More CIOs bidding adieu, but retirement not always sole reason, recruiters say

Asset managers as well as asset owners have recently experienced turnover in the chief investment officer position. In some cases, firms have replaced a retiring CIO, but others have involved changes of mid-career executives.

For example, Ontario Municipal Employees' Retirement System, Toronto, recently named Ralph Berg, currently global head of capital markets, as CIO to succeed Satish Rai, who is retiring; Arif Husain, head of international fixed income, is slated to succeed the retiring Andrew McCormick as T. Rowe Price Group's CIO of fixed income; and Peter Branner will leave Dutch pension fund giant APG Asset Management to become CIO at abrdn, replacing Rod Paris, who retired at the end of 2021, among other changes.

Commenting on Mr. Berg's ascension, OMERS CEO Blake Hutcheson stated in a news release that "Ralph is a proven investor and a seasoned executive … a respected leader who will work together with a world-class team of dedicated investment professionals." Regarding Mr. Husain, a spokesman for T. Rowe Price said by email: "He is a highly respected investor and leader who has been influential in the growth of the firm's fixed-income business since he joined in 2013."

Laura Pollock, Darien-Conn.-based founding partner of Third Street Partners, a boutique talent strategy and advisory firm that consults with asset managers, said that while it is impossible to quantify the rate of turnover among CIOs , she has anecdotally noticed a significant number of recent changes.

"I think one reason for this ongoing turnover is the poor performance in both stocks and bonds in 2022," she said in an interview. "You really have to deliver amazing performance relative to your peers in order to compete and to generate strong revenues for your company."

The other cause is the impact of the pandemic. "People focused on the markets have said, 'OK, we figured out a new way to work in the pandemic. We figured out how to work remotely, we figured out how to manage our teams, we figured out how to trade, we figured out how to work with the sell side to a lot of things. And older executives held on for a few more years when they might have left earlier, but now are rethinking how much longer until they are ready to retire."

Clemence Droin, Paris-based partner at asset management strategy consultant Indefi, thinks the changing market environment — such as rising rates and higher inflation — has likely increased CIO turnover as the role faces struggles in "a less predictable market."

"Difficult market conditions are more challenging for CIOs and require agility," she said by email.

However, there may be other forces at play that influences CIO turnover. According to a report issued in July 2022 by the CFA Institute, CIOs among its membership reported an average tenure of 6.1 years (while the figure for CEOs was 9 years). Ms. Pollock commented that tenure can vary widely. "There are CIOs, for example, at boutique firms that stay for decades building and maintaining the business," she said. "This is especially true if they are also a portfolio manager or manage a portion of assets. On the other hand, we sometimes see larger firms bring on a big name in a CIO capacity that serves more as an ambassador for the brand without direct portfolio management responsibilities — the tenure for that type of role could be shorter."

Ms. Pollock said she does not know if many CIOs have been working remotely, but speaking generally of senior executives, she noted that "for the most part, I think that ability to work from home, allowed for a couple more years for some of the more senior talent that was ready to walk out the door pre-pandemic, because they were just tired of the commute."

However, Hannah Brazier, Stamford, Conn. and New York-based managing director-global investment management practice at leadership advisory firm Russell Reynolds Associates, said by email that CIOs have "typically been more inclined to be in-office, more so than their peers in other roles at asset managers and asset owners." She added that "investors and analysts thrive on the sharing of insights and ideas, which they feel is best ensured with a high level of in-person communication."

Corporate culture might also be at play here, in tandem with the phenomenon of the so-called great resignation witnessed following the emergence of the pandemic, Ms. Pollock indicated.

"Some office cultures are more collaborative than others and perhaps some CIOs and senior executives wanted a change," she said. "CIOs in mid-career would be more amenable to switch companies for this reason."

For example, some CIOs might choose to move to a smaller asset management firm where they would face less bureaucracy and have more input on company policies and direction, Ms. Pollock noted.

Michele Browne, New York-based senior advisor at Chestnut Advisory Group, a business management consulting firm based in Westport, Conn., said by email that while she could not comment on specific firms or individuals, she cited another possible reason for executive moves.

"We are approaching the end of the first quarter and bonuses have either been delivered or discussed," she said. "Turnover in the first quarter is a part of the natural and recurring cadence in the financial services industry."

On Oct. 25, the Office of the New York State Comptroller estimated that Wall Street bonuses in 2022 were expected to decline by at least 22% from their record highs of 2021.

Lower bonuses, Ms. Pollock noted, may have been the "nail in the coffin," but it was not the reason that senior executives (at asset management firms) decided to move on and leave. "It is probably reason three, four or five. Bonuses depended on where AUM stood at the end of the year, and most people saw their bonuses (decline) because AUM was down."

Another factor behind some of the changes in executive suites, including the CIO position, might be the desire of many company boards to increase diversity — both in gender and ethnicity — at the very top, Ms. Pollock said. "Some asset managers want to make their firms more diverse and inclusive," she said. "This might be influencing some decision-makers to shuffle their senior officer roles."

But Ms. Pollock concedes that despite these progressive goals, CIOs remain overwhelmingly male and the emergence of female CIOs has been slow.

Still another factor to consider is the growing complexity of the CIO position and the multitasking required to perform well at it.

"It has become a more complex role and perhaps it's getting harder to find suitable candidates," Ms. Pollock said. "Some CIOs are good at managing portfolios, others are good with clients and others are good at managing people, while others may be good at administration. It might be difficult to find people who are adept at everything."

Indeed, Ms. Pollock pointed out that some money managers have multiple CIOs, each with a specific area of expertise. For example, in November, alternative asset manager Waterfall Asset Management named two CIOs — Patrick Lo and Brian Rebello — to succeed Thomas Buttacavoli. In February, hedge fund giant Bridgewater Associates LP named Karen Karniol-Tambour to become its third co-CIO.

Ms. Pollock thinks multiple CIOs might become more common in the future.

Higher turnover might not necessarily be a bad omen.

Ms. Droin of Indefi suggested that high turnover among top staff at an asset manager could mean the company is in trouble or it might simply reflect difficult market conditions.

"High turnover can also be (a) reflection of poor remuneration/incentive schemes to retain top investment professionals," she added.

Ms. Droin further surmised that the era of "star managers" in the asset management industry might now be over "as companies have built robust investment capabilities which rely on extensive processes and resources across investment and research, which limit the impact of CIO turnover."

Scott Gockowski, New York-based senior manager at consulting firm Casey Quirk, a Deloitte company, noted that unplanned turnover of senior investment professionals — particularly where a clear succession plan is not outlined in advance — is destabilizing to asset managers. "This is particularly true in the institutional channel — where unplanned turnover can lead to managers being placed under heightened scrutiny and on consultant 'watch lists,'" he added by email. "However, turnover in itself is natural and often a reflection of personal, firm and market conditions."