Towers Watson is busy building out its private markets consultancy team in Asia as a reflection of increasing demand among institutional investors for exposure to alternative investments.
This service area has seen strong interest among Asian clients over the past three years, the professional services firm says, in terms of structuring an alternatives strategy, management of risk and populating strategies through manager selection or due diligence.
It forms part of a general drive by institutional investors to diversify sources of risk following the global financial crisis on the understanding they had been too heavily skewed to equity risk.
Until recently, Towers Watson had relied on its global research team primarily based in Europe to service Asian clients seeking private markets exposure. A year ago its private markets team in Hong Kong consisted of a solitary person.
But that is changing, and the firm has just hired Richard Tan from Squadron Capital and Agnes Lee from Navis Capital Partners as senior private markets consultants to cover the region out of Hong Kong.
It is also in the process of transferring a member of its global staff to further bolster the team in Hong Kong, and is working with headhunters in the hiring markets to add more.
“In the first instance we took a step back to see what we needed [in Asia] given the demand, and we decided it was really important to have people on the ground to meet and work with clients,” says Naomi Denning, Asia head of investment for Towers Watson.
She notes that while its general consultants are comfortable talking about alternatives, there is a need for specialists with hands-on industry experience to take conversations deeper.
“It is tough to keep flying people out of London, and we felt that given this is clearly a priority in Asia we need to be in front of our clients much more often,” Denning adds.
She points to differences in servicing needs between Asia’s large institutional funds which boast internal teams and the more modestly sized funds it deals with in the US and Europe. The firm has also sought to determine the need for Asian alternative investments in global portfolios.
“There is perceived to be increasing demand for Asia to feature in the line-up,” says Denning, noting that in the past, US or Europe-based institutional providers of alternative investments may or may not have had a little Asian exposure in a fund of funds product.
“Those that have cut their teeth and got into the asset class through a fund of funds strategy are now thinking of taking the next step and looking at direct funds,” she explains.
Towers Watson has about 40 staff in its private markets team globally now; Asia-wise it is represented in Australia, China, Hong Kong and Japan, although it declined to break its numbers out further.
The latest private markets hires, Tan and Lee, report to global head of private markets Luba Nikulina, based in London, as well as Denning herself from an Asian business perspective. The duo also work underneath Mark Brugner who has day-to-day responsibility for their efforts as head of manager research in Asia.
In terms of increased demand for alternatives exposure, Denning suggests it is across the board in Asian geographies, with the notable exception of Hong Kong.
“Many retirement schemes in Hong Kong are closed and therefore gradually winding down, although for many over a long period of time,” she notes. “They are also relatively small, and so private equity is not something they are therefore that comfortable with, particularly if they need liquidity. Hong Kong is probably the least active market and I don’t expect that to change significantly.”
Tan has joined Towers Watson from Squadron Capital, a private equity fund of funds manager in Hong Kong, where he was an investment director. He has 16 years of experience in operations and private equity investment.
Lee was also an investment director at Navis Capital Partners, where she had focused on Southeast Asian mid-market buyout private equity investments.