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Sunday 7 March 2010
Mainland’s mutual funds battered by brain drain
The mainland’s mutual fund sector has suffered a huge brain drain as nearly 200 fund managers left their posts last year, dimming the outlook for the industry despite its breakneck growth in the past few years.
The mainland’s mutual fund sector has suffered a huge brain drain as nearly 200 fund managers left their posts last year, dimming the outlook for the industry despite its breakneck growth in the past few years.
According to a report by Haitong Securities, 199 investment professionals working for 545 mutual funds on the mainland quit their jobs in 2009, and more are likely to resign this year as they are headhunted or go searching for lavish perks offered by hedge funds.
“The brain drain is having a very bad impact on the mutual fund industry,” said Wu Xianxing, a Haitong analyst who compiled the report. “The industry has lost a batch of experienced talent due to a lack of attractive remuneration packages.”
Wu could not give an exact number of how many had jumped ship to join hedge funds, but he did say that a majority were attracted to rivals by well-padded pay packages.
China’s mutual funds have experienced impressive growth over the past few years as the regulator encouraged retail investors to buy into funds, letting investment professionals manage their assets in a move to avoid volatility in the market.
By the end of last year, 408 stock-focused mutual funds had a total value of 2.2 trillion yuan (HK$2.49 trillion), accounting for 15 per cent of the total capitalisation of the tradable equities on the Shanghai and Shenzhen stock exchanges.
The benchmark Shanghai Composite Index jumped 80 per cent last year, bringing a windfall to mutual funds.
However, analysts said the rosy performances were not reflected in the pay for mutual fund managers, who were already among the country’s highest-paid individuals.
According to a Beijing-based fund manager, he could earn a maximum 3 million yuan annually at a mutual fund company, while the income from a hedge fund could be more than double that if the performance lived up to investors’ expectations.
Hedge funds normally pay managers performance-linked salaries and bonuses.
“After a strong rally last year, the market is expected to be volatile,” said West China Securities’ trader Wei Wei. “Therefore, fund managers’ investment expertise will make a big difference this year.”
Wu said most of the managers who left mutual funds were experienced and had better track records than their peers.
Among them, Sun Jiandong, a renowned fund manager at China Asset Management, resigned recently and was reported to have joined a hedge fund. The Renaissance Fund, managed by Sun since 2008, has generated a handsome return of 21.4 per cent, one of the best-performing equity-based funds on the mainland.
Beijing set up the mainland’s first mutual fund in 1998, hoping they could become a stabilising force in the volatile market.
Between 2006 and 2007, the industry benefited from a bull run on the market as the China Securities Regulatory Commission fast-tracked approvals for new funds.
However, a Galaxy Securities report in early 2008 found that nearly a third of asset managers running the funds had less than a year’s experience. In December 2008, another Galaxy Securities report found that the performance of mutual funds on the mainland had almost nothing to do with those who managed them.
The report, based on the track records of funds over five years, said different investment strategies basically made little difference to performance, while only a few experienced managers did an outstanding job.
1 comment:
Mainland’s mutual funds battered by brain drain
Daniel Ren in Shanghai
06 March 2010
The mainland’s mutual fund sector has suffered a huge brain drain as nearly 200 fund managers left their posts last year, dimming the outlook for the industry despite its breakneck growth in the past few years.
According to a report by Haitong Securities, 199 investment professionals working for 545 mutual funds on the mainland quit their jobs in 2009, and more are likely to resign this year as they are headhunted or go searching for lavish perks offered by hedge funds.
“The brain drain is having a very bad impact on the mutual fund industry,” said Wu Xianxing, a Haitong analyst who compiled the report. “The industry has lost a batch of experienced talent due to a lack of attractive remuneration packages.”
Wu could not give an exact number of how many had jumped ship to join hedge funds, but he did say that a majority were attracted to rivals by well-padded pay packages.
China’s mutual funds have experienced impressive growth over the past few years as the regulator encouraged retail investors to buy into funds, letting investment professionals manage their assets in a move to avoid volatility in the market.
By the end of last year, 408 stock-focused mutual funds had a total value of 2.2 trillion yuan (HK$2.49 trillion), accounting for 15 per cent of the total capitalisation of the tradable equities on the Shanghai and Shenzhen stock exchanges.
The benchmark Shanghai Composite Index jumped 80 per cent last year, bringing a windfall to mutual funds.
However, analysts said the rosy performances were not reflected in the pay for mutual fund managers, who were already among the country’s highest-paid individuals.
According to a Beijing-based fund manager, he could earn a maximum 3 million yuan annually at a mutual fund company, while the income from a hedge fund could be more than double that if the performance lived up to investors’ expectations.
Hedge funds normally pay managers performance-linked salaries and bonuses.
“After a strong rally last year, the market is expected to be volatile,” said West China Securities’ trader Wei Wei. “Therefore, fund managers’ investment expertise will make a big difference this year.”
Wu said most of the managers who left mutual funds were experienced and had better track records than their peers.
Among them, Sun Jiandong, a renowned fund manager at China Asset Management, resigned recently and was reported to have joined a hedge fund. The Renaissance Fund, managed by Sun since 2008, has generated a handsome return of 21.4 per cent, one of the best-performing equity-based funds on the mainland.
Beijing set up the mainland’s first mutual fund in 1998, hoping they could become a stabilising force in the volatile market.
Between 2006 and 2007, the industry benefited from a bull run on the market as the China Securities Regulatory Commission fast-tracked approvals for new funds.
However, a Galaxy Securities report in early 2008 found that nearly a third of asset managers running the funds had less than a year’s experience. In December 2008, another Galaxy Securities report found that the performance of mutual funds on the mainland had almost nothing to do with those who managed them.
The report, based on the track records of funds over five years, said different investment strategies basically made little difference to performance, while only a few experienced managers did an outstanding job.
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