Hiring in the asset management business rebounded in 2010 after two sluggish years, but active domestic equity managers are on the outs, according to a new report by executive recruiting firm Russell Reynolds Associates.
Russell Reynolds' survey, which was based on informal conversations with almost 100 of its clients and other participants, found that much of the aggressive cost-cutting that occurred after markets ran into trouble in late 2007 has abated.
The survey found demand for investment personnel with specialized backgrounds in global/emerging markets and international equity as well as alternatives and credit strategies. Chief investment officer searches were also particularly strong this year, according to the report.
But despite increased recruiting, the survey found that overall activity was not back to 2007 levels, even though Debra Brown, the firm's managing director in the asset and wealth management practice, said it has “turned the corner.”
Still, the report found a world that has left active domestic equity managers at the bottom of the totem pole in terms of hiring.
Demand for active domestic equity portfolio managers and analysts “was virtually zero,” the report said. “Bottom-up, fundamental domestic equity stock pickers struggled to find new opportunities.”
In fact, Ms. Brown said investment personnel specializing in active domestic equities who were laid off after the 2007 market decline still might be looking for a job if they have not found a new specialty. “Displaced talent is still looking for a home in this market segment,” she said.
Ms. Brown said institutional investors increasingly are shifting to indexing or reducing domestic equity portfolios in favor of more global mandates because they have not been satisfied with the alpha generated by domestic active equity managers.
The report said money management firms that don't expand beyond traditional long-only equity strategies also could be in for rougher times.
“There is a sense that investment management firms that remain too domestic in their offerings will continue to have a tough time attracting assets — and thus talent,” the report said.
As for chief investment officers, some foundations and endowments had to look for candidates with non-CIO backgrounds, such as an investment officer who manages funds of funds, Ms. Brown said.
Meanwhile, total compensation should be up this year from 2009, but the report noted compensation hasn't returned to pre-upheaval levels.
It said overall U.S. compensation is set to increase 10% to 15% this year while compensation in Canada, Europe and Asia is expected to jump 15% to 20%.