The increasing trend of sovereign wealth funds (SWF) managing more of their money in-house is likely to spur demand for asset management professionals within the state-backed entities.

Currently, around a third of the estimated $3 trillion in SWF assets is run by external asset managers, according to research by State Street, but this looks set to shrink.

“It’s quite clear that the more established funds have been increasing their internal capability,” said John Nugee, managing director for the official institutions group at State Street. “We expect this to continue.”

Invest AD already has a 12-strong investment management team, while Bahrain’-based Mumtalakat’s asset management hiring spree is complete, say headhunters. Nonetheless, there are signs that SWFs have an appetite for taking on asset management talent.

Rory Adamson, director of executive search firm Azrek, says: “Demand for senior investment professionals within Gulf sovereign wealth funds has been steady for the last six months. As they’re bringing more of their investment strategies in-house, we’d expect this to continue.”

The latest recruitment snapshot by headhunters Heidricks & Struggles suggests that hedge funds and long/short equity talent have migrated to sovereign wealth funds in Q4 2009 and it expects trend to carry on in 2010.

Interestingly, one headhunter currently working on two investment management positions for a Gulf sovereign wealth fund says experience in a Western firm is essential.

“SWFs demand experience of either the European or US asset management space. Unlike other roles within the Gulf financial sector, MENA experience is not a prerequisite.”

Senior investment analysts can expect to earn around $200k, plus bonus.