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GUEST COMMENT: Why you would be mad to work for a sovereign wealth fund

Robert-Moxon

With job cuts being rolled out across the financial sector, many professionals are eyeing opportunities at large sovereign wealth funds, which are recruiting heavily, particularly in the Middle East. In my experience, however, it would be like signing up to the civil service.

In my eyes you would be mad to take a role at one of the large SWFs in the region – they are huge, unwieldy behemoths, where the decision-making process is arduous and wealth continues to expand regardless of their investment strategies.

Longevity is not common within sovereign wealth funds and the changing of the guard every two to five years is reflective of the fact that investment performance continues to disappoint. In fairness, it’s difficult to make your mark, since every decision has to go through a committee of people and personal responsibility is heavily diluted. SWFs insist that they want star performers – the pick of what the international financial sector has to offer – yet these people are given little opportunity to shine.

Take the recruitment process; instead of line managers being empowered to form their own teams, a committee needs to interview any potential recruit. This is a long process – even compared to investment banks which are drawing out recruitment decisions – and getting everyone involved to agree on a candidate can take a very long time indeed.

All in all there’s a dusty feel of a government institution.

Because so many people are involved in the recruitment process, the credentials of potential recruit have to be made simple from the beginning. This means big brand names on the CV, whether that’s employers or schools, and MBAs and CFAs are given highest billing.

So, what sort of person is suited to a SWF? Usually a meek, well-qualified individual who’s prepared to compromise on prestige and pay. Maybe, since big bonuses have become a thing of the past, SWFs have become more competitive on pay, but generally you should expect a cut – again, this comes back to the public sector mentality.

The world will chase you for business, but since there’s little individual responsibility no one has much business to give. It is almost impossible to get an appointment to meet the so-called fund managers at Gulf SWFs, simply because they are so over visited by outside managers.

If you’re a humble person with top quality qualifications looking for a change of pace, by all means apply to a sovereign wealth fund. Otherwise, steer clear.

Robert Moxon a private equity veteran in Bahrain and and has been working in the Middle East since the mid-1990s. He has held a range of private equity and fund management positions in Saudi Arabia, Bahrain and London.

Comments (9)

Comments
  1. well peronally know guys at QIA/QH and ADIA on about $1m. They are not even THAT senior. 1 buck tax free is 2 bucks here which is not a huge compromise on prestige and pay

  2. My struggle would be an ethical one. How does one get comfortable running money for governments that oppress their people and where especially women’s rights are so restricted? I know that in money management we’re never supposed to ask about the ethics of our clients, but how does one feel good about (and then do your best) running money for a country in which, for example, your wife can’t drive a car without your permission or that operates a police state? I’m not trying to judge those that do run money like that, but it’s something that I would have to get comfortable with. Being able to connect to the mission of my clients is an important part of what I need to give clients my best.

  3. I have interviewed with both ADIA and Temasek for senior positions and while they say they will pay whatever the candidate is looking for, they tend not to overpay.

    The pay structure is not as generous as one thinks. They don’t want to upset the applecart where the expat makes more than the local bureaucrat (otherwise there will be an internal revolt).

    There is a lot of ad-hoc decision making by the senior figurehead(s) on investment decisions. The bureaucracy is unwieldy (lot of red tape) and people should (at best) view it as a temporary stopgap in their careers.

  4. I worked at a SWF for a few years and recently left. For the most part the article is correct. The organization was large, bureaucratic and paranoid about their employees (especially the foreigners) taking advantage of them. Our attendance was taken daily, and if you took a sick day you needed a note from your doctor. Kind of reminds you of elementary school, doesn’t it?

    Was very hard to make good investments, because your proposals needed to be approved by a large group of senior people, most of whom make investment decisions based on politics or personal biases, rather than the investments’ merits.

    In general, salaries are what you negotiate when you sign on, and they will never change after that. After you join, don’t ever expect a significant promotion. Pretty much the only way to rise through the ranks is to leave and come back. I did see a few people get $1mm+ pay, but they were the most senior ~15 people in the institution. Everyone else got less. I think the highest-paid employee got $3mm one year (that was the rumor at the office, anyway).

    And they can and will screw you on the bonus. They might promise you something when you join, but don’t expect them to keep their promises. Get it in writing. But then, I’ve known SWFs to breach their own compensation contracts, so… that’s the risk you take when you work in a place that does not have rule of law.

    There are some good points. You won’t get fired, even for bad investment returns, unless you do something really politically incorrect. You generally work government hours, i.e. 9-5. The system is designed to avoid accountability, so you’ll almost never be held accountable for anything that goes wrong. You’ll meet a ton of people and quickly build out your network. And of course all the sales guys will buy you lunch/dinner/drinks.

    Anyway, that was my experience.

  5. The ethical debate is an interesting one but then how do you reconcile working for any bank at this rate? I guess there are limits (screwing some people over CDOs is one thing, torturing people is another). Most Private Banks would collapse if Russia, African and ME money was refused based on this ethical dilemma however. Money basically stolen by plutocrats and then stored in Switzerland.

  6. After reading the comments I wonder how much the nationals like working with the imported Alphas. I worked in a gulf crown corp with a SWF as an investor, and they gave us a kicking once in a while. However, they were senior people and not expats who were probably populating the spreadsheets and running the models. In my shop, I sometimes felt I needed the chairman’s approval to buy a pencil. I would simply say if you have issues working for anyone in the Gulf, then stand aside and make room for the rest of us from mere top 50 schools who want to.

  7. Having worked at a SWF in MENA, the one recommendation that I would make (and I was able to do this) is to negotiate a 5-year contract with the total bonus for the period pre-determined, payable in advance into an escrow account with a bank outside the area (e.g., at Barclays in the U.K.). Each year, 15% of the total was released to me, provided I was still with the SWF. At the end of year 5, the remaining 40% was paid to me. As the funds were on deposit at Barclays, the interest on the funds accrued to the account.

    If I was terminated for ANY reason except fraud or embezzlement (specifically defined in the contract), the entirety of the balance became mine. If I left for any reason, I lost the remaining balance, plus I owed the vested amount(s) back.

    The Board members with whom the contract was negotiated were, actually, pretty fair … it was the senior management of the SWF (locals all) who kept trying to find ways to get me so frustrated that I would leave.

    Look, it was akin to a prison cell, albeit one with golden bars (no pun intended). But, as we all know what we are, one simply needs to know at what price they will sell out.

  8. Sounds like working for a Japanese bank!!

  9. in my experience of interviewing with one, they seem less concerned with performance and returns than with creating an infrastructure to “show” the world they are serious about managing money. citizens should be mad at the waste created by such an inefficient and unmotivated organisation.

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