Review of 2015 Hiring Trends, Compensation Benchmarks and Looking to the Future

Introduction

2015 represented the strongest hiring environment for a number of years. Significant regulatory change has meant a substantial rise in the requirement for risk, compliance and audit professionals. The need for asset growth in an era of lower margins has also seen an ongoing need for strong sales and marketing professionals across all channels. Investment hiring – in particular in Multi Asset and Alternative Credit – remained strong.

This has played out in an Investment environment that has been mixed at best. EM funds suffered as China's ongoing travails led to significant withdrawals. Commodities have had a torrid time with the shift in China's consumption model – a trend unlikely to change in the foreseeable future. But for the "nifty nine" – made up of the likes of Facebook, Amazon, and Netflix – US markets would also have had a poor year. Challenges to oil producing countries have seen a dramatic retrenchment from SWFs in the Middle East impacting asset flows for firms with significant AuM in this channel. Europe has been a bright spot and this is a trend we envisage continuing. Investment firms saw the second half of 2015 up to December as generally very positive from a market perspective but the outlook has darkened significantly in January.

Below we look at the various functions within the Investment Management industry and give a snapshot of related compensation levels (excluding long term incentives where applicable).

Distribution

1. Sales

Within Sales, we saw continued high levels of hiring across all channels. With a series of regulatory changes in the UK and Europe has come a need to hire a different leadership profile for a number of firms. This has naturally led to turnover as new leaders seek to enhance the bench-strength of their teams.

In the UK, we have seen a number of new entrants into the market seeking sales and marketing professionals to lead the charge into Wholesale markets. This has been driven by positive markets, a change in the regulatory landscape and a desire to tap into Europe's largest investment market. Equally, established players with significant books of existing business have needed to reshape their teams as they respond to a lower margin environment and a greater concentration of flows into a smaller set of products and strategies. In Continental Europe, 2015 was a year of growth and development. The ECB's

QE programme and a general turning of the Investment cycle have meant European Markets have grown strongly.

In particular, Italy and Iberia have seen a great deal of interest on the part of Investment firms seeking to tap into this growing market.

The Institutional channel has also seen steady hiring. Team leadership remains a key requirement for a number of firms. Consultant Relations also continues to be an area of interest for firms, both global and UK, as Investment Consultant relationships remain a key priority for fund managers.

Sales Chart

2. Marketing

In ever evolving times, how Investment firms communicate with their customers is of increasing importance. In the d2c space, the rise of robo-advice and the broader move to digital led customer engagement has seen a consequential rise on hiring in this space. We made a number of hires last year into Marketing leadership roles as firms seek to enhance their content, think more deeply about how clients will be allocating funds over the coming years and how best to ensure the message around product, investment approach and client service is delivered as effectively as possible.

Marketing Chart

3. Product

Over the last 18 months, we have noticed a significant uptick in clients seeking to discuss with us their existing Product Strategy and Development functions. In part, these conversations have been about benchmarking their functions against their peers in terms of structure and output. The search for alpha, demographic change, shifts in investment cycles and continued fee pressure have all contributed to clients looking to enhance the infrastructure around product development and strategy. This trend will be ongoing as firms respond to shifting client demand.

 Product Chart Client Service Chart

4. Client Service

In an era of steady asset growth, client service can be a key differentiator for investment firms and their clients. When fund flows become tighter, this area takes on even greater importance. The need for high quality client engagement coupled with a commercial approach to investing in key client relationships over more transactional ones has resulted in a steady year for hiring in this space.

Investment

1. Fixed Income

Fixed Income has had a mixed year from a hiring perspective. EMD has had its challenges, however many Managers with limited EMD capability saw the market dislocation as a good opportunity to hire portfolio management talent. This included both hard and local sub asset classes. Mid-market lending teams have continued to grow amidst the demand for alternative debt providers across all client types. This has included both Alternative firms as well as more traditional Asset Managers. CLO and Loan Investment capabilities have continued to be bolstered. The further emergence of boutique and mid-market firms has continued. Global Aggregate and Absolute Return Fixed Income resources were grown with hiring at all levels from Analyst through to Portfolio Manager.

