After a year of slow growth in 2020, robust hiring and increased cash compensations are expected among private capital investment professionals in Asia Pacific as private capital markets continue to gain strength. 

Over a third of investment professionals surveyed (35%) expect their base to increase in 2021, down from the 41% who had expected an increase in 2020, according to Heidrick & Struggles’ latest annual survey of investment professionals in the Asia Pacific region released on Thursday (September 16).

The outlook for bonuses stayed essentially flat, wrote the report, which surveyed 192 professionals in Asia Pacific. The share of respondents who reported they had received carried interest rose from 40% at the associate level to 86% at the managing partner level.

Hiring has been robust in the Asia Pacific private capital market and cash compensation is on an overall upward trend, the survey showed. 

The most interesting finding was the steady increase in cash compensation in the private equity (PE) industry despite grappling with the after-effects of the pandemic, lead author Stephen Zhang, partner for private equity and financial services practices in Greater China, told AsianInvestor.

REGIONAL FUNDS OUTPERFORM

Already, the professionals are reporting higher compensation, with regional funds offering higher median base compensation in 2021 than their peers at global funds with exposure to the region. However, total cash compensation is higher at the global funds.

Zhang said that Asia continues to outperform in terms of raising capital and hiring particularly in local and regional funds, where local knowledge and language capabilities are a key driver in giving them an edge.

“This ties in with the multi-strategy approach that is becoming more popular in the PE industry, which is opening a wider variety of positions and rewarding unique skill sets,” said Zhang.

“Traditional buyout firms are adding growth or public investment professionals to their teams and even public funds are hiring professionals with experience in alternative assets. While this opens up more possibilities for talent, more funds are also trying to vie for the same person with a unique set of sectoral knowledge,” he added.

POSITIVE MOMENTUM TO CONTINUE

The Asia Pacific private capital market has experienced impressive growth in the last five years. According to a recent report by Prequin Markets, assets under management (AUM) totalled a record $1.71 trillion as of September 2020, a nearly three-fold increase in five years. Combined with the $156 billion held by Asia Pacific hedge funds as of Q4 2020, the industry is closing in on $2 trillion in aggregate assets.

Zhang told AsianInvestor that he expects the strong positive momentum in the Asia Pacific capital markets to continue into 2022.

“People and leadership will be a key differentiator in giving PE firms the flexibility to capture value across sectors and asset classes. It will all come down to finding the right talent for helping these firms adapt to and navigate the changing landscape,” said Zhang.

Over the coming years, Zhang expects private equity firms that are looking to expand the breadth and depth of their investment and talent strategies to be best positioned to capitalise on the formidable growth expected during post-pandemic recovery, in sectors such as healthcare, consumer, technology, and renewables.

“For instance, if you take the case of the robust growth, we are seeing in the healthcare industry since last year, it is hard to find outstanding investment professionals who not only have expertise in finance but also a background in healthcare,” said Zhang. “Usually, these professionals tend to be corporates or professors. In the next year, we can expect compensation for such roles will rise because of sheer demand for their skill sets even if they lack experience in finance.”