Who would want to work for a sovereign wealth fund? Not many people, it would seem, as the government-owned goliaths – which are increasingly trying to build up their in-house investment teams – continue to struggle to attract the people they want to hire.
Most SWFs have a recruitment shopping list that includes exemplary academics from an Ivy League or Russell Group university combined with extensive experience working for an internationally recognised financial services organisation. However, they’re also unwilling to budge when it comes to remuneration, which means they’re struggling to compete with the private sector – and this is having an effect on their ability to hire.
A new report from NMG Consulting on behalf of asset manager Investec suggests that SWFs struggle to attract and retain staff for functions like “risk management, asset allocation, investment strategy and internal asset management” despite an increased desire to bolster their investment functions.
This is not simply because SWFs are generally located in countries that would be considered ‘hardship’ locations for Western financial professionals. SWFs in Western locations – as well as those in the Middle East – have the biggest ‘talent gap’, according to the research.
“Western sovereigns have the greatest need for top investment professionals because on average they do more in-house asset management and this requires individuals who can outperform external fund managers,” said the report. “Furthermore, executives felt that high levels of disclosure around performance, especially during a sustained period of market volatility, puts more pressure on Western sovereigns to develop more innovative investment strategies (such as risk premium drivers) and to increase exposure to alternatives.”
SWFs are at least trying to close the gap on the private sector – big bonuses are still a rarity, but carried interest or equity participation are increasingly common, according to compensation experts.
SWFs in Asia tend to look to the local market for new hires, while those in the Middle East are aggressively trying to attract international talent. Recruiters suggest that senior investment roles at SWFs in the Middle East typically pay $400-600k.
One head of recruitment for a large SWF in the Middle East tells us that he spends the majority of his time in London, Paris or New York scouting and interviewing potential new recruits. “It’s become easier over the past 12 months, with all the lay-offs in developed markets, to attract better qualified people into the roles.”
Recently, the Qatar Investment Authority – which has been bolstering headcount for some time – brought in Ugo Arzani, previously a managing director at Bank of America Merrill Lynch in London, as its new head of consumer and retail investments, and Jason Chew, formerly the head of Greater China operations at Pramerica Real Estate Investors as head of Asia real estate. Meanwhile, the Abu Dhabi Investment Authority appointed John McCarthy as global head of infrastructure from Deutsche Bank in May, and Greg Eckersley as global head of internal equities at the beginning of 2013.
“The reality is that working for a SWF isn’t for everyone,” adds James Wakefield, director of headhunters Cobalt Abu Dhabi. “However, there are top investment professionals with hardly any meaningful equity participation and little dry powder to invest who would welcome the opportunity to work for a stable employer with a huge amount of capital to invest.”
Nonetheless, the politics of working for a state-owned institution – at least one where transparency is a concern – means that pay will never reach that of the private sector. “The lack of flexibility on remuneration can be linked to high levels of disclosure on executive pay in annual reports and intense scrutiny from politicians and electorates,” said the report.