China hedge funds pay top grads richly to beat Wall Street

Beijing

WHEN computing major Garen Zhou deferred his studies in the US because of the pandemic, he applied for internships with China's biggest Internet companies.

In the end, the Peking University graduate chose Ubiquant, a local hedge fund managing US$8 billion in assets which is offering top college leavers annual salaries of as much as US$300,000. In a year, he was made a permanent employee, giving up his place at Johns Hopkins University.

"The benefits of staying in this job far outweigh those of studying in the US, both in terms of knowledge and financial return," said 23-year-old.

For elite students in artificial intelligence and computer science, companies like Ubiquant offer triple the US$100,000 sticker price for freshly minted college graduates on Wall Street, illustrating a shift in global financial hiring driven by the pandemic and rising emerging market wealth. Rather than aspire to an education in the US that often leads to openings at global companies or even a life in the US, some of the nation's best and brightest are choosing to stay home.

Graduates are in particular demand at funds which use computer models to trade. Business has been lifted by inflows from rich individuals in the world's second-biggest economy; assets at such funds in China have jumped 10-fold from four years ago, and now exceed a trillion yuan (S$208.6 billion), said Citic Securities.

But quant funds are also competing for hires with Internet titans from TikTok owner ByteDance to Alibaba Group Holding Ltd, and global hedge funds including Bridgewater Associates and Citadel. The battle for talent even transcends business as China and the US make technological superiority important national objectives, channelling increasing amount of support toward research and innovation, as well as data security.

Wang Chen, 39, founder of Beijing-based Ubiquant, said: "It's very important for us to identify talent early on, because once they go abroad to study, they'll have more options and we'll have to compete with global companies. Their willingness to join has gone up quite a bit from a few years ago."

Seeking an elite education abroad is a well-trodden path, and the number of Chinese pursuing computer science degrees in the US has steadily risen in the past decade. Now, with more students deferring their studies as the global pandemic restricts travel, companies like Ubiquant have tweaked their hiring strategy by offering one-year internships.

So far, the tactic is working. Ubiquant has had an influx of talent, partly due to Covid-19 and also because a humbled tech industry in China is grappling with regulatory change. Applications have jumped six times this year to more than 300, compared with when the company was founded.

Asset Management is also capitalising on the changing priorities of graduates. The country's largest quant fund managing more than US$10 billion hired about 10 researchers over the past year, many of whom gave up overseas studies amid the pandemic, said chief executive officer Simon Lu.

Shanghai Minghong Investment Co, which manages US$8.5 billion in China, hired more than 10 experts in artificial intelligence and natural language processing in recent years, said its founder Qiu Huiming; Lingjun Investment, which manages about US$7.7 billion, plans to expand its investment and research team by as much as a third to 140 people by the end of the year, the firm said. China's private quant funds have been facing a persistent shortage of new talent since 2018, and this has pushed salaries up, said Eric Zhu, Shanghai-based head of financial services at recruiter Morgan McKinley.

The higher wages are in line with a broader global trend that goes beyond hedge funds, as business at financial firms is booming. In a few months, entry-level salaries at top investment banks shot up into six figures - before bonuses - as executives responded to a rebellion against the demands of Wall Street life sparked by a damning presentation from a group of junior analysts at Goldman Sachs.

And while hedge funds are helping China to hold on to students in priority areas like artificial intelligence, high salaries jar with President Xi Jinping's rhetoric about "common prosperity" as the Communist Party takes aim at wealth extremes.

Stationed near China's prestigious Tsinghua University, Ubiquant tests people on everything from coding to statistics and examines their academic research papers, hiring about 10 fresh graduates last year. Ubiquant's Mr Wang said he has offered more experienced hires salaries of US$1 million a year. The company also offers its top staff one-time bonuses of 10 million yuan or profit sharing from breakout trading strategies, as he gets more comfortable poaching talent from global corporations.

"If we think someone is worth hiring, we try to hire them, sparing no efforts," he said.

Back at Ubiquant's headquarters, Mr Zhou and his colleague Nathan Lin, who both joined a year ago, focused on studying natural language processing and the firm's existing research in the first four months of their internships.

"I like the fact that your code and work speaks for itself," instead of having to socialise and meet clients, said 22-year-old Lin, adding that this combined with the better salary offer from Ubiquant was the reason he joined the company instead of ByteDance or a job in banking.

The work pace also appeals. Starting at 10 am every day, they work for an hour and a half, then head for lunch and a quick nap at their desks. They resume at 1 pm, writing codes and brainstorming strategies till about 7 pm or 9 pm before hitting the gym. Often, the day includes a game of ping pong with colleagues.

"Working here matches the spirit of being a self-branded geek," said Mr Zhou. "As long I'm still learning, I'll be staying on." BLOOMBERG