to the full report. - Barrington Hibbert Associates

Transcription

Asset
Management
Compensation
Analysis 2013
Contents
Company Overview
4
Executive Summary
8
Paradigm Shift: Compensation & Pay Choices
10
Hiring, Headcount and Promotions
14
Asset Management
17
Asset Management:
Infrastructure, Compliance & Operations
21
Contacts
23
Strictly Private and Confidential
www.barringtonhibbert.com
Michael
Barrington-Hibbert
3
29th Floor
1 Canada Square
Canary Wharf
London E14 5YD
T +44 (0)20 7712 1567
michael@
barringtonhibbert.com
Michael Barrington-Hibbert is the Managing Partner of BHA and
oversees the firm’s Financial Services practice. He founded the
firm in 2010 having previously worked for Odgers Berndtson the
UK’s pre-eminent executive search firm. Michael has an extensive
global track record in primary and secondary banking and markets
appointments, both on the sell and buy side. Client activity spans
the developed markets of EMEA, North America Asia and the
Middle East.
Michael is responsible for key client relationships for BHA, operating
at Board and Global Management Committee level. Clients include
Global Investment Banks, Insurance Companies, Asset Managers,
Hedge Funds, Family Offices & Private Equity Firms.
Michael graduated from the University of New York with a dual
degree in Business and Strategic Leadership before joining Morgan
Stanley in New York. Five years later, in 2005, he moved to London
where he began his headhunting career.
A proud REACH National Role Model, Michael represents the
Government-backed REACH programme; an initiative to raise
the aspirations and achievements of young black men. His hard
work and deserved success was recognised in the PowerList 2010,
sponsored by JP Morgan and Thomson Reuters, a comprehensive
compendium of the most influential black people in Britain today.
Company
Overview
4
5
Founded in 2010 by Michael Barrington
Hibbert, and privately owned, Barrington
Hibbert Associates is one of the industry’s
preeminent firms in recruiting senior and
middle management positions, partnering
with a select group of clients across
professional services and financial
institutions across the globe.
We provide a results-driven, flexible and transparent service to our
clients and candidates within the markets in which we specialise,
including:
•
•
•
•
Financial Services
Business and Professional Services
Leadership and Development
Interim Management
Entrepreneurial and privately-owned, Barrington Hibbert Associates
has grown exponentially since its inception. A key component of
our strategy is the acquisition of complementary businesses, each
chosen carefully to ensure we can provide our clients with
a complete human capital platform.
A critical part of our business is our discernment in accepting new
clients and projects. Through being professional, discreet and
highly selective in our client partnerships we ensure total synergy
and exceptional results. In particular, we track the ‘rising stars’
across sectors and functions as the business leaders of tomorrow.
The thoroughness with which we understand our clients, together
with the due diligence that we undertake, ensures that the ultimate
appointment makes the desired impact.
With partners in London, New York, and Dubai and research
support across the world, we ensure that our retained clients receive
premium level service to optimise the performance and capabilities
of their people.
Ben Rowley
6
29th Floor
1 Canada Square
Canary Wharf
London E14 5YD
T +44 (0)20 7712 1542
M +44 (0)7891 660 298
ben@
Ben is a Business Partner in the Financial Services Practice in
London and leads the Global Asset Management Division. Ben and
his team work in partnership with leading Asset Management firms,
Hedge Funds, Pension Funds and Investment Consultants in the
UK, EMEA, US, LATAM and ASIA with the appointment of highly
skilled and ambitious investment, manufacturing and distribution
professionals across traditional and alternative asset classes.
His asset management search career began in 2004 when he
specialised in investment and distribution mandates across
equities, fixed income and alternatives investments for large
institutional asset management companies and boutique
alternative investment firms.
Three years later he joined Swisslinx AG to set-up and lead the
EMEA Asset Management & Hedge Fund Practice based out of
Dubai and Zurich. He expanded Swisslinx’s buy-side capabilities
across the EMEA region and reinforced successful relationships with
his core international clients by working in partnership with them to
build sustainable businesses on the ground in the Middle East.
Ben also worked with local Middle Eastern and Swiss institutions to
develop their asset management capabilities, and create solutions
to resolve issues in areas including strategic talent management,
cultural alignment, diversity and internal structuring.