Fixed Income Investment Chart

2. Equities

Hiring across the Equity asset class was limited aside from a few notable senior appointments. Bucking the trend was European Equities which continued to be active from a hiring perspective as demand shifted away from Global to more geographically specific products. Niche Investment funds such as Agriculture, SRI and Renewables specialists continued to be of interest to firms whilst Macro Research professionals and Product Specialists continued to see demand.

Equity Investment Chart

3. Multi Asset

‎Amidst strong retail demand, Multi Asset Investment hiring, particularly for those able to run absolute return vehicles continued in 2015. This included some notable senior Portfolio Manager and team hires. ‎Also noted was continued demand for Multi Asset Strategists and Senior Research specialists, able to provide top down asset allocation perspective. Requirements ranged across the seniority spectrum. Selective expansion hiring was also observed whilst there remained a strong desire for strong Multi Asset Product Specialists.

Multi Asset Investment Chart

4. Product Specialist/Investment Directors

Communicating Investment strategies to clients was also a focus of a number of our clients. The role of an Investment Director/Product Specialist is key in firms where the PMs are allowed to focus almost exclusively on their portfolios or where the firm is a new entrant into a market with PMs located in a different geography.

Product Specialists Chart

Infrastructure

Within control functions, recruitment at executive and mid-levels remained exceptionally high in 2015. Regulatory requirements at UK and Pan European levels have led this drive for higher quality Finance, Compliance and Risk Professionals. The need for deep product knowledge is more and more important within this group. Equally, as the demand increases, the supply of quality professionals in this space with an Investment management background remains limited; meaning the cost of acquisition is growing. Transitions from the sell side to the buy side are far more commonplace than ten years ago, partly as a result of the weakness of the Investment Banking sector and also as the compensation gap that previously existed has diminished significantly.

Compliance Chart Finance Chart

Risk

Across all areas of Risk demand for experienced resource has continued at a pace. With the financial markets being heavily affected by increased regulatory demands, organisations have had to focus strongly on all risk areas of their business.

There has been a trend in hiring professionals with a more diverse skill-set getting paid more than individuals who are siloed into one Risk discipline. Key areas of growth have been in model validation, governance, enterprise risk and counterparty credit analysis.

The volume of risk vacancies remains high and outstrips supply which means organisations need to attract and on-board candidates in a timely fashion and has led to candidates from diverse backgrounds transferring into the overall risk arena. As a result salaries continue to increase as competition remains high.

Portfolio Investment Risk  Chart Operational Enterprise Chart

Thoughts for 2016

2016 has started with a bang – and not in a good way. China remains a drag on markets and the US economy, whilst pulling in the numbers on the non-farm payroll side, also saw long term US Treasury yields flattening – a possible market indicator of recession. Whilst Europe – and some country specific Investment markets such as India – looks strong, challenges lie ahead for Investment firms seeking alpha for their clients.

A combination of challenging Investment markets, a higher cost of doing business and a lower margin environment could result in a more focussed recruiting from Investment firms with the need to justify adding headcount compared to last year's hiring growth.

The need for talent in key leadership areas remains critical for the success of our clients. However, we anticipate a thoughtful approach to talent acquisition.

Bonus numbers for 2015 due to be paid in Q1 of 2016 will see greater emphasis on rewarding high performers whilst being more judicious with staff that have not exceeded expectations. In some cases, we see clients envisaging a 10-20% drop in bonus pools, especially those with narrower product ranges. This should mean the talent pool at the executive level is more "liquid" as high quality individuals seek to move to more stable environments.

The need for compliance and risk professionals will remain high, not least due to the lack of deep talent pools in this space meaning competition for the best. We see clients seeking to change their operating models in Distribution and as a consequence, hiring in this space will remain central. In addition, ongoing growth in European markets will mean

UK based firms continuing to push for growth in the key financial centres of Europe. Investment hiring in Equities will remain muted, however we see continued growth in Alternative Credit and Mid-Market Lending amongst others.

In summary, the Investment Management sector will see some challenging times in 2016. The need for the right leadership in the right roles to see firms through this period is of critical importance. Given this, despite pressures on margins, we anticipate a solid year's hiring needs at executive level within the industry.