Pick up any trade magazine covering asset management and you’ll read about the ever increasing demand for skilled professionals to join the hedge fund sector. Adjectives such as ‘entrepreneurial,’ ‘risk taker’ and ‘dynamic’ are not unusual in job specifications and for the front office trading team; a PhD and a strong mathematical modelling background are an absolute given. Increasingly though, language skills are also becoming vitally important as new players such as India, China and Russia – as well European countries like Luxembourg – get in on the hedge fund act. We live in a shrinking world, where businesses of all sizes can operate in global markets – markets where languages and intercultural skills are key.

However, with the number of people speaking English around the world growing every day and its dominance over the internet and many aspects of international business, is there still really a need for UK hedge fund professionals to have other language skills? The answer has to be a resounding yes.

While it’s true that English is becoming the global business language, there is possibly more demand for a second language now than ever before. If you have a good understanding of the local language of your customer base you gain tremendous advantages in day-to-day business meetings, in negotiations, and in building relationships with clients and colleagues. It makes it so much easier topick up on the cultural differences and nuances that can sabotage good business relationships

So what languages are needed? Obviously, European languages are always in demand – not surprisingly since European fund managers started a record 330 new funds in 2005, almost a third more than in the previous year. Additionally, recent changes in the regulatory environment in Europe have paved the way for hedge funds in locations such as Germany, France and Luxembourg. Predictions are that there will be significant growth in both onshore and offshore hedge funds, and that means more fund managers and investors looking to leverage this new regulatory environment and diversify into other European countries. As Germain Birgen, head of HSBC Securities Services in Luxembourg put it in a recent interview: “With hedge funds and funds of hedge funds around the world predicted to take advantage of the new opportunities, we believe that Luxembourg, through its long history of servicing continental Europe generally and its alignment to the German market in particular, will be at the forefront of developments through its additional ability to service Luxembourg regulated vehicles.”

Interestingly HSBC has set up a dedicated German speaking team, which is fully conversant with the new legislation, so that new clients can be sure of rapid set up and administration.

And in France, a whole new category of funds has recently been introduced – one of a series of recent innovations by the AMF designed to boost the onshore alternative investment industry.

The rising star of Asia

However, it is the rising star of Asia, and the languages associated with that region which is really dictating the demand for multilingual skills. Memories of the 1997 Asian crisis have faded into memory and Asia’s institutions are becoming a powerful force in the hedge fund industry with the Japanese leading the way. Morgan Stanley’s benchmark index posted a return of 20% for the past year for Japanese funds compared with 9% for European and 5% for US funds. According to financial intelligence firm Greenwich Associates, 62% of Japanese institutions will be investing in hedge funds this year and some industry pundits are forecasting the Asian market to be worth $250 billion by 2010.

We are also seeing a gradual emergence of a domestic investor base. Asian investors are very sophisticated and demand not just quality but also effective communication. Speaking to them in their own language is therefore absolutely vital, not because they can’t speak English, but that they may prefer not to. A lack of language skills can be seen to go hand in hand with ignorance at a cultural level. To counter this both UK and US firms are investing in an Asian ‘face’. New York based investment advisers Drake Management for example, has a bi-lingual Japanese/English website with Chinese and Korean language pages due to be added this year.

The rise of China as the world’s next super power is also driving the recent heavy demand for languages such as Mandarin and Cantonese . It’s an economy that is booming and the markets are maturing. China is in the process of transistion from a market that focused mainly on attracting foreign investment to one that is also allowing and encouraging domestic customers to invest abroad -communicating with those investors will therefore be key.

India, seen for many years as somewhat of a sleeping giant, is also waking up and is today seen as a vibrant and up and coming market. The economy has accelerated and is expected, in the not to distant future, to be one of the strongest in the region. With government debt falling and foreign exchange reserves rising, the demographics are looking good. Interestingly, one of the candidates we recently interviewed who had relocated to the UK from India had just completed a project commissioned by a ratings agency for a report on hedge funds in emerging markets – and the report had to be presented in both Hindi and English, suggesting the emergence of a defined domestic investor base in the country.

Russia

Russia has seen a remarkable return to fortune since the economic collapse and political instability that dominated the country in the late Nineties and the recent increases in oil prices has had a marked effect on the Russian economy. According to a recent report by the Ministry of Economic Development and Trade, the middle class in Russia is predicted to grow from today’s 20%, to 60% of the population by 2015. Financial institutions have not been backward in coming forward, and names such as Citigroup, Morgan Stanley and Goldman Sachs have all set up local operations leading to an obvious need for Russian speakers.

Many of the candidates we place in the asset management sector tend to be nationals with perfect English as a second language. The level of technical understanding needed within the hedge fund sector demands a bilingual speaker at the very least and more often than not a native. For the London market this has meant that the highly skilled migrant programme has been very important, a government scheme that allows highly skilled migrant workers to live and work in the UK without an employer needing to sponsor a visa. Candidates can therefore interview with potential employers safe in the knowledge that they already have the right to work. But there are English speakers with fluent Asian and emerging market languages. The challenge is understanding not only the language but also having an appreciation of the cultural differences of local clients. If you are dealing with local clients in their own languages – or based abroad – we would offer the following advice:

• Find out about any particular cultural customs – In one central European country a rat in the house can be a sign of good luck. A UK manager sent to work abroad once gave strict instructions to remove the rat in his office only to find later the local staff secretly feeding it, fearful of losing their luck!
• Remember that even if people can speak English – they may not want to – as often cultural identity and language are inextricably linked.
• If you are speaking in English, avoid the use of idioms and colloquialisms as they can easily lead to misunderstandings. One example of where this can lead to miscommunication is when the British director of an international project responded to a Dutchman’s idea by saying it was a no brainer. The Dutchman dropped the idea thinking that it was rubbish – the very opposite of what was meant.
• Don’t rely on literal translation – although many translation services are now available on line, they can only really give a flavour. So-called ‘false friends’ have tripped up many an amateur linguist. Take the hotel in East Asia which thoughtfully displayed the sign “You are invited to take advantage of the chambermaid” or the European restaurant which promised on its wine list: “Our wines leave you nothing to hope for” – or even the Swiss hotel brochure which stated; “Because of the impropriety of entertaining guests of the opposite sex in the bedroom, it is suggested that the lobby be used for this purpose”.
• Do not assume a smile or a nod from your foreign colleague denotes agreement; he or she may be too polite to say: ‘I do not understand.’ In many Eastern and South East Asian cultures most people try to avoid saying ‘no’ because it is too direct. Instead, they say ‘maybe’, or ‘yes’, very slowly.

Despite the fact that the US is the home of the hedge fund, and therefore English will always be one of the languages needed in any market, a big challenge still remains – being able to understand the needs, aims and motivations of a potential customer base that spans the world. And that can only mean that languages and intercultural skills will become even more important.

Heidi Collins is manager of the Banking & Finance team at EuroLondon Appointments, specialising in multilingual professionals across the asset management and investment banking sectors.

www.eurolondon.com