Commentary

Hedge funds and their managers have in recent times vilified for their high-risk activities and relative lack of regulatory oversight. Recall that hedge funds were thought to be responsible for the Asian Banking and Financial Crisis of 1997. A recurrent concern shared by market participants and regulators around the world is that the increasing size of the hedge fund industry coupled with potential agency problems, activist investment practices and herding behavior may exacerbate financial instability. Having said that, although media reports frequently suggest that hedge funds are unregulated, hedge funds are in fact regulated at least to some degree in every country around the world. So before we start maligning hedge fund managers, it is worthwhile to consider such differences in legal and institutional settings across countries as they directly affect the structure, governance and performance of hedge funds. In our book Hedge Fund Structure, Regulation and Performance Around the World (Oxford University Press, 2013 with Douglas Cumming and Na Dai) we consider data from a multitude of countries to understand how and why hedge funds markets differ around the world. Idiosyncratic features of certain countries may distort our understanding of how hedge funds work in practice, therefore by considering international data including data from Asia and Europe, and not just US data, we are able to gain a significant amount of insight into how hedge funds operate on a global basis. While hedge funds are hardly regulated in the US, other jurisdictions implement different and sometimes more onerous sets of regulatory requirements. As explained in the book, international differences in hedge fund regulation include but are not limited to minimum capitalization requirements, restrictions on the location of key service providers and different permissible distribution channels via private placements, banks, other regulated or non-regulated financial intermediaries, wrappers, investment managers and fund distribution companies. This raises the question of whether hedge funds forum shop, that is move to jurisdictions that afford less strict forms of regulation. We find little support for the view that hedge fund managers pursuing riskier strategies systematically select jurisdictions with less stringent regulations. In fact, to the extent that there is evidence of forum shopping, it is for the most part suggestive that funds pursuing riskier strategies select jurisdictions with more stringent regulations. Hedge funds may select stricter jurisdictions mainly in order to facilitate capital raising, but nevertheless they are not seeking more amendable shores as initially though. So now we know. Not all hedge fund managers should be vilified, maybe just some. I say this because among other things, we also show evidence that international differences in hedge fund regulation are significantly associated with the propensity of fund managers to misreport monthly returns. For example, misreporting is less common among funds in jurisdictions with minimum capitalization requirements and restrictions on the location of key service providers. Finally, we also assess the determinants of hedge fund survival and examine arguments regarding the interplay between the hedge fund industry and the stability of financial systems and consider whether hedge funds affect macro-financial outcomes in a country, or the reverse causality regarding the affect of macro-financial conditions on the stability and survival of hedge funds. Essentially, hedge fund regulatory structures differ in many countries, so maybe we should not tar and feather all hedge funds with the same brush.

How often do you see someone tapping their feet to music from a walkman or speaking on a gigantic mobile phone that can no longer fit into a pocket? The answer is – hardly. Technology must evolve to meet the demands and needs to its users.

The Key to the Successful Launch of ING Direct

Asian economies grow unabated and fresh ones like Myanmar, who are shooting up and attracting global attention. Few months back the very savvy Malaysian business tycoon, the owner of Air Asia and the EPL team Queens Park Ranger, Tony Fernandes took a plane load of friends and other top businessmen, for a reconnaissance mission to erstwhile Burma.

The unauthorized ATM withdrawals that occurred in Singapore over the past year have highlighted the issue of payment fraud.

Whether you’re a local plumber or multi-national conglomerate, cash flow is the heart of any businesss. Managed poorly, it will stymie business growth, and in the most extreme case lead to bankruptcy.

With the increasing intensity of regulatory oversight, the importance of a bank’s ability to report to local regulators and respond to ad-hoc requests accurately and promptly has never been greater.

The world of Private Banking in Asia is changing quicker than ever before. The last economic crisis forced the banks as well as the bankers to change their mindset.

