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Fund derivatives hit Asia (but hiring has yet to follow)

First there were mutual funds, then there were derivatives. The next hot thing may yet turn out to be fund derivatives.

Fund-linked derivatives enable asset managers to create new customised investment products without also creating new underlying funds. With many based on hedge funds and funds of hedge funds, they offer investors an opportunity to access high-return products at controlled levels of risk.

Last month, Dutch financial services giant Rabobank announced plans to move its London-based head of equity derivatives to Hong Kong in order to start a fund derivatives business in Asia - a move it said was prompted by the region's "rapidly developing market" for fund derivatives. Other banks may yet follow suit.

Hong Kong's Securities & Futures Commission, for example, has already lightened the approval process for certain UCITS III funds. It's a small step from this European directive on the investment powers of mutual funds to the development of a derivatives industry based upon them.

Recruiters say they've yet to see a rush of demand for fund derivatives professionals, however. Andrew Price, director of banking for PSD Group in Singapore, says he's yet to be approached by a bank looking to make a fund derivatives hire, although he predicts it will happen one day very soon.

Until then, it seems local recruiters are more engaged in digging out other species of derivative specialists.

"There is a huge shortage of people on the equity derivatives front," says Matthew Hoyle of executive search firm Matthew Hoyle International in Hong Kong. He says a shortage of candidates means banks will pay up to US$500k for derivatives traders with experience of Asian markets; most have been working with local clients whilst on the 'graveyard' shift in London.

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