7
Gareth Mann
29th Floor
1 Canada Square
Canary Wharf
London E14 5YD
T +44 (0)20 7956 8396
M +44 (0)7877 1 15 859
gareth@
Gareth is a Business Partner at Barrington Hibbert Associates
in the Financial Services Practice based in London. He leads the
Infrastructure Practice, and operates across a number of Functional
areas including Technology, Operations, Finance, Compliance and
Risk where he partners with his clients to identify emerging talent.
In addition, Gareth co-leads the firm’s FinTech & Industry
Infrastructure Group across EMEA, where he recruits emerging
talent across Settlements, Clearing & Outsourcing, FinTech,
Payments, Stock Exchanges, and Brokers.
Gareth began his headhunting career began in 2006 for a boutique
financial services in London. During this time, he covered Operations
and Finance across Investment Banking, Asset Management and
Hedge Funds.
In 2010 he joined Morgan McKinley with a mandate to expand
their commodities capabilities across the EMEA region. Gareth
on-boarded several investment banks, utilities, producers and
Independent Traders to the organisation.
Upon graduating from Birmingham University with a degree in
Business, Gareth worked for Barclays Bank for two years prior to
starting his head hunting career.
Executive
Summary
8
As we proceed into 2013, challenges will be presented throughout
the year. In particular, institutions who are based in Europe are under
increased pressure to take a more tempered approach to awarding
bonuses, even where performance has been favourable.
9
A major challenge will be how firms balance the responsibility of
rewarding their employees, and that of their shareholders; whilst also
remaining competitive to attract and retain high calibre personnel.
With a front-row view of the measures taken by leading financial
institutions, Barrington Hibbert Associates has conducted a
comprehensive analysis of the compensation and recruitment trends
over the recent months. This report summarises the views expressed
by senior management around the world, and provides a breakdown
of information across departments and geographies.
Michael Barrington-Hibbert
Managing Partner, Barrington Hibbert Associates
Paradigm Shift:
Compensation
and Pay Choices
10
As 18th century Congressman Artemas Ward observed, “when a
fellow says it ain’t the money...it’s about the money”. Compensation
practices within financial institutions remained a topical subject
during 2012. As we move into 2013, organisations face a more
stringent regulatory landscape as well as increased pressure for
shareholder returns. The structure of financial rewards given to
employees remains under scrutiny.
Several reform agendas1 have issued guidelines on compensation
practices. The focus centres on the need to align incentives with
longer-term goals, and to reduce the level of risk taking. Key points
of the reforms are summarised below.
11
1. Financial Stability Forum,
Institution of International
Finance, G20 working paper,
Turner Review and Walker Review.
Variable Compensation
• For senior executives, 40-60% of variable compensation should
be deferred over a period of three years or more.
• More than 50% of variable compensation should be vested in
shares or similar instruments.
• Guaranteed bonuses after the first year of employment should
not be provided.
• Poor performance should result in lower variable compensation,
including the claw-back of amounts previously awarded.
Long-Term Compensation Plans
• Firms should concentrate on the long-term health and security of
their businesses by ensuring that deferred and phased payouts
are aligned with risk horizons.
Risk Alignment
• Compensation outcomes must be symmetric with cost of
capital and liquidity. Unlike previous years, firms should link
compensation to long-term results.
12
Total Compensation
The prevailing theme among financial institutions for 2013 is
the realignment of bonuses to overall firm revenues. Aside from
reductions in headcount in order to reduce overheads, firms
are progressively making more global decisions. Profit-making
franchises are increasingly relied upon to subsidise loss-making
businesses. This is recognised across geographical regions and
across asset classes. Barrington Hibbert Associates has observed
that the compensation paid to UK and European Asset Managers
has undergone the greatest degree of restructuring, with many firms
transitioning from a formulaic or commission based bonus scheme
to a discretionary model which ultimately give them more control
over the bonus pool.
• Average total compensation for 2013 is 4% to 6% higher yearon-year (YoY), we have seen the greatest gains from firms with
strong capabilities within fixed income, emerging markets and
liability driven investments (LDI).
• Early indicators show there is an emphasis on rewarding the
top 10% of performers, which is centred around performance /
revenue generators (portfolio managers, senior analysts) and
individuals who can originate business / raise assets from new
channels (business development executives, institutional sales,
wholesale distribution).
