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Investment & Middle Office

INVESTMENT & FRONT OFFICE MARKET COMMENTARY, Q1 2020

• Article by BRUIN Financial

INVESTMENT & FRONT OFFICE MARKET COMMENTARY, Q1 2020

MARKET OVERVIEW

 

Equity

The outlook seemed largely positive for equities at the start of Q1 2020. The UK entered its transition period and exited the European Union, which provided seemingly no shocks on the FTSE, but weak GDP growth and low retail sales saw it end 1.3% down for January.

 

The S&P 500 reached a new record high mid-January, but fell back to its original level to finish January flat. Global equities (MSCI global index) showed the first signs of what was to come, as it finished January down. COVID-19’s outbreak in February and continued spread in March led to stock markets around the world crashing.

 

FTSE-100 and S&P 500 both recording their worst days since 1987 (falls of 10%+), FTSE 100 fell below 5000 for the first time since the 2008 crash and the Dow Jones fell below 20000 points. Q1 finished with rallying stock markets as governments launched extreme fiscal and monetary measures to battle COVID-19 and its effect on the global economy, whilst China’s stock markets saw rises of 40%+ as it recovers from the virus’ outbreak. Despite the climate within equities, there is still a demand for strong female equity research analysts in Asset Managers.

 

Fixed income

Fixed Income markets had a lot of activity in Q1, with the Bank of England cutting the Base Rate twice. Rates went from 0.75% to 0.25% to 0.1% (lowest level in history) in just a week in response to the outbreak of COVID-19. The FED took a similar track – cutting the rate from 1.75% to 0.25%. As a result, US 10-year Treasury yields have fallen below 0.7%, starting the quarter at 1.88% and 1-month yields hitting 0.01%, from 1.53% at the start of the year.

 

In February, US bond funds received record inflows. $23.6bn was taken in by fixed-income mutual funds and ETFs in one week – the biggest inflow since 2001 – as investors sought risk-averse strategies during these uncertain times. Amongst the negative outlook on the markets, daily trading revenues have been on the rise, with $650billion on average changing hands in the bond market per day in February, whilst the 2019 average was $593billion.

 

Given 2019 was a good year for fixed income markets, specifically credit, recruitment within the space has been healthy and BRUIN recently placed a UK Credit Sterling Portfolio Manager as hiring  increased from research and analyst level, up to managing funds.

 

ESG

COVID-19 aside, ESG has been the most prominent conversation in Q1 of 2020 as the biggest Fund Management houses introduced policies and strategies to change the direction of their investments. US sustainable funds saw record rises in AUM for 2019 and globally the trend appears to have continued in January as investors seek long-term growth opportunities. A study found more than two-thirds of investors under 30 prefer their investments to have a positive social/environmental impact – perhaps highlighting the focus for the future.

 

From a hiring perspective, ESG hires have increased fourfold since 2017, whilst the number of people hired in Stewardship roles has doubled.  These hires appear to be catering for the demand into sustainable investing with expectations to increase further as time goes on.

 

BRUIN has recently created an ESG workstream to highlight our commitment to supporting a sustainable future within financial services and amongst our client base. We are also seeking to improve the social and environmental well-being of the financial services community, whilst attracting top talent that will help to influence this.

 

ROLE PROFILES

 

Portfolio Management

Q1 continued to be relatively quiet for the release of new mandates within portfolio management teams as many individuals await their bonus pay out throughout Q1 & Q2. Fixed income credit managers are still in demand in line with continued processes from 2019.

 

Markets began to fall in March which left portfolio managers grappling to save client investments, leading to a decline in engagement with recruitment. All of this said, there has been some planning demand for candidates with a background in Real Estate and Multi-Asset, so we expect an influx of hires at the end of Q2.

 

Equity Research

Equity Research hiring continued to be as buoyant as ever with a number or organisations hiring within this space focusing specific sectors such as direct equities. Diversification of teams is still paramount in the search for key talent despite the delay in gender pay gap reporting anticipated for April 2020. We also saw an increase in candidates from the consumer markets sector seeking a move throughout Q1. We anticipate with recent market volatility due to COVID-19, hiring with Equity research teams will increase further throughout Q2.

 

Product

Product departments continued hiring across levels with many adding additional capability to their teams. In contrast to 2019 we saw asset managers turn their focus to product strategy and building out departments with creative and innovative candidates to be able to focus on designing new products and completing competitor analysis. Equally organisations are beginning to bolster governance capability with AMMS regulation tightening ever further in 2019.

 

Performance

Performance teams continued to hire in a cyclical manner, with the majority of asset managers going to market towards the beginning of quarter. Similar to before teams are constantly looking for more technical abilities incorporating attribution and quantitative analysis elements into the roles. We also saw a demand for project management skills coupled with performance as teams begin to look process improvement and migration of systems.

 

FMA/Assistant Fund Manager

There was a slight decrease in demand for Fund Manager Assistants and Assistant Fund Managers  over Q1 of 2020. Roles tended to focus on discretionary services to institutional and private clients. A significant influx of candidates in this market were keen to engage and begin the search for their next opportunity however indicating they were awaiting bonus pay outs in March/ April prior to making a new career move.

 

Movers & Shakers

  • Aberdeen Standard Investments has promoted Dominic Byrne to Head of Global Equities, succeeding Stephen Docherty who is stepping down due to personal reasons.
  • GAM Investments has hired Giovanni D’Alesio as Head of Research for alternative investment solutions.
  • Nora O’Mahony has been appointed as Head of Product EMEA for BMO Global Asset Management with the news of BMO’s decision to strengthen its focus on product development in both EMEA and North America.
  • Allianz Global Investors has hired BlackRock’s former Head of Emerging Market Debt (EMD) sustainable investing Giulia Pellegrini as Senior Portfolio Manager within its EMD team.
  • Artemis Investment Management has appointed former GAM Head of Investments Matthew Beesley as Chief Investment Officer to replace Peter Saacke.
  • Andrew Lebus will stand down as lead manager of the £1.2bn Pantheon International investment trust, to be replaced by Helen Steers. The move comes ahead of Lebus’s retirement from Pantheon in 2021.
  • Christopher Smith will join Jupiter Asset Management in June to replace Steve Davies as manager of its UK Growth strategy.
  • Chris Foster has been promoted at Liontrust where he will co-manage three funds within the firm’s £5.3bn Sustainable Future equity range alongside Simon Clements and Peter Michaelis.

 

Investments and Front Office Candidate Survey

Given the current situation with COVID-19, clients and candidates have been making adjustments to remote working and operational processes, as well as the on-boarding of new employees, IT issues and lack of face to face engagement with candidates throughout  interviews.

 

With this in mind, BRUIN’s Investments and Front Office team recently conducted a survey which was sent to over 10,000 investment professionals. The aim of which was to better understand candidate motivations, sentiment and expectations in light of the current climate. And it is clear that a large proportion of candidates remain interested in exploring new opportunities. Over 75% of respondents would move roles in the current economic climate, which reflects that the market remains candidate driven and buoyant.

 

We are currently producing a full analysis of the survey and will send you a copy in due course.

 

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For more information about the market or current opportunities please contact one of our Consultants.