The hiring market is especially tight for private equity, private credit, direct lending, real estate and other alternative investment strategies, observers said.
"Alternative strategies just exploded in popularity with investors, and fees remained high in 2021," said Alan Johnson, managing director of Johnson Associates.
"Competition for recruiting private market managers is insanely hot because there just aren't that many very experienced, very talented investors out there. Private market firms are constantly trying try to poach the most experienced talent from each other because candidates are comparatively scarce," Mr. Johnson said.
Two other areas of intensely competitive recruiting are for candidates with experience in managing ESG investment strategies and for candidates with diverse backgrounds, sources said.
"Adding ESG investment professionals is difficult because experienced talent is very scarce. People with the right skill set are being bid up," said Amanda Tepper, founder and CEO of Chestnut Advisory Group LLC, Westport, Conn., a management consulting firm that works with money managers.
The search for candidates with diverse backgrounds also is extremely competitive.
"Every manager is trying to increase the diversity of their employee base and is having a hard time because the talent pool is small," Sheffield Haworth's Mr. Thompson said.
Many publicly traded money managers, including the world's largest money manager, New York-based BlackRock Inc., combine employee compensation and benefits in their earnings reports.
BlackRock reported compensation/benefit costs that were up 19.9% in the year ended Dec. 31, compared to 12.8% in 2020, fourth-quarter earnings reports for each year showed.
BlackRock, which managed $10.01 trillion as of Dec. 31, declined to comment.
State Street Corp., Boston, reported compensation/benefit costs across the whole firm, including State Street Global Advisors, as up 4.6% in the year ended Dec. 31 compared to 6.3% in 2020, in its fourth-quarter earnings report.
State Street did not respond to a request for an interview, but during the firm's Jan. 19 earnings call with analysts, Eric Aboaf, executive vice president and chief financial officer, told analysts: "We saw an opportunity to correct an imbalance in the competitiveness of our compensation program by accelerating expenses associated with certain deferred cash incentive awards," according to a transcript of the call.
He said the change will "allow us to realign the mix of immediate vs. deferred that cash in our incentive compensation awards in future periods which will make our pay practices competitive and enable us to better attract talent in an increasingly tight talent market."
SSGA managed $4.14 trillion as of Dec. 31.