As fund managers face a “tsunami” of regulation, executives are parachuting in elite risk managers, disrupting what was once a staid and cozy specialty.
Risk professionals have long been viewed as second-class citizens next to managers who make investment decisions, but their status has risen as regulatory pressure has upped demand for their expertise. “One of the biggest issues that fund managers face currently is finding adequate resources to meet the regulatory pressures on their risk teams,” said Peter Griffiths, director at at boutique risk advisory firm Calimere Point. “Everyone would like to view themselves as an expert, but the reality is that there’s a very small pool of expertise.”
To meet demand, fund managers are bringing in experts on a contract basis for £600-700 a day as well as hiring senior risk management to work with portfolio managers on, for example, scenario analysis. The latter approach is creating a new layer of management. Both methods are increasing strife within risk teams.
“Many asset managers are hiring a ‘head of risk oversight’ to liaise with the investment teams, which both adds a two-tier system of management and can create tensions in the teams,” said Laurence Wormald, head of research at Sungard APT. “Nonetheless, most asset managers are taking a brute force approach – building bigger and bigger risk teams.”
Risk is undoubtedly a hot area to work in within the asset management sector currently. The latest PwC/CBI Financial Services Survey published in March suggested that a balance of 75% of fund managers were likely to hire in the next three months, but this is predominantly in risk. “Investment managers were bullish on recruitment, but much of this is likely to be focused on the middle office due to regulatory changes,” said Paula Smith, PwC partner and UK asset management leader.
Yet these are not universally good times for risk managers in fund management. Priya Marriannie, principal consultant at risk and compliance recruiters Merje, said that most of the new recruits are being brought in to “shake-up” the existing risk teams.
“Most asset manager risk teams are fairly small, and people have been working there for a long time. Any new recruits are usually senior and aimed at bringing in a fresh perspective,” she said.