What is the state of the market for investment banking human resources in Asia these days?
McAlinden: It is actually surprisingly robust. Given that the general trend in investment banking is to downsize, there are still areas where people are looking to recruit û usually at a very senior level. This would be largely for China, Taiwan and Korea. These three countries are so active you would have to say it will be an extremely good year.
Korea seems to be the new investment-banking battleground in Asia.
McAlinden: I've been covering Korea for ten years and I have never known it to be as active as it is now. It's remarkable. Moreover, the activity is across all disciplines and asset classes. It is probably the only area of the market where prices are still ticking upwards.
Do the available returns match the prices that banks are paying for people? Are the banks making sensible decisions or is it another headlong rush into a hot area from which they will all pull out of in two years time?
McAlinden: No I don't think that's the case. Banks think that the depth and profitability of business in Korea is a long-term trend. I don't see people pouring crazy money in, but given how profitable Korea can be for banks which have a strong franchise in Seoul, inevitably that results in higher packages. It is not a bubble where people throw good money after bad. It is a legitimate business decision in a very active market.
Are there any particular product areas in Korea that are seeing the most attention?
McAlinden: What is unusual is it is literally everywhere: equities, fixed income, derivatives, banking, asset management and private equity. I cannot think of a single discipline we are involved in that is not active there. It means that a serious and sustainably profitable business in Korea is here to stay. It is now one of the most important parts of a bank's business in Asia.
Regionally where is weak? Where are banks not hiring?
McAlinden: There is some activity everywhere. But there is conspicuously less activity in Asean than in North Asia. Most of the clients we talk to are very keen not to abandon their Asean franchise, but they are just trying to keep fewer resources there and maybe adopt a bit more of a hubbed approach. There is not a single country where we are not doing something.
Are banks well staffed with their Mainland Chinese requirements now?
McAlinden: We are still very busy across most asset classes, hiring PRC nationals for our clients' China businesses û based either in Hong Kong or in China itself, usually Shanghai.
Presumably when the Chinese domestic capital markets open up for foreign banks to do business, this will set off another huge wave of placements and postings?
McAlinden: There will be significant headcount addition in Shanghai and Beijing at some point in the future. This will be in equities, investment banking and asset management. All of our clients have a coherent and ambitious strategy for China going forward. It's going to be very exciting.
How far along are they? Are they talking about office space yet?
McAlinden: Some have small offices but it has not got quite that far yet. It is more about hiring key people at the moment. I would describe most banks as cautious expansionists at this stage in the PRC.
In general, investment banks are having a hard time. Compensation is down, clients are cutting fees, and even the regulators are being quite aggressive. Is investment banking becoming a less attractive career than before?
McAlinden: In the middle of the dotcom craze, young professionals felt they had a much larger market in which to make their fortune. But in the last two years that has changed and investment banking looks attractive again. It was never very difficult to get the most talented people into investment banking, although it did become more competitive. The strong international banks still do not have much trouble in attracting the best young people and seasoned professionals to their firms. We still get a huge number of speculative applications from people who want to shift careers into investment banking or from those who are fresh out of business school looking to get into it. But if they do not speak Korean or fluent Mandarin, it is almost impossible for us to help them these days.
But will they still be able to make their fortunes? Are the days of million dollar bonuses over?
McAlinden: There is a strong preference by banks to try to do things without guaranteed bonuses these days. In the areas where the talent pool is shallow, banks will still pay the prevailing market rate. Banks are running their businesses in a disciplined way in Asia these days. They are succeeding in keeping their cost to revenue ratios under control. The whole market is more sober and considered than it was a few years ago.
Can the same be said for the headhunting market in Asia? Is it equally sober and considered?
McAlinden: There is such a wide variety of disciplines that people are hiring for, although within a narrow geographic area, that it does not feel constricted to us.
So even though the banks are having a tough time overall, the headhunters are actually doing OK?
McAlinden: Yes. In this kind of market, where potential hires need to have international training with very relevant skills alongside language capabilities and local understanding, banks need help from organizations that have a track record of completing deals. So in these kinds of market conditions, where banks have important hiring requirements, they need the services of executive search firms.
And that is because the requirements of the people they are looking for are so specific?
McAlinden: Yes, because that narrows the field of potential recruits to a very small number and a very short list of truly relevant candidates. To make sure those people come across the line, most organizations need some help.
Are you being challenged on the fee front at all? Given that the executive search business is quite a fragmented business with lots of small firms, is the competition eating into the fees that you can charge?
McAlinden: Clients want to use the services of the best search firms that have a track record of getting things done in those strategic areas where the banks absolutely have to have a result. In those situations there is no real fee pressure.
Given that it is a small market, with a finite number of very good potential hires for you to approach for each assignment, your business must be all about winning the mandates and not actually doing the placemen - which must be easier in comparison.
McAlinden: I think it is the other way around. You will only win the mandate in the first place if the client is convinced that you can do the deal for them. So having a strong record of proven success in difficult markets is what clients want to see. If clients know you can do this then you will win the mandate.