Average Compensation by Corporate Grade in 2013
250
(£000s)
200
150
100
50
0
Entry Level 1-3 Years
Associate
Vice President
Director
Managing Director
Base (Investments)
Base (Investments)
Base (Business Development, Institutional Sales, Wholesale Distribution)
Base (Business Development, Institutional Sales, Wholesale Distribution)
13
Bonuses
• Asset Managers who have a clear identity and have focused
on developing/marketing their core capabilities have been far
more successful than managers who have tried to be ‘everything
to everyone’. Bonus pools in these firms are up as much as 12%
from 2012.
• From a macro perspective front office bonuses for 2013 have
increased steadily from 2012 levels. Bonuses for front office
individuals who work for asset managers with strong emerging
market, fixed income or LDI capabilities are up by as much as 13%.
• Bonuses for non-revenue generating individuals have remained
flat (similar level to 2012) in many firms, with the top performing
firms rewarding these individuals with 2% increases.
• Increased emphasis is being placed on only rewarding strong
performance; a gradual shift away from old perceptions, where
bonuses were seen as a defined right.
• With corporate grade level remuneration under the spotlight,
the ability to reward top performers and senior corporate
management has been made possible through the reduction
of bonuses to junior staff, non-revenue generators, and back &
middle office professionals (excluding senior management).
• The need to honour the guaranteed bonuses of new joiners is
a contributing factor to the increased variance in size of
individual bonuses.
• At the Director and Managing Director level we have observed
variances of up to 30% in total compensation between individuals
at the same corporate grade working at different firms.
• Continued strong performance across Fixed Income has led to a
rise in pay across the asset class. Discrepancies in compensation
across business lines and asset classes has led to a degree of
internal conflict. Underperforming divisions argue that payment
to staff is critical to remain competitive going forward.
Hiring,
Headcount
and Promotions
14
• Promotions in 2013 are moderately lower in comparison to 2012,
as firms recalibrate their respective MD to Director ratios.
15
• Headcount across support groups are down 10% across EMEA,
predominantly due to increased emphasis on location strategy.
• Cuts of 5%–10% to back & middle office headcount for 2013 has
occurred for most Asset Managers, which has allowed for more
potential hiring across the front office.
• Several firms have indicated that revenue generating businesses
in equities and fixed income will no longer be paid on par.
Business leaders agree that in the short term fixed income
departments with contribute a greater amount to the bottom
line compared to equities in the next few years, before a shift
to equities is expected. Consequently, total compensation paid
to staff within fixed income is projected to outperform those in
equities in the short term.
• Director and Managing Director departures are not being
replaced like for like. Staffing overheads have been reduced
through promoting internal staff into more senior roles,
without receiving significant improvement on their respective
compensation packages.
• On-going scrutiny from regulators and increased regulations &
legislations has driven the demand for compliance and
regulatory specialists.
16
Regional Hiring Trends
• On the whole hiring trends in Asia have remained buoyant.
Several asset managers have set up new operations in Hong
Kong and Singapore, and existing businesses have expanded
their operations. Headcount continues to grow with several
organisations moving desks into the region.
• Growth in EMEA has been consistent, with considerable growth
across sales and distribution. Firms have also been making
opportunistic hires across investments. Emerging Markets,
divisions have bucked this trend and hired far more actively
across investments.
• Within North America and LATAM, revenues have been driven
by businesses geared towards Brazil and Argentina. We have
seen high performing individuals moving to LATAM and receiving
competitive guaranteed bonuses.
Headcount: Percentage Change Year-on-Year
8%
6%
4%
2%
0%
-2%
-4%
-6%
Fixed Income
Equities
Sales & Distribution
Operations
Private Wealth
Asia Pacific
North America
Europe
Redundancies due to Division Closures not accounted
Asset
Management
17
18
• Financial rewards in Asset Management still remain highly
dependent on core product capabilities, asset mix, longevity &
commitment to the markets and track record.
• Successful asset managers are those which have credibility,
transparency and a clear identity which they have committed to
on a long term bases.
• Underperforming asset managers tend to be firms which try to
be ‘everything to everyone’ and market / develop products which
aren’t historically part of their strengths and core capabilities and
which they do not have a consistent track record in.
