12 Dec 2006

Global Money Management Article - Record Staff Turnover In '06 Could Continue In New Year

Driven by a wave of new openings and corporate restructurings, investment professionals--especially consultants--will not only continue to move between big firms but also to boutiques, partnerships and employee-owned businesses. Additionally, a surge in demand for fixed income products is contributing to record turnover among U.K. asset managers, a study by Investment Solutions shows. This is likely to continue in 2007. In 2006, fixed-income managers had a turnover of 61% compared to 51% for equity managers. Suzanne Lubbe, research analyst at Investment Solutions, explained that demand for LDI and specialist bond strategies are driving the turnover in fixed income. Among the firms that have beefed up their fixed-income capacity is Standard Asset Management, which last year was seeking credit analysts to add to its fixed-income team as institutional investor demand grows for absolute return (GMM, 25/5). Blue Bay Asset Management was planning to seek analysts for its newly opened New York office (GMM, 17/05) last spring, while hedge fund manager Thames River Capital also went on a hiring spree in November (GMM, 22/11).

Investment consultants are being poached by asset managers, life insurers, pension funds and banks launching investment advisory services rather than competing consultancy firms, said Jessica Glantz at headhunting firm Mansion House Executive. As top consultants are lured away by the promise of large bonuses and new opportunities, investment consulting firms are starting to offer greater flexibility in senior job specifications to attract skilled consultants, she added.

Swiss firm Complementa Investment-Controlling recently lost its second consultant in four weeks. Erich Zuger will leave the firm to join newly created Clariden Leu private bank, a subsidiary of Credit Suisse. His colleague Michael Frei earlier announced he would join Swiss asset and liability company OLZ. Earlier in the year, Watson Wyatt's Kevin Carter, European head of investment consulting, left for investment bank JP Morgan. According to a headhunter, the firm also lost nearly half of its nine investment consultants with LDI skills.

In attempt to motivate and retain key people, Watson Wyatt has now introduced a long-term incentive plan for a small number of staff in its European investment practice. It operates like a shadow equity plan that may pay out in 2010, depending on the performance of the investment practice, said Paul Deane-Williams, client development consultant at Watson Wyatt. But the plan, which is currently open to only 14 people, risks upsetting those who have not been invited to join. Although others could earn the opportunity to join later, he added.

"If an investment consultant wants a new career the opportunities are far greater than before both inside and outside of consulting, especially given the trend towards fixed income and the demand for derivatives and structured products," Glantz said. "That trend will continue."

One investment house to buck the trend is Liontrust Asset Management. The majority of its investment managers have been with the firm for over 10 years. Marketing Director Jonathan Harbottle said the best way to keep fund managers on board is to offer them a good working culture as well as opportunities for development. Liontrust gives all its fund managers shares as an incentive to stay longer and even devised a private equity scheme for the professionals setting up its new cash flow solution investment method.