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Asset and wealth management firms prepare for post-meltdown competition


After two years of contraction, hiring in the asset and wealth management industry rebounded in 2010 and compensation is set to show modest gains, according to a report by executive search and assessment firm Russell Reynolds Associates.

"Private banking divisions at both local and international banks that avoided major problems during the crisis and able to maintain their solid platforms in Mexico sought to attract private bankers with sound track records to complement their local distribution capacity," says Eugenio Riquelme, a managing director in Russell Reynolds Associates’ Mexico City office.

"Fortunately, they have been able to recruit the kind of top talent that has already been seeking strong platforms to service their assets under management from financial institutions that were troubled."

For the asset and wealth management industry as a whole worldwide, certain functions are starting to see upward pressure to attract or retain key personnel. But while overall US compensation is set to increase ten to 15 per cent this year, compensation in Canada, Europe and Asia is expected to jump 15 to 20 per cent, although bonus pools will be finalised later this year than in previous years.

The 14th annual report, Navigating the New Terrain in the Asset and Wealth Management Industry, is a qualitative review of talent and compensation trends within both traditional asset and wealth management firms and those focusing on alternative investments, including hedge funds, real estate, and private equity, in the Americas, Europe and Asia Pacific. 

The report found that asset managers have returned to the basics to get business back on track and focused on top line growth, now that much of the dramatic cost cutting is behind them. Firms with platforms distinguished by their integrity, transparency and simplicity attracted not only clients, but talent. "Boring is the new brilliant," says Debra Brown, a managing director in the firm’s asset and wealth management practice.

Wealth management remains highly competitive, with dominant national platforms fighting to hold market share in the face of consolidation and the increased threat from smaller boutiques and regional players, who are gaining ground in their ability to attract wealthy clients and top advisory talent.

Demand for chief executives with investment backgrounds continued into 2010, yet finding qualified individuals with the desired mix of leadership and technical skills proved increasingly difficult. As a result, "best athlete" appointments were on the rise, with solutions coming from other branches of the financial services industry such as investment banking, capital markets and the securities business.

Chief investment officers were in great demand this year as endowments, foundations, pension funds, family offices, sovereign wealth funds and asset and wealth managers were in the market for talent. As Brown points out, the competitive headwinds from numerous simultaneous chief investment officer searches led boards and investment committees to consider creative, non-traditional solutions in addition to the tried and true.

In the fundamental equity space, global was up, domestic was down. Emerging markets, global, EAFE and international equity were all sought-after strategies and will remain so into 2011. As a result, there was heavy demand by traditional long-only players as well as hedge funds for global, international (non-US) and emerging markets equity portfolio managers. Their domestic counterparts, however, struggled to find new opportunities.

In fixed income, credit continued to a hot spot, with the demand for high yield talent and teams picking up again this year. Hedge funds saw positive flows in event-driven, global macro and distressed credit, adding to the upward pressure on this group. Some of this demand was satisfied by teams coming off of sell side prop desks.

Assets started flowing back into hedge funds this year, though new fund formation has become increasingly difficult with fewer and smaller launches on the docket. Larger, more mature hedge fund firms face the challenge of passing on the equity value to the next generation such that succession planning and ownership structure have come under increased review.

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