There are more redundancies and fewer vacancies in Asian and Pacific financial services than a year ago as many institutions strive to slash costs in an uncertain global economic environment. But this isn’t an excuse for employers to stop focusing on retaining their staff. Whether it’s motivated by saving costs, targeting high performers, pre-empting future attrition, or stopping defection to the corporate sector, retention still matters. Reasons for retention The cost of rehiring is always a driver of retention, and firms are even more loath to replace staff in a cost-conscious climate. Retention strategies are often targeted at high performers whose skills need to be kept in-house, particularly when the firm is battling a downturn. Although there aren’t too many financial services opportunities available in the short term, the desire to move roles is still fairly strong. In Singapore and Hong Kong respectively, 66% and 63% of finance professionals intend to jump ship this year, according a recent survey carried out by my company. Yet they are realistic about their chances, with more than 70% of respondents in both centres expecting it to be hard or very hard to find a new position. The potential danger for employers is that pent-up demand to leave their ranks will grow, resulting in too many staff quitting when markets pick up – just the time when firms want to expand, not lose talent. Going corporate Another retention problem is already underway. HR professionals in Asia have told me that compared with a year ago more people are considering opportunities in other industries. In an era of lower bonuses and leaner teams, some employees are questioning whether working long hours is still worth the effort, especially when many corporate employers seem less vulnerable to retrenchments. People with sector-transferable skills, such as those in accounting, risk and technology, pose the greatest retention danger. Heavy workloads help to explain why having flexible hours is an important non-monetary benefit. Our survey reveals that 84% and 79% of active job seekers in Singapore and Hong Kong respectively consider it to be crucial, yet only about half currently enjoy it. This supports remarks from recruiters that people are leaving financial services partly to gain better work-life balance elsewhere. Flexible working in the finance sector – while historically poor and still inappropriate for some jobs – is growing in importance. Although initiatives are often company wide, some organisations allow managers to authorise reasonable requests from staff without HR approval. Programmes can also be targeted at particular groups, such as women returning from maternity leave. And importantly, employers should provide proper technical support to those who work from home, and establish ground rules to ensure they are not tied to their mobile devices late at night. What staff are seeking Retention does not always come down to bidding wars because employees are now increasingly looking for a mapped-out internal path that will put them in a stronger position in the future. Our survey indicates that a lack of career progression beats compensation as the top motivating issue for those looking for a job. A lack of recognition for accomplishments is the third key factor, and this poses a challenge to managers, especially when many staff feel under pressure following downsizing. In a downbeat market, it’s important to recognise people’s efforts and keep them energised. The hardest candidates to headhunt are those who like their job and have a good relationship with their boss. The way in which firms handle the aftermath of lay-offs is also essential to keeping the remaining workforce loyal in the longer term. Line managers should meet employees and clearly explain the business case behind their colleagues’ redundancies. Having plans to redeploy, or offer career advice to, retrenched staff also helps to improve morale among the survivors. Retention matters right now thanks to factors including the high cost of replacing staff and potential attrition when markets recover. It is up to senior management, line managers and HR to work together to boost retention rates, concentrating on the issues most relevant in the post-GFC financial world – career progression, recognition and flexible working chief among them.  

Most financial services regulation fails because it is backward-looking. In seeking to address the problems of the last crisis, regulators often sow the seeds of the next.

Gold isn't an investment the way most folks see it. A hundred shares of Coca-Cola is an investment. An income-producing rental property is an investment. Gold is "real money" and thus is a crisis hedge.

In these tough times, as the global financial industry is going through turbulent times, the Asian banking and financial services industry, relatively less impacted, is learning from the lessons and preparing for the times to come.

What is Basel II / Basel III / Basel Quattro?

The explosive growth of wealth populations in emerging markets presents both eye-watering opportunities and challenges for wealth management professionals. In Asia, the need to address challenges faced is most critical, as it is predicted to be in the early stages of a 150 year wealth cycle.

In today’s competitive, cost-conscious and profit-driven economy, Asian banks must continually focus on optimising their distribution channels in a way that allows them to move customers into higher-value relationships.

For many Asian companies the creation of the annual plan or budget is a major event that consumes significant time and resource across the organisation, particularly in finance.