Asset managers looking for a big pay day should arguably avoid bank-owned firms, which will be subject to the tough new EU bonus cap rules.
Most asset managers with an investment banking parent will find it very hard to argue their way out of the European Parliament’s preliminary agreement to cap bonuses at 100% of salary (or 250% if two-thirds of shareholders vote otherwise), particularly if they significantly contribute to the overall profitability of the group, said Tim Wright, head of compensation for asset management at PwC.
“The new rules put bank-owned asset management firms at a huge disadvantage,” he said. “Independent fund houses are not subject to the rules, so there’s every chance talent will gravitate towards them, and it may also prove a catalyst for fund management professionals moving to other jurisdictions.”
Investment banks are already extending more onerous deferral schedules to their asset management divisions and the fact that average pay is outstripped by successful standalone firms like BlackRock and Aberdeen Asset Management may exacerbate staff defections.
Goldman Sachs Asset Management (GSAM) has hired hundreds in the past 18 months, but is still something of a revolving door for talent, according to Financial News and our own research. Morgan Stanley Investment Management recently lost Simon Baxter to BlackRock, where he now manages the European Credit Lead Portfolio and Total Return team, and Arnout Matthijs Vis, head of Nordics, joined Pantheon Ventures as principal in September.
Meanwhile, the number of regulated employees at Credit Suisse Asset Management, which merged with the bank’s wealth management unit in November, has fallen from 94 in October to 88 in January; Deutsche Bank has just 28 UK regulated employees in its asset management division and UBS Asset Management has lost 13 staff from regulated functions since January last year.
The Swiss bank paid its asset management staff an average of $251k last year, compared to $238k at J.P. Morgan and $313k at BlackRock.
A February report by consultancy Casey Quirk suggested that bank-owned asset managers need to address perceived restraints – namely “cultural aversion to autonomy, inability to implement effective asset management-focused incentives, and heightened regulation”, it said.
“Some banks will choose to address the success requirements head-on, and some will exit the business altogether, either via a proactive exit or through client attrition,” said the report.
However, Amin Rajan, chief executive of fund management consultancy Create, doesn’t buy the argument that bank-owned asset managers are struggling to hold on to talent.
“They’ve paid some top dollar to attract talent, and some of these firms, like J.P. Morgan, have been hugely successful in the past year,” he said. “Capital requirements have forced some to divest their asset management arms, but independent fund houses are also under pressure to cut costs and they’ve done this through headcount reduction, scaling back pay and exiting certain business areas.”