So-called expert networks may be verboten in the US, but they’re Job One in Asia.
Matchmaking services linking investors such as hedge funds with company insiders are under scrutiny from regulators in the US, but are expanding across Asia, where the market for corporate intelligence is less transparent.
The US Securities and Exchange Commission has charged over three dozen people and firms as part of a broad investigation into ties between investors and expert networks that has uncovered insider trading and helped trigger the high-profile fall of Raj Rajaratnam’s Galleon hedge fund.
Rajaratnam has 11 years left to serve on his conviction.
Those cases have bruised confidence in expert networks in the US, and some clients have stopped using the service for fear of running afoul of regulators.
But in Asia, where regulators have yet to pay the industry much attention, the service is thriving — fertile ground where emerging market investors are willing to pay for inside knowledge on company supply chains, key personnel moves or regulatory shifts.
“The fastest sales process has been in Asia,” said David Legg, managing director of Asia and Europe for Gerson Lehrman Group, the biggest player in the industry. GLG says it has tripled its Asia revenue in the past three years.
Legg says a relative lack of transparency in Asian markets means investors are much less willing to rely solely on research from investment banks and brokerages. “In London and New York, you get a lot of people who say: ‘Look, I can rely on some banking analyst on the sell-side to help me figure out something’; in Asia, nobody believes that.”
Capvision, the biggest expert network group in China, said it has tripled in size over the past three to four years and now employs close to 200 people. It says it can connect clients with more than 60,000 “knowledge consultants” across all major