Leading executive recruiters are becoming nearly as recognizable as the famous money managers they pursue.
In fact, being recognized in restaurants, airports and lobbies is becoming something of an occupational hazard. "No one wants to be seen with me. It's like a red light going off over their heads proclaiming `I'm job hunting! I'm job hunting!"' joked Peter Crist, vice chairman of Korn/Ferry International in Chicago.
Executive recruiters specializing in investment professionals are part of a small, tightly knit community. Many of the most prominent ones got their starts, or worked together, at Russell Reynolds Associates Inc. Its alumni list includes David Barrett, partner at Heidrick & Struggles International Inc. in New York; Jane B. Marcus, partner in Heidrick's Chicago office; Mr. Crist; and Marilyn Prince, partner in Prince Goldsmith LLC, New York.
Executive Recruiter News, an industry newsletter, named Heidrick & Struggles, Korn/Ferry, Spencer Stuart and Russell Reynolds as the top recruiters ranked by 2001 revenue from searches in all industries.
Among boutique players, Prince Goldsmith is considered an up-and-comer, with 2001 revenue estimated between $6 million and $7 million, high for a boutique manager. Warren International Inc., New York, remains a strong boutique, although competitors noted they see a bit less of the firm and its charismatic chairman, Robert Warren, since part of his recruiting team departed last year.
The use of executive recruiters in the money management business was minimal in 1981 when Richard S. Lannamann, then at Russell Reynolds, founded the first specialist asset management practice. Mr. Lannamann now is vice chairman of Spencer Stuart, New York.
"There was a bias against executive search firms. Executive recruiters were not considered trustworthy. They were seen as raiders. The unofficial motto was that `good companies didn't steal people.' Companies were supposed to grow their own money management talent," Mr. Lannamann said.
By the end of the 1980s, it became more apparent to money managers that bringing in outside talent was healthy and one of the only ways to add new capabilities and new geographic coverage, or to develop new products.
"The recruiter pie expanded dramatically in the 1990s; the stock market exploded and people wanted to get into this business," said Heidrick & Struggle's Mr. Barrett, in charge of the global asset and wealth management practice. By the mid-1990s, "if you weren't already specialized in asset management recruiting, you'd find it increasingly difficult to get in. It's become a much more recognized profession, a specialty."
George Wilbanks, managing director with Russell Reynolds, New York, predicts the use of recruiters will increase as the money management industry matures.
"There's an enormous transformation facing the industry as it grows, forcing money management companies to look for talent outside its usual places," Mr. Wilbanks said.
In the 1980s, most searches were for portfolio managers, Mr. Wilbanks said. Now, nearly half of the searches are for support services - risk management, legal, marketing and compliance, to name but a few. Four of 10 people employed by the investment management industry do not manage money, Mr. Wilbanks noted. "The process of running an asset management business now is not about picking stocks, it's about delivering investment management service," he said.
Ms. Prince of Prince Goldsmith said she is handling far more non-investment searches than in the past and these also require a new level of specialization.
Where she might once have recruited an IBM Corp. salesman for an investment management marketing position, clients now demand specialist marketers, recruiters, lawyers, technologists, chief operating officers and client service representatives. Investment management talent is increasingly sought for the alternative investments, such as hedge funds and hedge fund-of-funds, Ms. Prince said.
Mr. Crist of Korn/Ferry said money management firms will have to look at broader financial services companies for leadership talent.
"Asset management companies don't create good leaders by their very nature. You don't grow leaders from investors," Mr. Crist said. The most likely future scenario will bring in outside talent with experience of managing companies on multiple levels and multiple platforms, he said.
J.P. Morgan Fleming Asset Management, New York, usually does not use recruiters for alternative investments because the universe of candidates is fairly small, said Michelle Bucaria, vice president, human resources. Generally, the internal heads of private equity, hedge funds and real estate know the competition well enough to recruit their own new staff, said Ms. Bucaria.
For senior level positions and for other asset classes, such as international equity and large-capitalization equity, where the universe of potential candidates is large, J.P. Morgan Fleming uses a cadre of recruiters.
J.P. Morgan Fleming is adamant that recruiters agree to keep J.P. Morgan Fleming off-limits when they are recruiting for other firms. "If they won't agree, we won't hire them for a search," Ms. Bucaria said. "We are more concerned about losing our own employees than about where a recruiter can find new talent for us. This is a big, big issue for us."
Spencer Stuart's Mr. Lannamann said he expects some shakeout in the business, with non-specialist firms dropping out.
But recruiters are here to stay, Mr. Lannamann said. "When I started, people, if they picked up the phone at all, would refuse to speak to you. It was like recruiters were the scum of the earth. ... Now, I think recruiters are so much a part of the money management business."