If you work in a trading position in an investment bank, particularly in the fixed income divisions, the third quarter results would have elicited some sweaty palms. No banks have announced any drastic headcount cuts, but compensation has been scaled back, and employee numbers have been gradually reducing.
This, quite naturally, is what has been hogging the headlines. However, it also hides a little touched-upon fact – the asset management arms of the banks have been quietly doing very well. At JPMorgan, for instance, revenues were up 12% year on year during the first quarter to $2.7bn, while headcount increased by 10%. It now employs 19,928 people, up from 18,070 at the same point in 2012.
Compensation, which has been cracked down upon in most investment banks this year, is also rising in asset management. Morgan Stanley, which doesn’t breakout headcount by division, increased compensation in asset management by 32% in the first nine months of 2013, compared to the previous year, while JPMorgan’s fund managers have accrued 10% more than last year so far. Average pay to September in JPMorgan’s asset management business was $117k, compared to $166k in the investment bank, however.
“This year there’s a been a change in sentiment among most asset management firms towards front office hiring, rather than support or middle office functions,” says Amin Rajan, chief executive of fund management consultancy CREATE-Research. “Specifically, there’s been more hiring in high yield, infrastructure and real estate as well as multi-asset solutions for clients.”
Outside of the investment banks, other major fund management players are also growing. BlackRock, for instance, now has a headcount of around 11,200, an increase of 600 people globally since March.
Fund management has been one of the fastest growing sectors for employment throughout 2013, according to the latest Financial Services Survey by PwC and the CBI, and employment prospects remain “robust” going into the final quarter, it suggests. Meanwhile, a recent KPMG study of US fund management hiring, said that 48% of firms were intending on increasing headcount over the next year
While investment banks are focused on bringing down compensation ratios, reducing costs and employment prospects have been shaky for some time, fund managers remain focused on the long term. Some recent high-profile moves – notably Neil Woodford, the star fund manager who left Invesco last week after 25 years, and Richard Buxton who defected from Schroders to Old Mutual in March following 11 years at the firm – demonstrate the potential longevity of a career in the sector.
“I can’t tell you the number of people who have been trying to orchestrate a move from the sell-side to the buy-side in the last 12 months,” said one asset management headhunter who is not authorised to speak to the media. “There have been some big wins for the sector – notably the backtracking on pay caps for fund managers – as well as the increased job security, which is attracting people across.”
However, fund managers have become increasing sceptical of investment bankers trying to make the transition across. Most successfully making the move have done so by leveraging their relationships with institutional investors, according to headhunters.