Hiring of money managers by U.S. institutional investors dropped sharply in the fourth quarter last year as the financial crisis knocked the wind out of capital markets, and investment consultants expect activity to remain tepid at best through at least the first quarter.
"If things have settled down somewhat they may be wiling to make decisions and even take advantage of some of the (market) dislocations," said Bill Dewalt, a senior consultant with Watson Wyatt Investment Consulting in Atlanta, referring to institutional investors such as pension funds. "Many clients recognize there are some extremely attractive opportunities, but remain cautious."
According to money manager consultant Eager, Davis and Holmes LLC, U.S. institutional investors hired fewer money managers in the fourth quarter last year than in the same period a year earlier, but hired more managers over the full year than in all of 2007.
Placement activity in the quarter ended Dec. 31 dropped 29% to 460 from the 652 reported a year earlier. But a rise in placement activity in the first half of 2008 1,268, an increase of 20% from the first half of 2007 lifted the total hiring activity for the year to 2,321, slightly higher than the 2,312 reported in 2007.
While private equity and hedge fund hiring activity went up in the first half of 2008 and contributed to the high placement activity in those quarters, both significantly declined in the second half of the year, said David Holmes, a partner at the Louisville, Ky.-based firm. The firm's numbers are based on publicly reported hiring activity.
Private equity placements were up 22% in the first half of 2008, to 351, compared with the first half of 2007, but dropped 28% to 253 in the second half of the year from the first half. The fourth quarter saw only 98 private equity placements.
There were 84 placements in the first half of 2008 for single-manager hedge funds, compared with eight in the first half of 2007. Placements went down to a total of 37 for the second half of 2008.