Asset managers are struggling to hang on to young professionals, especially analysts, who are more prone to leave in search of better career opportunities than more seasoned professionals.
This is according to a survey by discretionary fund manager INN8 Invest.
“Analysts tend to leave if it will help them advance to the next level, which goes to show why about 35% were likely to have left for better growth opportunities,” says the research. “Most asset-management firms prefer to groom analysts, many of whom come straight out of university, into portfolio managers.”
INN8 Invest, with R35 billion under management, was previously part of Stanlib’s multi-manager business.
Some smaller, independently-operated firms attribute part of the churn in their investment teams to poaching by larger asset managers.
Boutiques feel they can’t compete on pay and that many junior professionals want to be associated with established brands. This could, however, be a perception, since boutique managers can provide staff with good opportunities to improve their skills and gain a wealth of experience.
According to the research, some 63% of the asset-management firms surveyed said that their compensation structures are not responsible for exits.
Just 9% of survey respondents say remuneration, including share ownership, was possibly the reason for staff quitting.
Shorter-term incentives – such as a market-related salary – are more important for younger investment professionals, while the longer-term ownership-related matters impede stability at the senior level.
Most of the reasons cited by the firms for people leaving were emigrations, relocating to another town, leaving for academia or to pursue further studies, starting a business, or for health reasons. These together accounted for 69% of departures.
INN8 Invest says the survey is aimed at measuring the stability of money management teams, which can impact returns.
Companies are not taking this staff churn lying down.
“To improve retention, asset managers have put clear developmental paths in place at the start of an individual’s career and have analysts manage paper portfolios to enable the build-up of abilities and skills transfer within the industry,” says the research.
Other retention measures include improved succession planning and business continuity, and reducing the risks of having a single decision-maker. Of the asset-management firms surveyed, 78% follow a joint decision-making process. Some firms have put in place incentives to give employees meaningful responsibilities, while paying for training, studies, and mentorship programmes.
Appointments in the past five years in the industry have targeted previously disadvantaged individuals, the survey found.
The challenge for some managers, however, has been finding diverse individuals. The survey shows that the industry has experienced notable people changes over the past five years, with 59% of the managers undergoing some form of restructuring, resulting in changes to investment teams, and causing some instability.
INN8 Invest’s survey also found senior departures have been substituted by junior appointments, in which, for instance, a portfolio manager is replaced by two analysts. This means that while investment teams have become 68% larger over the past five years, collective investment experience between teams has reduced.