UK – More fund managers are leaving the industry than at any point in the past seven years, reveals a survey by consultants Watson Wyatt.
The survey shows that, in 2002, almost half of fund managers that departed from asset management firms also left the industry. This compares to only a third when the survey was initiated in 1996. Movement between mainstream investment managers is at its lowest point since the survey began, and even the number of fund managers leaving to start up hedge funds has dramatically decreased since peaking in 2000.
The loss of investment professionals has been attributed to cost cutting by companies as the bear market effects take hold. Says Nick Watts, European head of investment consulting at Watson Wyatt: "The increased cost pressures and complexity facing the
industry has resulted in many experienced and well remunerated professionals
leaving the industry and not being replaced. The situation has been exacerbated by new initiatives such as legitimate calls for greater transparency on how costs are incurred and for greater time and effort to be spent on corporate governance. These new service demands, with the accompanying increase in costs they would incur, come at a particularly challenging moment for the industry."
The trend, while unsurprising, is causing concern. Investors, such as pension funds, need access to good investment skills like never before, and will suffer considerably if the exodus of fund managers from the industry continues. Says Watts: “The most concerning aspect of this trend, aside from the destabilising effect of increasing churn, is that investment talent has been lost from the industry. This confirms our observations that we now have a fund management industry where professionals experience a higher level of job uncertainty, which inevitably contributes to a less stable environment and one where it is more difficult to concentrate on the task of generating alpha."
The survey covered 25 of the largest investment management firms with combined global assets under management of approximately 5 trillion pounds (7.2 trillion euros).