Is working for a sovereign wealth fund in the Middle East all it’s cracked up to be? Despite relying “almost entirely on expatriate labour”, the favouritism exhibited towards the small proportion of local candidates makes for some fractious internal politics.

SWFs in the Gulf have been successful in signing up talent from some big ticket financial services firms over the couple of years, such as Goldman Sachs, Credit Suisse and Rothschild.

An uneasy reliance on expats

In fact, the small pool of talent available locally is “particularly problematic” for these organisations, according to a new, and wide-ranging, study from the Oxford SWF Project. The research is based on interviews with current and former SWF staff, which scratches away the façade that “these funds are operating like any other globally-oriented financial institution”.

This is due to the fact that they a) struggle to attract international financial services talent because they are “loathe to pay employees private sector rates of compensation” and b) the heavy reliance on expats causes internal tensions, it suggests.

“Funds recruit overseas for the talent needed to sustain the SWFs’ functions. However, this arrangement generates a variety of internal tensions and agency issues,” said the research by Gordon Clark and Ashby Monk.

Funds are hiring high school students

There are reasons to believe that funds are taking steps to address this, however.

Firstly, there’s the issue of attracting local candidates. As we’ve pointed to previously, the Abu Dhabi Investment Authority earmarks what it calls “future leaders” at high school and oversees their development through university and beyond.

This strategy is also employed by Mubadala Developments. Nationalisation expert Charles Wilson says these development programmes from school onwards are being rolled out by an increasing number of government entities in the Gulf.

Pay is increasing

Gulf SWFs are not well-known for their generosity. ADIA, for instance, has previously said it relies largely on the fixed component of its compensation packages, at the expense of bonuses.

This is changing. Recruiters who work with SWFs claim that base salaries have been tied to international financial services firms’ benchmarks and bonuses are akin to “London or New York in an average year”. Paying carried interest, or an equivalent, is still off the table, however.

“The biggest source of frustration I’ve come across from the people I’ve placed in SWFs is not internal conflicts or pay, but the high levels of bureaucracy that makes for a slow-paced working environment,” says one Gulf financial services headhunter.