(Bloomberg) London investment firms are raiding the competition and raising pay for money managers as cash pours into funds that invest across a range of assets, from stocks to high-yield debt.
Companies from Goldman Sachs Group Inc. (GS) to Aviva Plc and Pictet & Cie. Group SCA are hiring multi-asset managers and executives in Europe as they look to open new funds to meet demand that has accelerated since the global financial crisis.
“I’ve got a client at the moment looking to add three or four people to their team from a competitor,” said Chris Apostolou, director at London-based recruiting firm Arbitrage Search & Selection Ltd. “Salaries are being squeezed higher, there is massive pressure. Some firms have increased bonuses for their managers to 200 percent of their base salary and guaranteed them for two years in order to make them stay.”
Firms are hiring and creating new products amid increasing demand for multi-asset funds that money managers surveyed by State Street Corp. say will be the biggest growth engine in the next three years. Mixed-asset funds in Europe attracted 62 billion euros ($78.6 billion) in the first half of 2014, about 1 billion euros more than stock funds, according to data from Lipper Inc.
Almost 30 mixed-asset funds domiciled in the U.K. have been started this year, drawing almost 4 billion pounds ($6.4 billion) from investors, according to Morningstar Inc.
Across Europe, four of the top five funds that attracted the most money this year have a mixed-asset strategy, the data show. Richard Woolnough’s 23 billion-pound M&G Optimal Income fund, which invests predominately in fixed income as well as some equities, was No. 1, with an estimated 5.5 billion euros of net inflows this year.
A multi-asset fund typically spans several investment classes from U.S. stocks to European corporate bonds or high-yield credit and can include as many as 20 investment strategies designed to provide steady returns under all market conditions. Standard Life’s 21.6 billion-pound Global Absolute Return Strategies Fund (SLIGARS), known as GARS, targets a return of 5 percent above the London interbank offered rate over three years.
GARS posted a gross annualized return of 8.1 percent for the last three years, according to the company. That compares with the MSCI World Index, which had an annual return of 18.7 percent over the same period. The fund’s volatility was 4.1 percent versus 9.2 percent for the index.
Mark Dampier, head of research at Hargreaves Lansdown Plc, said the trend has largely been created by a desire among institutional investors and advisers to not put all their clients’ money “into one basket.”
“It’s not a new way of investing,” he said, adding that similar funds have been around for at least 30 years. “Multi asset still got hit quite badly in 2008. Ultimately, the fund manager still has to make the right decision.”
Tim Wright, a director at PricewaterhouseCoopers LLP in London, said demand to open new funds and the small pool of executives with the skills and experience to invest across various asset classes had increased the competition among firms to hire the right staff.
“There is a price to pay,” said Wright, who provides compensation advice to the asset-management industry. “High demand and short supply means that the cost of employing someone increases.”
The average salary and bonus for a multi-asset fund manager last year was 200,000 pounds, according to Apostolou, the London recruiter. Next year that is expected to be closer to 300,000 pounds, he said, with some of the “top guys earning into the millions.” Firms needed to work to retain their managers or risk large asset outflows when they leave, he said.
Baring Asset Management Ltd.’s head of multi assets, Percival Stanion, joined Geneva-based Pictet in August to help the firm open a new set of funds. His departure, along with colleagues Andrew Cole and Shaniel Ramjee, saw the Baring Multi-Asset fund lose 60 percent of its assets, cutting the fund to 403 million pounds in the two months through September, according to data from FE Analytics.
Stanion was replaced by Baring’s current chief investment officer, Marino Valensise. Baring also added Ken Lambden as CIO, who left Schroders Plc last year.
Goldman Sachs Asset Management hired the head of JPMorgan Chase & Co. (JPM)’s global multi-asset group, Neill Nuttall, in June, naming him co-chief investment officer of the global portfolio solutions group, which oversees more than 15 billion pounds in assets. JPMorgan’s division has about $165 billion under management.
Aviva Investors recruited Ian Pizer from Standard Life Investments’s multi-asset team in May, rejoining his former boss Euan Munro, who started as chief executive officer in January. Munro, who helped create the GARS fund at Standard Life, was hired late last year to revive the profitability at the insurer’s investment unit.
Munro announced the firm’s new multi-asset strategy in July and named David Lis as CIO of equities and multi assets in September. He also hired Wei-Jin Tan from State Street Global Investors.
Schroders, which lost its former head of multi assets for Europe, Gregor Hirt, to UBS AG this year, turned to academia to bolster its 57 billion-pound multi-asset business. Duncan Shand of the University of Warwick in the U.K. and Fred Dopfel of the Dominican University of California in the U.S. were hired last month as senior advisers. Both previously worked for BlackRock Inc., the world’s largest money manager.
Schroders CEO Michael Dobson said in July the multi-assets unit was the firm’s fastest-growing business. The U.K.’s largest publicly traded money manager reported 4.8 billion pounds of net inflows in the first half of the year — 4.1 billion pounds of which flowed into the unit.
“Investors want to have exposure to a broad range of asset classes, and they want to use a manager to make those judgment calls,” Dobson said in a telephone interview. “It will be a big growth area.”