That is not to say, that the pair are likely to underperform from here, but it does highlight the current state of play within the asset management world.
Expect turnover to increase
In a report published earlier this week and titled: Rethinking reward as asset management moves centre stage, Pwc said it expects the level of turnover among investment professionals, which sat last year at 8.7%, to continue to increase as “they become more confident about leveraging strong track records to maximise career opportunities” – a trend exacerbated by the growth in the industry and the fact that “pressure on costs and the raising of the standard for transparency means that traditional methods of retention through financial incentives may no longer be viable.
Fundhouse MD, Rory Maguire, agrees adding: “Our sense is that fund managers recognise we are close to the top of a market cycle and that shifting employers will become increasingly difficult as markets enter more volatile cycles, which is likely bringing some personnel changes forward.”
“Therefore we expect a higher number of changes among the fund managers as they switch employers now, knowing that the next 3-5 years may not look as rosy. And, going forward, we expect take home pay to decrease from these inflated levels,” he said.
The last line of defence
If this is indeed the case, then the asset management industry is currently facing not only the prospect of greater industry churn, but it is doing so without its traditional primary line of defence – the ability to just pay managers more.
And, as Pwc pointed out: “Where retention of key staff is not a credible single strategy, firms will look to the next line of defence: succession planning. Increasing the emphasis on team decisions and outcomes and reducing the star manager culture can mitigate the negative impact of high profile departures.”
The growth in team-based strategies has been ongoing for years; they have and are likely to continue to co-exist peacefully with star managers. Indeed, it is unlikely that the sector will ever get rid of star managers entirely, but in the current climate of low margins and an ever increasing focus on costs, I can’t help but wonder if we might be getting near the top of the cycle?
