Asset managers struggle to hang on to young professionals, especially analysts, who are more likely to leave in search of better career opportunities than more experienced professionals.
It shows a survey conducted by the discretionary fund manager INN8 Invest.
“Analysts tend to leave if it will help them move on to the next level, which shows why around 35% would probably have gone for better growth opportunities,” the research says. “Most asset management firms prefer to nurture analysts, many of whom come directly from the university, to portfolio managers.”
INN8 Invest, with R35 billion under management, was previously part of Stanlib’s multi-manager business.
Some smaller, independently run companies attribute part of the decline in their investment team to poaching from larger asset managers.
Stores feel that they can not compete on salary and that many junior professionals want to be associated with established brands. However, this could be a perception, as store managers can give staff good opportunities to improve their skills and gain a wealth of experience.
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According to the survey, around 63% of the asset management companies surveyed said that their compensation structures are not responsible for exits.
Only 9% of respondents in the survey say that remuneration, including shareholding, may have been the reason staff stopped.
Short-term incentives – such as a market-related salary – are more important for younger investment professionals, while longer-term ownership-related conditions hamper stability at the senior level.
Most of the reasons that the companies mentioned for people leaving were emigrations, moving to another city, traveling to academia or pursuing further studies, starting a business or for health reasons. These together accounted for 69% of the departures.
INN8 Invest says that the study is aimed at measuring the stability of money management teams, which can affect returns.
Companies do not take this staff layoff.
“To improve retention, asset managers have put clear development paths in place at the start of a person’s career and have had analysts manage paper portfolios to enable the building of skills and the transfer of skills within the industry,” the research says.
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Other retention measures include improved succession planning and business continuity and risk reduction by having a single decision maker. Of the asset management firms surveyed, 78% follow a codecision process. Some companies have introduced incentives to give employees meaningful responsibilities while paying for training, studies and mentoring programs.
Appointments in the last five years in the industry have been aimed at previously disadvantaged people, the study showed.
The challenge for some leaders, however, has been finding different individuals. The study shows that the industry has experienced remarkable human changes over the last five years, with 59% of managers undergoing some form of restructuring, resulting in changes in investment teams and causing some instability.
INN8 Invest’s study also showed that senior departures have been replaced by junior appointments, where e.g. a portfolio manager has been replaced by two analysts. This means that while investment teams have grown 68% over the past five years, the collective investment experience between teams has been reduced.
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