Competition fuels pay jump for locals at China asset manager tie-ups

December 27, 2018 | Asia Asset

Foreign investment management companies are competing for Chinese talent in the Mainland and “dramatically” driving up salaries of senior local executives at joint ventures between domestic and foreign asset managers, according to Robert Knight, a partner at US executive search firm DHR International.

Salaries of local senior staff at the joint ventures have risen 12%-15% over the past two years and are on par with those of expatriates or senior officials working at international fund houses in Singapore or Hong Kong, Mr. Knight says in an interview with Asia Asset Management.

An increasing number of wholly foreign-owned enterprises (WFOEs) is being set up in China, and expectations that Beijing will further loosen restrictions in the asset management industry is spurring demand for locals who have strong connections to regulators.

A WFOE designation allows managers to offer investments such as stocks, bonds and multi-asset products to institutional investors and the wealthy in China.

“There have been more than 50 WFOE companies in the market. About 30 have received their trading licences,” Mr. Knight, who is based in Hong Kong, says.

Although they are hiring business development and technical talent from Singapore and Hong Kong, there has been little progress employing locals who “fit into their cultural and language requirement with high level of skill of investing or capital raising” from a limited talent pool, he says.

High quality local staff are also reluctant to join the foreign firms for fear of ending up in a “backwater” if Beijing doesn’t grant trading licences, or if the WFOE market liberalisation is dragged out, he adds.

So the WFOEs are looking to poach competent staff from joint venture asset managers, prompting the latter to increase the pay of their senior local executives in order to stave off brain drain.

By contrast, Mr. Knight says salaries of expatriates in the Chinese asset management industry hasn’t risen significantly in recent years because their jobs can be gradually replaced by locals.

According to Mr. Knight, Beijing should speed up liberalisation of the onshore asset management market, otherwise many foreign-educated Chinese will leave for financial hubs such as New York.