Although a tough economy has diminished compensation for most investment professionals, the outlook is not so gloomy for investment management firms, according to a new study issued by Russell Reynolds Associates, a New York-based executive search firm.
The study, which covers hiring and compensation trends across the financial services industry, is predictably uncheery, but does highlight some opportunities in the softened job market.
"It is not unexpected that in the current market climate we have seen lower demand and reduced expected compensation for money managers, not just in the U.S. but globally," said Richard Lannamann, managing director and global head of Russell Reynolds Associates' Investment Management Practice.
Compensation for executives involved with distribution of retail mutual funds will drop dramatically, the report said. Bonuses will drop as little as 25% for high-level managers at strong niche firms, to as much as 75% for some wholesalers.
Still, there is a bright side to the weak job market for asset management firms, he said. "This has been a good time for clients seeking to strengthen and upgrade their professional staff."
Performance has become the absolute lynchpin to the job market, fueling both upward and downward trends. The study reports that demand for large cap domestic equity portfolio managers has plummeted while the need for value managers is on the rise.
Succession plans have also become a major issue among firms, as many senior portfolio managers have opted to exit the business as a result of the extended bear market, the study found.
International and global equity managers are still in demand, and Russell Reynolds reports that searches have increasingly targeted entire team lift-outs.
Not surprisingly, fixed income managers have drawn a lot of attention, "particularly in the areas of high yield and distressed investing."
As for e-commerce, the report stated that some executives will experience a "rude awakening" in terms of compensation. Many who had doubled their compensation will have to adjust downwards or get edged out; others who had fled to lower-compensation positions at dot-coms are seeking more stable jobs as dot-com opportunities disappear.