Alternative trading market needs specialized education
Print Edition
Private equity, venture capital, hedge funds, futures, credit derivatives, commodities, infrastructure, timberland, and farmland are all part of what is considered the alternative investment market.
The Chartered Alternative Investment Analyst Association is a nonprofit organization set up in 2002 to educate professionals working in the market.
The association has 7,400 members in 83 countries, including 100 in China.
In January, the organization set up arms in Beijing and Shanghai. A Chinese executive committee of nine professionals in investment and education fields will sponsor local events such as lectures and networking evenings.
Shanghai Daily sat down with William Kelly, CEO of the association, to discuss the market, its professional requirements and the need for education in China.
Q: What has impressed you during your visit in China?
A: I see China with a great commitment to opening up more sources of investment for the public. The market needs to have more diversified risks for portfolios.
Shanghai recently opened its Qualified Domestic Limited Partner (QDLP) program, which will give domestic investors access to overseas hedge funds. Chinese insurance companies also have been allowed to diversify their portfolios and seek higher returns from fields such as private equity and real estate.
As investment products become increasingly open to average investors, not only in the US but also in China, there is a role we can play to help.
Alternative investment products such as hedge funds really have to be understood, as opposed to, say, a stock you can trade in and out of on a regular basis.
Q: During your visit, you held talks with the Shanghai Financial Services Office, a main driver behind the QDLP program. What do you think about the regulatory environment?
A: In every market we go into, we talk to regulators. I think in China, the regulatory authorities have been outstanding.
The Financial Services Office seems open for business, and they are trying to work close with managers and are interested in education. They want to do things in a very careful way, and they want to be responsive to what investors want. Ultimately, the media, our association, regulators and asset managers all work for the asset owner. That’s the end body we look to support and do a better job for.
Q: Do you see any special requirements for training in the China market?
A: The Chinese market is not unique. For any market we go into, somebody will always ask: Is this just for me? Can you customize it to our direction?
Language is one issue. When we come into a new market such as China, people ask whether we can have courses written in Chinese. Right now, we have just the one-language curriculum in English.
In terms of certain aspects of our program, there are people who say we are more heavily into private equity and maybe less so in commodities, so could we have a more focus on PE? Our view is that asset owners should not be discriminated against in regards to where they may potentially put their investments.
Q: What role can a local talent play?
A: Given the development of this market and as the number of members in this city grows, we think the time is ripe to get these members together. By having a chapter in Shanghai, we can get feedback more efficiently from members in terms of where they see the industry going. It’s like a two-way street. We depend on our members for new knowledge.
We’ve also seen a return of alternative investment talent back to Asia from the US and Europe. The professionals from overseas will bring back knowledge and experience from different jurisdictions.
The mobilization of global talent is crucial for the investment market. It is important to have a community of investors on the ground.
Q: What new trends have you observed in the alternative investment market globally?
A: In 2002, we saw a worldwide market of hedge funds, real estate and private equity of about US$5 trillion. Now it’s about US$13 trillion.
One area that has seen significant growth is real assets, such as commodities, infrastructure, timberland and farmland. When we revised the textbooks in 2012, we added a lot of material on real assets. What we spent time on recently is liquid alternatives. Hedge funds have changed a lot since 2008, moving from an investor base that is largely individual to one that is largely institutional now.
Later this year, we’ll release the third edition of our textbooks because we know that the market changes over time.
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