Some Wholesaler Earnings Fall as Much as 50%, 60%
December 2, 2002
General management searches for fund executives at the CEO, COO and division head level are up 60% this year, the executive recreating firm Russell Reynolds Associates reports.
While fund companies have slashed transactional-level jobs in phone service and trade-processing centers, and have eliminated some mid-level sales positions, hiring levels overall are up 26% over the past 10 months, said George Wilbanks, managing director in the investment management practice of the New York-based executive-recruiting firm.
Fund executives who have been the hardest hit by the bear market are wholesalers who were big earners in the 1990s, as well as equity portfolio managers, chief investment officers and technology executives, Wilbanks said.
A wholesaler who earned $700,000 before the market decline would be lucky to make $250,000 today, Wilbanks said, elaborating on Russell Reynolds' "2002 Recruiting Trends in Investment Management" report released last week. A chief technology officer who commanded as much as $3 million during the rush to e-commerce, Y2K and T+1 would be fortunate to make $1 million today, Wilbanks said.
As to why top management searches are up 60% in this market, J. Nicholas Hurd, managing director and global head of Russell Reynolds' investment management practice, explained that firms are looking for "outstanding investment professionals" with 30-plus years of experience, particularly through all kinds of market cycles. Leadership, teamwork and the ability to pitch in as positions are eliminated or altered are also valued skills, according to the Russell Reynolds report.
Many top fund executives, "whether they have $2 million or $200 million in the bank," Wilbanks said, "realize they made a fortune in the bull run, don't foresee annual returns of 20% or more on the horizon, realize it's going to be tough, and have voluntarily said, I'm out.'"
And for the star 30-something-year-olds who were promoted to head up the money management units of big investment firms in the 1990s, who suddenly found themselves swept up in the excitement, the profits, the fast pace of the bull run, the game is now over for many, Wilbanks said. Many such firms who rewarded these individuals for the tremendous growth in assets these firms enjoyed - as much as $1 billion a month at some of the giants, Wilbanks said - are now essentially playing a blame game, and letting these executives go.
You Are the Weakest Link: Bye-Bye!
"They're getting blown out. They're getting crucified," Wilbanks said.
This, combined with the fact that depressed equity levels at the publicly traded firms are prompting buyouts, has led to a fair amount of turnover at asset management firms, according to Russell Reynolds.
Finally, while the average investor's retirement savings in mutual funds may have fallen 30% or more, asset management firms have held their own due to a split between equities and bonds, and within the world of equities, some of those products being core growth, balanced and value funds, Wilbanks said. As well, 401(k) investors have provided a steady stream of revenue to investment managers, he added. Finally, one must not forget that while total asset levels are down at complexes, fund firms collect their fees, regardless, many of which are not collected until months after stock market downturns make the headlines, Wilbanks added.
The demand for alternative and high-net-worth investment professionals has offset a marked decline in the demand for sales executives and equity portfolio managers, Russell Reynolds also stresses in its report.
Besides the obvious demand for hedgefund, fixed-income and value fund managers, as well as financial professionals truly capable of giving wealthy investors better advice, Russell Reynolds recruiters also reported that leadership is back in vogue.
Conducted by the executive recruiters of the firm's investment management practice, the report found that firms are looking for people who are team players, who can navigate through all types of market cycles and who are level-headed and "seasoned" enough to "fulfill near-term succession planning needs."
Many firms are also hiring star equity buy-side analysts, ostensibly to have the talent on hand to spot moneymaking areas when the market turns around.
Also of note is the fact that confidence under fire has replaced creativity as managers' key considerations when hiring new people.
Finally, the ability to reduce the bottom line also figured prominently, and bonuses and "prima donnas," are not favored this year.
"Contrary to the superstar solo acts of the '80s and '90s, companies are now seeking to attract stars [who] can succeed in a team environment," Hurd said.