In Focus: Asset management layoffs in Asia gather pace
The season of asset management layoffs is truly underway.
At least 10 global asset managers are reported to have announced layoffs in the past six months, with almost all of them affecting Asia operations in one way or another.
While the cuts are not as deep as in previous years, there are evolving trends underpinning this round.
A distinct lack of foreign investor appetite for Chinese stocks; tough conditions rocking the global asset management industry; a growing shift to private markets requiring different skills sets and broader technology adoption are all playing starring roles in these layoffs, according to industry experts.
CHINA CHALLENGES
The poor performance of Chinese equities has prompted some investment managers to rejig teams to adjust to the reduced investor focus on China.
Examples of this include Chinese asset manager Harvest Fund Management, which manages $210 billion in assets, laid off more than one-third of its staff at its Hong Kong unit, and Morgan Stanley Investment Management China, which has reduced headcount by about 15, according to media reports.
The lack of interest in Chinese stocks has also led to some managers creating emerging market portfolios without China in the past few years.
Forty-five asset managers run GEM ex-China equity strategies with more than 90 others considering a launch or willing to explore such a strategy, according to an October 2023 white paper by UK-based consultancy bfinance.
Still, despite the relatively pessimistic outlook for China equities in the short term, it’s hard for asset managers, especially the largest ones, to drop China altogether from portfolios.
“You can’t completely ignore the world’s second-largest economy, so fund houses are opting to ‘trim the fat’ and operate with leaner teams while sentiment around China remains uncertain,” said one investment consultant in Singapore who declined to be named.
In some instances, investments -- and teams -- have shifted away from China and Hong Kong and towards Southeast Asia and India.
“The political and economic situation [in China] now is too hard and it’s easier to go somewhere else. When conditions stabilise, they might opt to go back.”
GLOBAL WAVE, CHANGING PREFERENCES
Other investment firms operating in Asia have been caught up in a wave of global layoffs, as companies grapple with a relatively high-interest rate environment where investors are opting to park assets in cash and cash-like instruments and are less inclined to buy fund products.
Some examples of these are Manulife Investment Management and Fidelity International, which have announced worldwide job cuts that will also impact Asia operations, according to media reports.
Some of these changes are also prompted by evolving client preferences – investors are increasingly shifting allocations to private markets and asset managers have to adjust their staffing accordingly, the Singapore-based investment expert noted.
“Across the investment life cycle, investors are realising that they can get better returns from their private market portfolios. That needs a different investment team make-up and possibly less reliant on public market experience, so that will definitely cause some job churn,” the Singapore-based expert added.
“It’s a matter of resources and business focus,” said another alternatives manager expert who declined to be identified.
This manager, which has operations in China and other markets, is in expansion mode unlike other traditional long-only managers.
There is one silver lining to these layoffs: there are more talented investment-related specialists in the job market, who are being eagerly snapped up by smaller firms and multi-family offices, one expert in the family office space in Singapore told AsianInvestor.
TURNING TO TECH, ETFS
Asset managers, like other financial services companies, are grappling with a low returns environment made even tougher by inflationary cost pressures.
“People are looking very carefully at their employee bases and considering how technology can be leveraged to reduce costs. There is a lot that is increasingly becoming automated, which were previously done manually or outsourced,” the Singapore investment consultant said.
BlackRock’s layoffs of around 600 employees globally, for instance, is partly to do with reshuffling resources in response to technology changes.
Specialists using machine learning models and advanced analytics tools to develop algorithms for portfolio optimisation, risk management, and fraud detection are likely to be in demand, Nikko Asset Management told AsianInvestor recently.
BlackRock also believes exchange-traded funds, or ETFs, are becoming ubiquitous as the preferred vehicle for delivering both index and active investment strategies.
ETF teams by their very nature are lean teams. As the importance of ETFs in portfolios grow, the role of ETF advisor or strategist is likely to emerge, another expert told AsianInvestor.
With all these factors weighing heavy on investment managers, expect more job-related churn over the next few months.
(Shusi He contributed to this story,)
Para 2 has been updated to the correct period covered for this story.