedge-fund industry in Asia will continue to struggle to raise funds for the next few years as banks continue to have liquidity issues.”
Hedge-fund managers, traders and analysts in Asia are quitting as assets have failed to recover after the 2008 global financial crisis, and trading losses have left a majority of funds unable to collect performance fees. They’re moving to mutual funds, endowments, consulting firms and companies outside of the money-management business, often at a cut in pay.
Asian hedge-fund assets are 28 percent below their 2007 peak, according to data provider Eurekahedge Pte. Globally, money overseen by the funds increased 21 percent since 2007 to a new high of $2.3 trillion as of December, data from Chicago- based Hedge Fund Research Inc. show.
A total of 296 Asian hedge funds liquidated in the two years to December, 33 more than the number that started. On a global basis, 1,839 new funds outnumber those that shut by 371, according to Eurekahedge.
“Five years on, many of these guys are tired of the huge swings in hedge-fund compensation, and some have not tasted the sweet promise of hedge-fund payouts,” said Will Tan, managing director at Singapore-based recruiting firm Principle Partners Pte. “Investors getting increasingly selective, regulatory environment getting tougher, inconsistent performance of hedge funds and the overall state of the finance industry have all contributed to long-time veterans leaving the hedge-fund space for more stable careers in finance.”
Asian hedge-fund assets climbed ninefold to $176 billion from 2000 through 2007, expanding 32 percent in that final year alone, according to Eurekahedge. U.S.-based firms including Citadel LLC, Och-Ziff Capital Management Group LLC and SAC Capital Advisors LP opened Hong Kong offices in that period, according to regulatory records. It was common for traders to leave banks for the hedge-fund world.
Today, the $127.4 billion Asian industry accounts for just 7 percent of global hedge-fund assets, down from 9 percent in 2007, according to Eurekahedge. That’s in contrast with Asia’s more than 30 percent share of global stock market value.