Hedge Funds Seek Professionals With Expertise in Developing Credit Markets
Increased activity in the highly volatile credit markets of China’s and India is drawing even more attention to the rapid growth of Asia-focused hedge funds, according to a study released today by the financial services industry consultancy Oliver Wyman. A staggering 80% of the largest Asia-focused hedge funds are investing in China and India’s credit markets. The trend underscores the increasing significance of the Asia Pacific region to the $2.5 trillion hedge fund industry. Executive recruiting firm, A.E. Feldman, says demand is growing for professionals with expertise in developing credit markets. Candidates who can assess total return opportunities across the local debt markets of developing countries while managing overall risk are in a position to benefit.
China and India are the two most popular destinations for Asia-focused hedge funds that invest in credit, according to Oliver Wyman. The firm, which examined the investment preferences of 60 Asia-focused hedge funds active in debt markets, found that 78% of the funds surveyed were investing in China and 76% were investing in India. Bradley Ziff, Director of the Hedge Funds Advisory Practice at Oliver Wyman, says hedge funds are looking for higher yield and opportunities with lower rated credits. “A favorable environment for hedge funds continues to develop in Asia. Not only are there more than 600 funds domiciled in Asia, but hedge funds have become an important part of the capital equation that is central to the growth of Asian economies,” Ziff told Reuters.
Trailing China and India, other emerging credit markets that are destinations for investment were the Philippines (44%), Australia (39%), Thailand (33%), Indonesia (30%) and Hong Kong (29%). The Oliver Wyman study suggests that the growth prospects for infrastructure, utilities, and commodities companies are fueling hedge fund trading of credit products in these countries.
In addition to trading a range of credit products, Asia-focused hedge funds are investing heavily in special situations and private placement deals. The majority of hedge funds polled, 79%, are active in privately-placed high-yield debt deals in Asia. Meanwhile, 75% consider special situation deals in Asia “important” to their business.
But is increased hedge fund investing in the private-placement market in Asia cause for alarm? According to Ziff, hedge funds investing in private corporate debt in Asia aren’t using as much borrowed money to magnify the size of their bets as they are in other markets. As a result, the risks of defaults are reduced. Moreover, Ziff says funds typically require that the financial institution originating the loans invest as well so there is considerable risk sharing on these transactions. Ziff also notes that the documentation and the due diligence on these privately placed loans are of high quality, allowing a greater degree of scrutiny.
Executive search firm, A.E. Feldman, adds that overall hedge funds continue to challenge top firms in their quest for top talent. The firm reports that the growth in assets under management continues to pad demand for personnel. Need for alternative investment professionals who have a comprehensive understanding of the risks and benefits of the various asset classes and investment strategies is growing. Opportunities range from risk management jobs and accounting jobs to legal jobs.
