Ask recruiter Michael Castine about the state of mutual fund hiring now, and he brings up the Brad Pitt movie "Moneyball."
In the film, a baseball executive struggles to outwit his team's limited budget. Fund firms are trying the same, Castine says.
"Everyone is trying to hire B-plus talent, with a B-minus budget, in order to go against A-budget competitors," says Castine, chairman of the asset and wealth management businesses at the global recruiting firm Korn/Ferry International.
Thanks to another chaotic market year, as well as unending European uncertainty, firms are frightened of blowing player budgets, say recruiters. They are paring back on previous hiring plans, lengthening searches and aggressively seeking cheaper-read younger-talent. Several recruiters say compensation rates have dropped almost a third in some specialties.
"People aren't comfortable thinking big and taking risks now," says Castine. "They're all saying 'Let's do more with less!'"
Firms are reticent because market chaos has clouded their revenue projections, says Jacob Navon, partner at recruiter Westwood Partners.
Navon says that asset managers historically have followed a simple rule of thumb for hiring: Look at the markets today and compare them to what they were near year-end last year. When the market is flat or up, hiring is robust, he says.
"If I am a senior manager at a firm and I look at the current run-rates, that is the projection I use for next year. If the market is at the level or higher, I am earning equal or higher revenue than I projected. I will keep up my hiring plans," Navon says. "If revenues are not coming in, maybe I need to be careful about who I hire and where."
This is what happened in 2011, he says: the market rallied through the second quarter and then reversed itself. Looking back 12-months ago, Navon said, average revenues were higher than projected, so hiring was fairly robust.
This year, Navon expected the same thing. During the fourth quarter, he said the "frequency and nature" of client phone calls "suggested the year would start strongly." However, he says, despite the recent market rally, there has been "so much angst" around Greece and the potential collapse of the Euro.
"In January and February, we were expecting to hear back from clients. These calls were not happening at the same pace we would have predicted," he says.
This is not to say that hiring has ground to halt. Firms, rather, are focusing on key areas-such as business development-and are aggressively bargain hunting.
For example, Investment Management Recruiters president Kristen Schiver says that there is renewed demand for talented sales and market professionals-a category she says was widely laid off through 2008 as firms struggled to have products to market. "Today we see firms repositioning for growth and seeking marketing/sales assistance," she says.
Castine of Korn/Ferry says that demand is high for asset raisers, risk and compliance managers, as well chief executives who can create new business models.
"Some boards are looking for a fresh start, someone with a new vision," he says. "The business has evolved so much over the past few years."
Navon at Westwood says there is "a lot of interest in international specialties," and "a tremendous interest in emerging markets."
When they do find people, firms are often up to 30% discounts compared to pre-crisis salaries, Castine says.
Capital Asset Investments managing member Ed McGlynn says that fund executive salaries, depending on geographic area, can range from $150,000 to $250,000, in non-major metro areas, from $175,000 to $300,000 in the major money center cities, i.e. cities where financial exchanges are located. However, some banks are shelling out as much as $600,000 for the right risk talent.
Stuart Rosenthal, managing director of Rosenthal Recruiting, says he regularly sees discounts between 25% to 30% compared to pre-crisis. Moreover, he sees huge demand for junior talent.
"I see a lot of firms, whenever possible, looking at the most junior candidates they can, seeing if they can get someone with three years, or five-to-seven years, instead of 10-years," he says. "People are hiring junior candidates to save money."
Recruiters say firms can poach talent at such bargains because of widespread industry frustration. Castine of Korn/Ferry says that many employees, and entire departments, haven't seen raises in years and are hungry for opportunities.
"Never before have I seen so many teams come to us and ask 'Lift us out!" Castine says. "There is a lot of disgruntled talent out there."
There is also back-and-forth movement between traditional firms and hedge funds, says Navon of Westwood. During the first half of the past decade, there was a one-way street of analysts and portfolio managers leaving the traditional world to go to hedge funds. Now, he says, "it's a very healthy two-way flow."
"People are realizing, 'No. We can't all become Steven Cohen,'" the billionaire founder of hedge fund SAC Capital Advisors LP, Navon says.
"[There are ] a lot of hedge fund creations, but a lot of these funds fail,'' he says. "Others are realizing, 'If I work for somebody like that, he is more interested in stock ideas that work in the next 20-minutes, while I'm trained to think in terms of 18-months. I'm not sure I like this world.'"
Navon said that after 2008, through 2010, there were a lot of highly qualified, good people walking through the streets. That backlog of people has largely cleared now, he says.
Candidates are still adjusting.
For example, candidates tell Navon: "Pay me what the seat is worth. Don't pay me what they used to earn!"
His usual response: "The seat is not worth anything until a particular posterior is in it. The person occupying it has a lot to do with that the seat is worth."