NEW YORK - "What's hot and what's not" lists aren't only on the covers of popular magazines in grocery store checkout lines these days.
Instead of comparing Madonna and Jennifer Lopez's relative rankings in People, money management types need only check the latest annual hiring trends report from executive recruiter Russell Reynolds Associates Inc. to see how cool - or not - they are.
Just like pop stars, the consequences of fitting into one (or more) of the "hot" categories could have profound career and financial implications.
That's because New York-based Russell Reynolds' asset management practice partners report that industrywide, money management recruitment activity is down year to date, compared with 2001.
In such tight market conditions, money managers can afford to be fussier about whom they hire, what they are willing to pay, and what kind of guarantees they will offer on compensation, said Susan B. Fowler, managing director in Russell Reynolds' asset management practice. That's a far cry from the heady days of strong markets a few years ago, when many money management companies had trouble even getting close to hiring the candidate of their dreams.
"Bonuses definitely are not hot," Ms. Fowler said, with lower bonuses expected for every level of money management company staff. While multiyear compensation guarantees still were possible in 2001 as the industry grappled with the level and length of the market decline, this year "no one is even asking for multiyear guarantees because they know they aren't going to get them," Ms. Fowler said.
"Money managers are acting like value investors in their hiring mode," getting better people at lower prices, said J. Nicholas Hurd, another Russell Reynolds managing director and head of the investment management practice.
A majority of searches so far this year have been to upgrade the quality of existing money management staff, especially in performance-challenged companies or strategies, or for replacements of senior executives who left the business, said Mr. Hurd. Internal replacements of senior executives are not very common, the report's authors suggested, because few money management companies have formal management development programs.
"There has been a focus away from stars to teams and now, companies are looking for team leaders. Companies often don't have talent internally," Mr. Hurd said. Many companies have seen their investment managers advance through the ranks from analyst to portfolio manager, but are beginning to realize that these people may be better kept in the investment side of the house, rather than taking over the business management of investment departments.
The report noted that the most hiring activity in 2002 has been in private-client wealth management, fixed-income portfolio managers, buy-side research analysts, top endowment and foundation investment positions, hedge funds, hedge fund of funds, institutional marketers by hedge funds, and core value and core growth equity portfolio managers.
The report also detailed that the industry is on a roll when it comes to filling top leadership positions: Hires for general management positions like chief executive officer, chief operating officer, chief investment officer, head of distribution and division executives are up 60% year-to-date from 2001.
The trend also is toward hiring older managers, with 30-plus years of experience across multiple market cycles and "executives with presence."
Combine presence (undefined in the report) with Russell Reynolds' contention that management companies are looking for "true leadership and people management skills of coaching, mentoring and developing," and "successful market reputation and proven P&L management skills" in a cost-cutting environment, and it's little wonder the report's authors predict a "significant pool of highly qualified unemployed senior managers" will remain unemployed for some time.
In fact, many money management companies are "focusing attention on weak links" and are replacing lackluster senior manage- ment by "targeting (employed) top-performing business managers with 20-plus years of experience, low cash-deferred compensation and weak non-compete contracts."
CEOs and COOs stand an even better chance of getting a big new assignment if they "have experience and confidence under fire, rather than just creative energy," the report said.
But even leaders can't expect the pay offered in better market cycles. Russell Reynolds' investment practice partners hear from job candidates that "perceptions about future compensation are moderating. Both job security and the potential for endless windfall increases are perceived more realistically, putting a higher premium on company culture, independence and job satisfaction as recruiting and retention tools."
While many CEOs and COOs will simply have to be satisfied with working in a happy environment rather than becoming wealthy, distribution staff, risk managers, client service professionals and operations/technology experts might have trouble finding jobs at all, the report said.
Top institutional sales professionals, on the other hand, with 20-plus years of successful asset gathering experience can expect to be paid between $800,000 and $1.5 million in total cash compensation.
Russell Reynolds' report authors also noted only a small number of sales professionals with very strong track records will be unemployed for less than 60 days.
Consultant relationship managers also have been in demand this year, especially for people with more than 15 years of experience.
"Numerous hirings have occurred this year with a first-year guarantee of $340,000 to $600,000 in total cash compensation," according to the study.
Russell Reynolds partners found that plan sponsors at public funds, endowments and foundations have been playing "musical chairs," as experienced senior staffers move among funds.
Pension plans also have been in the market for internal staff with good track records in alternative asset classes, especially hedge funds and private equity, where Russell Reynolds' report noted "who one knows and partnerships one is invested in determine one's value."