Will your job exist five years from now, or even in 12 months?
For most people working in fund management the answer has long been a resounding yes.
Although technology has brought big changes, not least in the way investment decisions are made, the traditional staffing structure of many groups has remained consistent: a core of well-paid portfolio managers at the top of a pyramid supported by sales and distribution teams and a range of administrators at its base.
But the pace of change will quicken as those working in the industry deal with a trifecta of pressures spanning automation, the triumph of passive investing over active management and the need to cut costs, all of which threaten old career paths.
“The industry is at an inflection point for all the obvious reasons: passives, fee pressure and the advent of technology,” says Michael Fitzgerald, a managing director in the asset management practice at RSR Partners, an executive search firm.
From BlackRock and Jupiter to Invesco and AQR, many companies have chopped away at their workforces this year.
“There’ll be fewer people and they’ll be more talented,” predicts Alan Johnson, a US remuneration consultant, who foresees a 5 to 10 per cent headcount reduction across the industry in the next couple of years. “It’s been so good for so long . . . it’s hard for the industry but good for customers.”
Others are uncertain whether there will be an overall headcount reduction in net terms once the dust settles thanks to job creation in areas such as stewardship and data science.
“This is a sector in flux,” says Bill Packman, head of wealth and asset management consulting at KPMG in the UK.
Nevertheless there are storms ahead, with headhunters and consultants stressing people cannot afford to sit on their hands.
“Fund management is set for the biggest makeover in history,” says Amin Rajan, chief executive of consultancy Create Research. “Those who use AI will displace those who don’t. Job titles may not change much but the nature of work within them will.”
FTfm examines where there are fresh opportunities and which roles are at risk.
Asset managers are reluctant to let go of their investment staff, even though individuals’ pay can run into millions of pounds.
Prudential, which recently demerged its UK insurance and asset management business, paid an unnamed employee £16.6m last year. The insurer declined to identify the person but it is widely believed to be Richard Woolnough, a bond fund manager.
Financial groups are chary of changing portfolio managers as this can trigger a review by clients as to whether to stick with the fund or follow a trusted manager out of the door.
Dramatic examples include Pimco, the $1.8tn bond fund group which suffered outflows of more than $100bn following the departure of Bill Gross in 2014. Jupiter Asset Management recently reported outflows of £1.1bn from its European Growth fund after Alex Darwall announced his departure.
“People are very careful about getting rid of portfolio managers,” says Mr Johnson, adding they provide “financial stickiness”.
Although nobody predicts swingeing cuts in this area, portfolio managers should not be complacent.
The growth of passive investment, as well as computer-driven investment styles, threatens the supremacy of the fund manager.
“The legacy star portfolio manager model will not really be the future,” says Jonathan Doolan, head of Emea at Casey Quirk, the Deloitte-owned consultancy.
Where investment staff do receive the chop, Mr Doolan believes it will “be driven by exiting asset classes”, with groups cutting bolt-on investment teams they previously poached “to cover the waterfront” by offering clients a wide product range.
Future-proof score: 8/10
Sales and distribution
Remuneration for staff in sales and distribution roles accounts for 20 to 30 per cent of pay-related costs for many fund houses.
“This is an area where asset managers have been reticent to take the scalpel to,” says Mr Doolan. But as cost cutting bites some of these staff will feel the pressure.
“I don’t think you’ll have as many salespeople,” says Mr Johnson. But he adds that a sizeable team will still be necessary given there are thousands of products which clients can choose from. “There are hundreds of funds out there, how do you differentiate yourself?”
Lower value distribution jobs, such as roles in digital marketing, are most at risk, says Christian Edelmann at consultant Oliver Wyman. “Ultimately distribution will have to become much more efficient,” he says, but adds: “Strong salespeople you will always need.”
Relationship managers are already used to working with client service platforms that can perform parts of their old jobs such as providing asset allocation models.
Mr Packman says sales staff can help themselves by focusing on their creativity and communication skills, elements of their job which are harder to automate.
Future-proof score: 7/10
ESG and stewardship
Interest in responsible investing has created a basket of new roles — such as head of responsible capitalism and head of sustainable credit — focused on the provision of environmental, social and governance expertise.
“A big area of investment is anywhere around stewardship,” says Mr Edelmann.
Such roles, which are fiercely competitive, offer an alternative route into the investment industry for those from a natural sciences or policymaking background.
Helen Pradas-Page at consultant Acre, which helps employers recruit for ESG roles, expects growth in the number of new roles in Europe to continue but to a lesser degree given progress already made. There will be “incremental growth” in new roles in Asia and the US, she adds.
Ed O’Bree, head of funds and markets at Bovill, the regulatory consultancy, says the biggest firms have hired the people they need but smaller groups are catching up: “I wouldn’t say it has plateaued at the medium to smaller end.”
Future-proof score: 9/10
Compliance and regulatory
Mr O’Bree says many of these roles have been created at consultancies such as Bovill or Duff & Phelps, rather than in-house at asset managers.
Demand has levelled off but he adds there has been an uptick in advertisements for liquidity and risk management roles over the summer, believed to be in response to the crisis at Neil Woodford’s investment empire.
The collapse of the former star stockpicker’s eponymous group was sparked by his level of illiquid holdings, an issue which has prompted greater scrutiny by the Financial Conduct Authority.
“I think people want to be seen to be proactive,” he says. “People are trying to stay a step ahead of the FCA in the fund management world.”
Future-proof rating: 6/10
Analysts and data scientists
Those with the skills to chew through a large data set and devise an investment strategy are in luck. “Everyone is trying to hire data scientists,” says Mr Edelmann.
Quantitative hedge funds in particular have focused on recruiting mathematicians and scientists, sometimes establishing direct links with elite university campuses to tap pools of talent, though they compete with Big Tech in attracting graduates.
But ordinary asset managers can also benefit. In one instance Mr Packman came across a firm where technology was helping portfolio managers identify which stocks out of about 500 they and their analysts should focus their attention on at a specific moment.
“The roles that are going to be the most useful are the people who write those algorithms,” he says.
The picture is bleaker for classic research analysts. Although the upheaval caused by the Mifid II rules meant some asset managers curbed their reliance on external research, Mr O’Bree believes there has been a slight drop in the number of internal roles in recent years as managers look to cut costs. Analysts are “a luxurious cost in this day and age”, he argues.
Future-proof score: 6/10
Back office and administration
One word: automation. Roles in areas such as settling trades, sending out factsheets, accounting and other forms of generic administration are highly at risk.
When Atlanta-based fund house Invesco recently cut 1,300 jobs after absorbing rival OppenheimerFunds, this included 850 losses from a single office in Denver that had performed administrative functions. Only about a dozen investing staff were dismissed.
“Mid-level support, they have got squeezed and they are going to get squeezed more,” says Mr Johnson. “The lower and mid-level tech people and support people are probably most at risk.”
There is one bright spot: some jobs may not be not “lost” but the employers offering them will change. For example, large groups may look to outsource roles, particularly in areas such as custodianship.
Future-proof score: 3/10