The technology industry is facing one of its hardest years on record, unleashing a raft of painful layoffs that have not gone unnoticed by asset managers on the lookout for tech talent.
So far this year, giants like Google, Meta, Amazon and Microsoft have already laid off thousands of workers. Just last month, Meta announced it was laying off about 6,000 people, bringing the tally of job cuts at the company to about 21,000 since November 2022.
But one industry’s loss could be another’s gain.
New Talent Available
John Bowman, executive vice president of the Chartered Alternative Investment Analyst (CAIA) Association, says the tech industry layoffs caused by the economic slowdown will likely accelerate hiring opportunities in the investment management industry. Asset management firms, albeit only those with the budget to grow their headcount in a down market, could be among the beneficiaries of the tech rout.
“There’s clearly a feeding frenzy for this artificial intelligence skill and enablement,” Bowman says of asset managers. “Even before the economic slowdown, there’s been this arms race in the asset management world to build out data science capabilities and hire data scientists to help enhance, and even in some cases replace, some of the human elements of the investment process.”
While demand for professionals with this expertise has been high, layoffs in the tech sector have “freed up some of that talent” for other industries, including finance. As such, Bowman believes many workers formerly in tech will be “on the sidelines, just itching to put their talents to work.”
Separately, he sees public pension plans as potentially being a “beneficiary of what, otherwise, is going to be a difficult economic period.”
Some of the more innovative, cutting-edge pension investors in the U.S., Canada and Europe could very well target and hire tech talent with backgrounds in AI or data science, according to Bowman. He adds that large, sophisticated public pension funds are in a unique position to attract alternative asset professionals from asset management firms.
“I think they will hold up better than asset managers who are sensitive to the economic cycle,” Bowman explains. “I think pensions will have the benefit of the first pick. I do think the asset classes that will be particularly hurt will be the ones they poach from first, like real estate, private equity and venture capital.”
“Venture capital firms, commercial real estate firms—these are going to be portions of the economy and asset management industry that will really struggle,” Bowman continues. “These shops will either slow down, have layoffs or freeze hiring.
Some Up, Some Down
Jim Cooper, a recruiter and founder of Concentriq, an executive search and management consulting firm focused on the asset management and fintech industries, has had an increasing number of conversations with asset managers about hiring tech professionals amid the reductions happening in the sector. Some asset managers are still battling the same downturn compression as tech firms, he explains.
“They’ve gone through similar situations with headcount reductions, but there have been some managers who’ve wanted to tap into that talent,” Cooper says. “A couple of the areas that are [in demand] are data management and data engineering roles, and folks with expertise in data analytics. … We’ve seen some [asset managers] pull from tech companies in the marketing and investor relations side—those who can tell the story and develop brand messaging.”
Cathy Seifert, an analyst at CFRA Research whose coverage includes asset managers, similarly notes that firms’ performances are varying widely in the current economic climate.
“I think, across the board, there are some asset managers that have implemented 3% to 5% workforce reductions, but it’s kind of a tale of two situations,” Seifert says. “For almost every asset manager that is laying off, you can point to another that is hiring. Net-net, job losses in the asset management industry, while there may be some, they’re certainly not as drastic as what we’ve seen in technology or in investment banking sectors.”
While Seifert believes some asset managers could hire from the pool of workers impacted by steep cuts in tech, she is skeptical it will be to any high degree.
“I don’t think it’s necessarily going to move the needle,” Seifert says of the recruitment opportunity for asset managers.
Fidelity Investments is among the firms adding to its headcount , despite economic headwinds, and part of its hiring push has been for tech roles. In February, the firm announced it was creating an additional 4,000 new jobs in the first half of this year, Kirsten Kuykendoll, Fidelity’s head of talent acquisition, wrote in an email. As of March 31, Fidelity had filled 71% of those roles, she added.
“While other companies are reducing headcount, Fidelity continues to invest in its people and customers,” Kuykendoll wrote. “At the end of the first quarter of 2023, Fidelity’s global headcount was over 70,000, up from 68,000 at year-end 2022.”
Kuykendoll specified that Fidelity intends to add almost 300 technology jobs in Salt Lake City in the next few months.
“The company is prioritizing the increased use of digital platforms to provide the best possible service and financial education to its customers, using data and machine learning to provide integrated, personalized, digital experiences and improve its products,” Kuykendoll wrote.
For the asset managers experiencing a “general tightening of the belt,” they are “doing more with less,” which often means operating with less staff and leveraging technology to do so, says Sidney Baumgartner, a principal in Korn Ferry’s global asset management and alternative markets practice in New York.
“There [are] certainly still pockets of really strong activity in terms of hiring across asset management,” he notes.
In fact, firms are looking to take advantage of the downturn in the tech industry to find professionals with expertise in data science, big data and AI-related services—with the latter a still-burgeoning area.
“I don’t know if the industry is quite there yet, in terms of providing that AI talent, because it’s such a new emergence,” Baumgartner adds. “It takes some time to build that type of talent over the years.”
Bonuses, Pay Structure Could Be Attractive
From a compensation standpoint, Concentriq’s Cooper says pay packages have generally “leveled out” in the asset management industry, compared to several years ago.
“Whereas in the two years after the pandemic, we saw a dramatic rescaling in compensation, that has fallen off more recently,” Cooper says. “Compensation has generally leveled out and plateaued. I think that has happened in tech too.”
Asset management bonus payouts for 2023 are predicted to be down 5% to 10% compared to last year’s incentive pay, a May report by Johnson Associates Inc. found. This despite assets under management going up at money managers, since investors have moved from active strategies to lower-fee passive products, cash and fixed income, driving down revenue and profits at firms, according to the report.
Meanwhile, bonus payouts for private equity professionals are expected to be flat compared to 2022, according to the report, while hedge funds are projected to see flat to 5% growth in bonus payouts.
Korn Ferry’s Baumgartner says one appeal of finance, for those coming from the tech sector, could be the pay structures. Asset managers typically offer much higher cash compensation to workers than what is paid in tech, he notes.
“A lot of these folks coming from the tech world, their compensation packages largely rely on restricted stock units,” a type of equity compensation, he explains. “With the tech downturn, that just has taken a complete nosedive.”
One of the asset management industry’s major challenges, however, could be retaining any talent it has lured from tech, as retention has historically been a concern, Baumgartner adds.
“Asset management firms don’t do a great job at succession planning [or] building up talent internally to step up into these very senior roles,” particularly on the investment and distribution side of the business, he explains.
Furthermore, he adds: “These big mutual fund houses, they are not really viewed as forward-thinking and as future-proof as other areas of finance. … If you have top junior talent, they will mostly look at private equity or hedge funds, because that’s where compensation is the highest. Then folks will look at [traditional] asset management as a second option.”
Tags: Asset Management, asset management culture, CAIA Association, CFRA Research, compensation, Concentriq, Fidelity Investments, Hiring, Information Technology, Korn Ferry, recruiting, Talent Retention, Team Building