Tom Wilson, the head of talent acquisition at $240bn asset management firm OppenheimerFunds, has a curious analogy about the seemingly slow decline of active asset management. It's a melting iceberg - but it's a very big one.
“The rate of attrition from active to passive ebbs and flows, and that will continue,” Wilson said. “Flows come in and go out in cycles, but assets have a stickiness, and the demise of the active management business has certainly been exaggerated.
“That said, to be effective, the approach that you have to take is changing, which is why we’ve been building out a smart beta ETF business,” he said. “We in active management are being impacted in so many ways by the growth of passive, the influences of quantitative investing, regulatory burdens and AI, which is impacting not only how analysis is done, but so many types of work.
Wilson, a former a sales-trader who worked his way up to managing director and the global head of recruiting at Merrill Lynch, was giving the opening keynote address at a recent employment event hosted by the CFA Society New York.
Those factors are impacting OppenheimerFunds’ economics, hiring practices and business strategies.
“They’re having interesting effects on blurring lines in asset management between fundamental and quantitative and between institutional and retail distribution channels,” Wilson said. “We’ve combined those sales desks, because institutional consultants, retail gatekeepers and RIAs are all asking the same types of questions – the world is converging.”
OppenheimerFunds has been recruiting actively and consistently even though it has not been increasing its overall headcount.
“The net growth of our company from an employment perspective is flat, but we’re constantly recruiting, just not because of net growth,” Wilson said. “We went through the same thing at Merrill Lynch – even as it was shrinking dramatically, there was a lot of hiring going on.
“While the net growth of demand for fundamental analysis is flat, the impact of a good analyst is greater than ever before,” he said. “The core demand is more in international sectors than in the U.S., and there’s continued demand for credit skills, so there is opportunity.”
A tried-and-true buy-side career path is to pay your dues and prove your worth as an investment analyst, bide your time and try to position yourself for a promotion to portfolio manager.
“We promote a lot of analysts and they become portfolio managers, and it’s valuable for portfolio managers to never lose their hand in following specific sectors so that they retain an understanding of fundamental activities of what’s going on in those sectors,” Wilson said.
A key to getting promoted is to demonstrate consistency in your investment process and philosophy, as well as your approach to navigating your career path, he says. Don't job-hop.
“Consistency of returns is more important than ever, not just aggregate over a period of time but the smoothness of those returns,” Wilson said. “The corollary is the consistency of your [investment] team – you can’t have a lot of volatility in your team just like you can’t have a lot of volatility in your returns, and I see that from a recruitment perspective.
“It’s important for analysts to have a very coherent trajectory to your career, because that’s what we value, a confidence that your approach is going to be systematic and consistent and repeatable, not idiosyncratic,” he said. “Reflect that not only in your [investment] analysis but in your career path as well.”
If you’re making career shifts, differentiation is harder but more important than ever in the asset management industry.
“We care about how you approach generating returns, so it’s important to explain yourself in ways that are differentiated and yet are able to generate consistent and repeatable results,” Wilson said. “Not many people are good at it, so if you can find that differentiated approach, it can make a big difference.”
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