• 2012 was a very fragmented year for hiring across Asset
Management. The market was very split with the top performing
firms reinforcing their teams across core disciplines and ‘cherry
picking’ the top talent from underperforming firms. On the
flip side underperforming firms continued with cost cutting
programmes, headcount reductions and hiring freezes.
• From a macro perspective hiring across Asset Management is
most active in Asia and the Emerging Markets (including LATAM)
with the bonus pool up by as much as 13% in some firms. Hiring in
the EMEA markets is slightly less active but still very consistent,
with the bonus pool up by as much as 8% in the top performing
firms. Hiring across the North American markets is still very flat,
but we are starting to see a slow incline in activity.
• As we enter 2013 improving business revenue has enabled the
best performing asset managers to restart large-scale recruitment
initiatives. Barrington Hibbert Associates has observed a
maximum increase in hiring budgets of 8% from 2012.
• With attractive returns from fixed income and emerging
markets, and consistent growth within liability driven investments
(LDI), many firms have indicated plans to strengthen teams in
these disciplines.
• Many asset managers are expecting a market shift from fixed
income to equities in the next 3–5 years, which has prompted
many firms to review their equity capabilities and identify key
hires in the equities market.
• There has been significant growth across sales & distribution in
both the institutional and retail markets throughout 2012, with
early signs that this will continue through 2013. This is a clear
indication that the ability to raise assets and develop traction
with investors remains a key focus for Asset Management firms.
19
• The pace of hiring within investments (portfolio management,
analysis) is still subdued. Mid-level and senior placements have
been most active in Emerging Markets, Fixed Income and
Credit. Barrington Hibbert Associates expects a boost in hiring
across investments within 2013.
• Cost cutting initiatives are still being put into place by many asset
management firms including the top performing institutions. We
have seen many firms outsourcing certain back office divisions
and functions, and implementing lots of consolidation across
back & middle office.
• Other cost cutting initiatives include:
• Moving from a formulaic / commission based bonus schemes
to a discretionary bonus scheme.
• Capping performance related bonuses.
• Downgrading of corporate pay levels.
• Promoting internally but keeping the employee on his former
pay scale (eg. Vice President promoted to Director but kept on
a Vice President’s compensation package).
Asset Management: Bonus Deferral Arrangement by Volume
5
9
50
52
13
Fixed cash amount
Deferred into funds
9
Deferred into shares
Profit-linked
36
26
2011
2012
“Successful asset
managers are
those which
have credibility,
transparency
and a clear
identity which
they have
committed to on
a long term basis”
Asset
Management:
Infrastructure,
Compliance &
Operations
21
22
With an industry wide initiative to reward revenue & performance
generators and with more cost cutting procedures being put into
place, bonuses across operations and infrastructure have been
severely impaired with the exception of individuals working within
compliance and regulatory functions. Compensation and bonuses
for these individuals has increased due to continuing changes in
legislation and pressure from regulators on asset managers, which
has driven the need for experts in these areas.
• Compensation for top performers within control and regulatory
functions, such as compliance and operational risk has increased
by up to 15% in some asset managers. Firms have focused on staff
retention in these functions through increasing remuneration.
• The delivery of new regulations throughout 2013 has triggered
a demand for regulatory specialists in Asia and EMEA.
• A number of asset managers continue to relocate infrastructure
and operational divisions offshore. Headcount across sectors
such as Technology have been reduced significantly, and total
compensation for individuals in this sector has lowered by
approximately 10%.
• Junior level individuals within these areas have been affected
the most, with a large percentage of this population receiving
zero bonuses.
• Regulators have encouraged firms to move infrastructure staff to
salary-only models. This model is unlikely to be implemented by
many asset managers due to flight risk of employees.
For further information, please contact:
Ben Rowley
23
Business Partner
T +44 (0)20 7712 1542
M +44 (0)7891 660 298
[email protected]
Gareth Mann
Business Partner
T +44 (0)20 7956 8396
M +44 (0)7877 1 15 859
[email protected]
Ania Lichota
Partner
T +44 (0)20 7956 8394
M +44 (0) 7920 870 694
[email protected]
29th Floor, 1 Canada Square
Canary Wharf
London E14 5YD
T +44 (0) 207 129 8018

to the full report. - Barrington Hibbert Associates

Transcription

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