As private equity investments in Southeast Asia see a record surge in size fueling the need for investment professionals in the space, talent acquisition at senior levels and retention of mid- level professionals remain biggest challenges facing these entities, according to a regional boutique industry-focused executive search firm.
“Vice president or director-level professionals are the hardest to find (for PE). These are one or two level under partner level which is the harder role to find. When bigger funds ask me, I can tell them there are five or ten people in the market but they are not movable as some just moved, some got promoted or some left to start their own funds,” Tily Chu, the Founder and CEO of Singapore-based TC Consulting Asia, told DEALSTREETASIA in a recent interaction.
Chu explained that the said senior roles only come from replacement when the firms do not have juniors they would see being promoted to that level.
The need for investment professionals in Asia or Southeast Asia at PE firms can be gauged from the amount of capital available and more being raised currently to deploy in the region. According to a recent report from Bain & Co, fundraising in the Asia-Pacific in 2017 rose 6 per cent to $66 billion, above the five-year historical high.
In fact, Southeast Asia saw a record year with deal value in 2017 at $20 billion up from $8 billion in 2016 and the good news is that this momentum is set to keep the region at the forefront of investors’ minds as they look to invest in Asia, an indication that there may be a continuous need for a PE talent pool for the region.
Keeping that in view, it may be paramount to have a good pool of buy-side professionals in the region who can be responsible for making these investments and deploying the large pool of capital.
“First priority is people from buy side who have an investment track record,” said Chu commenting on the preference for PE firms.
However, she added that when the fund cannot attract people from the buy side, the partners get a Mergers and Acquisitions (M&A) banker to join them. “But, not all funds would like to hire a senior M&A banker as it is very hard to tell that a banker can switch from sell side to buy side,” Chu added.
In southeast Asia, Indonesia and Vietnam, she claimed, are hotbeds for PE hiring talent as the market is huge and the talent pool keeps changing. “Over 50-60 per cent of talented people in Indonesia plan to have their own business so they normally spend a couple of years in M&A and spend a few years at PE and eventually join the family business or a family office.
Compensations at PE firms have been witnessing an increase at junior or mid-level employees amid competition for talent in the space, a report Heidrick & Struggles had noted.
Today’s employees see themselves as being in the driver’s seat when it comes to career planning and development—and the companies that will win the race are those that are willing to rethink their hiring, development, and retention models in order to adapt, the headhunter said recently in a report.
Chu explained that different funds have a different structure where some may have a carry above the VP level and for the mid-level professionals to visualize that when they can take an advantage of their role becomes important. “Much depends on how the fund structure is set and how the partner wants to retain good talent. Though, I believe keeping the team small is good,” she added.
Further, she estimates that about 10-12 per cent of the talent from the investment side may also quit to set up their own funds.
What firms want
“Normally most of the global mega PE funds like to hire from the junior level like analyst or associates and for the past three years some of the global mega funds have accepted people not only from the traditional Ivy League schools but also look at sell side or equity research professionals or local graduates,” Chu noted.
This allows the private equity firm to have a mix of people from different backgrounds in the team. Also another reason that they try to explore these avenues is that some top graduates are now joining the e-commerce firms or tech companies and that may also explain why the firms cannot attract good graduates at the starting level.
Moving on, for wealth funds and others that have started exploring the region, the Asian culture where Asian juniors are comfortable with the work assigned to them poses a challenge for these funds which want talent to think outside the box. “It is an Asian culture.The seniors need to know that and also how to train these juniors in the investment space,” she added.
TC Consulting also provides recruitment services for portfolio firms of PE players. Chu notes F&B as the most challenging sector to recruit professionals who can be CEOs and CFOs to run the chain. Education, as a sector, poses a similar difficulty, she adds.