Executive recruiters say they are doing land-office business in investment management-related executive searches this year.
The reasons: increased interest in global investing; the proliferation of hedge funds; and the improving economy.
Richard S. Lannamann, managing director in charge of investment management at Russell Reynolds Associates, New York, said even after his company saw an 18% increase in new searches in the investment management arena in 1993, the volume of searches during the first quarter of 1994 rose another 28%.
Nicholas Crispi, president of Crispi, Wagner & Co., another New York executive search firm, said he has seen "a tremendous surge in our activity at the senior level," such as searches for chief investment officers, as well as security analysts.
His company has doubled its search activity this year and expanded its client base 55% to 60%, he said.
"Every time I look down, there is another person moving around," said Janie Kass, director, investment consulting services at Kwasha Lipton, Fort Lee, N.J. While Kwasha does not do executive searches, as a consultant performing manager searches, the changes in the firms are watched.
Increased opportunities in money management - thanks to a healthy economy - are translating into increased mobility, she said. "It is a reflection of the areas in which there is growth. It is also saying that the money management industry is alive and well, whereas a few years ago we didn't see a lot of changing of positions," said Ms. Kass.
"What we're seeing from a search standpoint is a substantial number of institutional sales and marketing-related changes," said Edward A. Oppedisano, chairman of Oppedisano & Co. Inc., another executive search firm in New York.
"I think it's driven mainly by the competitive forces in the marketplace .*.*. What we're seeing is performance-driven movement. People with superior performance results have more marketable opportunities."
Marketing executives still switch employers every three years or so, but portfolio managers are starting to change jobs more often, said Chas Burkhart, president of Investment Counseling Inc., West Conshohocken, Pa.
"Performance is more competitive. It's tougher to stay in the first or even second quartile, so when people see where they're in the third or fourth quartile for two years they begin looking elsewhere," said Mr. Burkhart. "They don't want to be associated with a firm that's seen as a loser or stagnant."
There was a sense the money management industry was peaking at the end of 1993, said Mr. Burkhart. "Some people are sensing it's going to become tougher to make some money there," he said. "There's a sense that the stock market is at an all-time high and we're going to have a correction. The investment business is going from an intermediate (stage) and growth business to a more mature business," said Mr. Burkhart.
The job-hoppers are taking advantage of the demand to position themselves for leaner times ahead, said Mr. Burkhart. "The idea is 'let's find the firms and the providers - in the way they pay and the way they treat the employees - to weather those environments," he said.
Most industry observers said the competition for top talent is pitched.
"The numbers of people available for these positions are not great," said Mr. Crispi.
A number of people left investment management following the 1987 market meltdown, he said, thinning the ranks of managers with five to seven years of experience. Recruiters have to look at higher-priced talent with 12 to 14 years' experience, or younger, less experienced managers.
"The (number of) people in the investment community pretty much matches the Dow Jones in the ups and downs," said Mr. Crispi.
The firms searching for investment talent run the gamut from small boutiques to megamanagers, but the big demand is for global investment talent, say the recruiters.
Michael Martinolich, managing director of Smith Hanley Associates, a New York-based executive recruiting firm, estimated the firm had spent 75% of its time in the past two years on global portfolio management searches. Mr. Oppedisano said the international or global arena accounts for 80% of his institutional requests.
"With the big shifts in pension assets toward heavier investments in non-U.S. securities, most money manager firms are scared to death of being left out of the significant growth of the business," said Mr. Lannamann. "There has been a bit of a bidding war, so that individuals with five years of international portfolio management experience are able to earn compensation that might compare with domestic portfolio managers with 15 years' experience."
Among the recent changes, Lawrence Speidell left Batterymarch Financial Management, Boston, in March to join Nicholas-Applegate Capital Management, San Diego, as senior vice president and director of its global/systematic portfolio management and research group. Around the same time, Dennis Ferro joined Kemper Financial Services, Chicago, as director of international equities, after leaving CIGNA International Investment Advisors, Hartford, Conn., where he was president, managing director and chief investment officer.
"So many firms, big and small, have an interest in becoming global and adding that international component (that) as a function of that, they've really tapped out the supply of talented analysts, managers and marketers," said Mr. Martinolich. Because there is a shortage of fine global talent, many money management firms are giving their domestic managers the opportunity to go global, he said.
"Firms like Wellington (Management Co.) and others now wishing to be big players in the global arena are now willing to consider folks who were heretofore domestically oriented players. They're giving them a chance to become global," said Mr. Martinolich.
On the other hand, investment professionals who had been global players for years are able to leverage that into partnerships, larger compensation and other advantages, he said.
The reasons for the recent mobility are twofold, said Mr. Martinolich: the interest among traditional firms trying to become global and the proliferation of hedge funds, particularly hedge funds involved in the global equities markets.
The hedge fund segment of the industry has grown to nearly 900 funds from 200 to 300 in three years, said Mr. Martinolich.
"Hot is an understatement. These hedge funds are luring the true global folks with an opportunity to earn huge compensation based on performance," he said.
It is only a matter of time until this market shakes up and thins the ranks, he warned, but until then, hedge funds are attractive to senior staffers in other investment firms for a number of reasons.
First, hedge funds are paid 1% of assets under management plus 20% of profit.
"The amount of money is significantly more than if they stayed in the fund management role," said Joan Zimmerman, principal of the executive recruiting firm G.Z. Stephens, New York. Returns of 60% are not uncommon among hedge funds, but even if the firms return 30% to 40% instead of 60%, they still will be able to lure talent, she said.
There also are operational reasons. Typically, hedge funds are much smaller organizations, is a plus for a number of people, said Ms. Zimmerman. They don't have to contend with investment committees and bureaucracy, and they spend more time picking stocks rather than on administration and marketing.
"The profits are astronomical. Therefore, they have money to spend (on salaries) and are attractive as a function of how they can invest," said Mr. Martinolich. "That's more attractive to a senior manager .*.*. that's like an artist walking into a room and being told: 'Here's the colors, paint what you want' instead of saying 'Here's blue, here's yellow, here's red - paint some boxes.'"