Private equity to hire out of investment banks

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When Jonathan Zhu, Morgan Stanley's chief executive in China resigned last month to join Bain Capital, a private equity fund, his move suggested a trend that may become increasingly apparent in the months to come: private equity funds in Asia are hiring.

And investment banks are their main hunting ground.

"The Asian private equity market will be a significant source of hiring activity in 2006," says Michael Di Cicco, a consultant at Hong Kong-based search firm Global Sage. "Funds have been raised and investments must now been made. Significant exits have fuelled focus on the region."

Are there opportunities for bankers currently working in London, New York or Sydney to make the leap to private equity in Asia? At senior levels, the answer is no. "Funds are looking for local deal origination experience, particularly in China, India and Japan," says Di Cicco. At more junior levels, however, bankers with solid transaction experience may be in with a chance, and all the more so if they happen to speak Mandarin.

Growth is attracting private equity groups into the region. Last week, for example, Kohlberg Kravis Roberts (KKR) hired Ming Lu as a managing director for the firm's newly opened Hong Kong office. Ming Lu was previously a partner at CCMP Capital Asia (formerly JP Morgan Partners Asia) and will serve as KKR's senior operating executive in Asia.

In September last year, KKR announced its plans to open its first Asian offices in Hong Kong and Tokyo. It moved Joseph Y. Bae from its New York office to manage the expansion, and hired Sir Deryck Maughan, former vice chairman of Citigroup, as chairman of its Asian operations.

Bain Capital is raising a fund for Asian acquisitions and plans offices in Hong Kong, Tokyo and Shanghai. In May last year, Blackstone, another large US fund, revealed plans to open an office in India.

Pay to rival banks'

The impetus to move is considerable. Alongside base salaries and bonuses, senior private equity professionals receive a share of the 'carry' or carried interest earned when funds exit their investments. Over time, this can amount to many millions of dollars. On an annual basis, Di Cicco says managing directors in a large Hong Kong-based private equity fund can expect a base salary of US$450,000 to US$650,000, plus a bonus of 80% to 100%, plus carry equivalent to between 2% and 5% of the profits made by the fund.

Recruiters say investment bankers are the prime contenders to fill vacancies created by private equity groups' Asian enthusiasm: "Private equity funds are keen to hire investment bankers with transaction experience," says one Hong Kong-based search consultant. "They need people who know how to execute deals."

Recruitment in 2006 is likely to be at all levels, with junior and mid-ranking staff in particular demand: after opening offices with senior staff, recruiters say funds will need to fill gaps lower down the hierarchy.

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