In stark contrast to 1999, when the raging bull market precipitated the movement of high-flying portfolio managers from one firm to the next, the past year has had a grounding effect on top investment talent.
Market watchers say industry consolidation and the slowing of the stock market have made top-flight money management jobs harder to come by. That's because the most talented individuals at the leading firms are staying put.
"People are much less willing to take that flyer to leave a decent situation," said David Barrett, head of investment management practice at Heidrick & Struggles International Inc., a New York-based executive search firm.
While there still are plenty of openings, the labor market in general for professional money managers may be the tightest it has been in 10 years, said Richard Lannamann, managing director at Russell Reynolds Associates Inc., a New York-based executive search firm. This is particularly true with regard to the most attractive positions at leading firms.
"We sense that there are fewer jobs open for investment professionals, particularly in the mutual fund area, than there were a year, year and a half ago" But on the other side of the equation, employers have more candidates to choose from. "Any time there's turbulence, there's going to be more candidates around for any given position," said John Coleman, partner at Boardroom Consultants Inc., a New York-based executive search firm. "Chances are, it will be easier filling any position at this point in time than it was six or 12 months ago, when firms had to come up with some extraordinary packages and guarantees to perhaps get second-rate talent."
Reluctant to leave
However, it's more difficult to pry away top-flight managers, who are more reluctant to leave a good situation for the money. The key for the higher-quality firms, said Mr. Coleman, is to find first-rate talent that is at a less-than-first-rate firm.
"Candidates are a lot more discerning than they were a year or two ago," said Mr. Barrett, "and less vulnerable to someone waving money at them."
Also, he said, the down market has slowed the "brain drain" to hedge funds and startups as candidates are less willing to take the risk.
Managers also are less inclined to be swayed by higher salaries, because compensation packages generally are high across the board for investment professionals, Mr. Barrett said. They are more concerned with the stability of a firm and the quality of its platform.
"It's remarkable what a bear market or a sharp selloff does to psychology and the marketplace," said Mr. Coleman.
Now, he said, the feeling among many investment professionals is they're "glad they have a job."
The money manager job market in 1999 and early 2000 was as wild as Mr. Lannamann has ever seen it. "There was the belief that if you were a hot technology manager, you could write your own ticket," he said.
Portfolio managers from large established firms walked away from big salaries and large equity stakes to join startups or start hedge funds. "You're not seeing that anymore," said Mr. Lannamann, who added he has seen a number of top-flight managers return to more established firms as the market has gone south, but he would not give examples.
Mr. Barrett said the beneficiaries of the "war for talent" will be large money management companies that offer a full range of investment styles, have strong performance and multiple distribution channels, and have complete infrastructure, marketing capabilities and client service support.
Also, culture will be a factor in hiring and retaining. Boutique investment shops may be able to retain or lure talent because of a unique culture or investment philosophy. Small firms, which are less diversified and more vulnerable to a declining asset base in a down market, might have a tougher time hanging on to top-flight talent, said Mr. Lannamann.
The biggest losers in the battle for talent will be second-tier firms that fall between the boutiques and the behemoths. These firms typically don't have the breadth of resources of the large firms and are viewed as less stable and more subject to acquisition in a struggling market. A few years ago, said Mr. Barrett, investment professionals were more open to going from a large well-known firm to a smaller firm for the right price. Now, he said, the thinking is more along the lines of "no matter how much they get, they're not giving up the A card to go the B card."
Sarah Allen, first vice president, human resources at Mellon Financial Corp., Boston, agrees there are fewer openings for investment professionals these days than there were a year or two ago. At Mellon, she said, the number of candidates for the investment management positions has increased significantly over the past year. For higher level positions, she said, Mellon is seeing roughly 25% more candidates than a year ago. In addition to the aforementioned sluggish market and flight to stability; Ms. Allen said more top-level candidates are forgoing search firms and using the Internet to look for jobs.
Also, said Ms. Allen, the caliber of applicants is much higher than it was.
A year and a half ago, she said, it was much more difficult to find qualified candidates for investment management positions. Now, due to market conditions, job seekers are more attracted to large, stable organizations. In addition, she said, larger companies are adapting to candidates who prefer the less stodgy, more entrepreneurial feel of smaller firms. "There's a real return to `old economy' values," said Ms. Allen.
Many search firms believe the money management industry will continue to consolidate in 2001. That could open some doors for the "second-tier" firms, said Mr. Coleman, because layoffs at merged firms could provide smaller firms with the opportunity to pick off good personnel.
Mr. Lannamann agreed. "I think there's a natural tendency to be cautious when the market's not as strong." Also, the bearish market has evened out the playing field between growth and value, so there is less differentiation between firms now than there was a year and a half ago, and as a result, less turnover.
While the job market for investment professionals has slowed compared to a year ago, Mr. Lannamann said, there still are jobs out there. While the demand for large-cap growth managers and technology analysts and managers has decreased considerably from a fevered pitch a few years ago, other positions are moving to the fore. Mr. Lannamann said there is more demand now for managers in the private equity, fixed-income and international areas, as well as marketing professionals.