By Ruth Sullivan
Published: July 25 2010 08:52 | Last updated: July 25 2010 08:52
After swathes of job cuts in the wake of the financial crisis, fund managers are cautiously hiring again, although not at their pre-financial crisis levels.
Part of the recruitment drive stems from a need to replace staff who opt to leave, but some investment houses are also building for growth.
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Hiring in the asset management industry increased by 20 per cent in the first six months of the year, compared to the same period in 2009, according to Powerchex, a pre-employment screening company for the financial services sector.
“Asset managers are talking about growing their business again,” says Andrew Evans, managing director at Morgan KcKinley, a financial services recruitment consultancy.
Signs of a UK pick-up also come from a recent survey by PwC and the CBI employers’ organisation, which showed headcount in financial services rose at the fastest pace since June 2008 in the April-June period, the fifth consecutive quarter of expansion. Further rapid growth is also expected during the current quarter.
One of the areas driving the upturn is the need for fund managers to ensure they have suitably skilled staff in place to meet tightening regulatory demands from European Union regulators and national watchdogs.
“The demand for risk managers, compliance and audit staff is growing as regulations force asset managers to strengthen their teams,” says Pars Purewal, head of UK asset management at PwC.
However, many fund managers are “struggling to find the right calibre [of staff]”, says Mr Purewal.
He believes regulatory compliance was not tight enough previously, so the talent pool lacks sufficient depth of experience to meet tough new demands. “There is a dearth of quality in jobs focusing on risk and compliance as the FSA tightens regulation,” he adds.
Fund managers are also struggling with the costs of recruiting skilled staff to deal with new and pending regulation such as the Alternative Investment Fund Managers directive and the Ucits IV package. Expectations of higher operating costs and lower fee income for investment managers are likely to lead to lower profits, according to the PwC/CBI report.
Asset managers are also hiring “to boost or break into areas where they expect growth such as emerging markets and bonds”, says Amin Rajan, chief executive of Create, a consultancy. Martin Currie recently hired an emerging markets team from Scottish Widows Investment Partners, while IMC Asset Management has taken on a team from Lombard Odier Darier Hentsch to boost its fixed income business.
It has also taken a financial crisis to wake up some in the industry to the importance of nurturing their institutional investors, moving away from their previous focus on retail.
“Large institutional investors expect transparency and good communication from fund managers who [in turn] need people to deliver,” says Iraj Ispahani, a senior partner at Korn/Ferry International, a recruitment company.
Fund managers do not have time to take on these roles as they need to run money, he adds.
Hedge funds are coming to the same realisation and are taking on professionals to talk to pension fund trustees. They are also hiring distribution professionals as they embrace Ucits funds to enable cross-border sales and distribution of so-called Newcits vehicles.
In addition hedge fund houses are tapping investment banks for experienced equity researchers and analysts and are also strengthening their compliance expertise.
“They are preparing for the AIFM directive and providing more transparency as clients ask for more information,“ says Mr Purewal.
Recruitment activity in the hedge fund sector has seen the fastest growth. In the first six months of the year, hiring by hedge funds rose by 135 per cent compared to the same period a year ago, according to Powerchex.
Brevan Howard, Caxton Europe and Moore Europe have all taken people from rival funds this year, and Citigroup has expanded its hedge fund servicing team by adding 13 new positions in London and New York.
And it is not just recruitment levels that have risen. Those changing jobs in financial services saw an average increase in basic pay of 19 per cent in the second quarter of the year, compared to just 10 per cent in the same period last year, according to Morgan McKinley.
However, Mr Purewal believes asset managers are following the example of investment banks, increasing base salaries but reducing bonuses. Bonus arrangements in asset management are described as more modest than before the financial crisis.
“A 20 per cent premium on the total package [for senior management] was normal in the old days but this does not happen so often, only if the person is critical to the company,” says Sarah Dudney, a partner at Lockwood Gibb & Associates, a financial services executive search group.
Although hiring is picking up this year there is still uncertainty whether the upturn will continue. Some managers that hired last year are now questioning whether it was the right move and much depends on market volatility, says Mr Purewal. The recruitment picture is almost one of two halves. Some players are focusing on organic growth, but there has been some consolidation of a fragmented industry, says Mr Ispahani.
Consolidation in the industry has had a negative impact on jobs in the industry. Recent deals include BlackRock’s merger with Barclays Global Investors, Schroders’ acquisition of RWC Capital and Man Group’s deal to buy GLG. “Consolidation creates fewer jobs and we can expect to see less hiring [in the future],” says Mr Ispahani.
Job hires in the second half of the year are not expected to be as strong as in the first six months, says Morgan McKinley’s Mr Evans.