Insights

Investment & Middle Office

INVESTMENT & MIDDLE OFFICE MARKET COMMENTARY, Q3 2019

• Article by BRUIN Financial

INVESTMENT & MIDDLE OFFICE MARKET COMMENTARY, Q3 2019

MARKET OVERVIEW
As we approach Q4 it is clear that whilst Brexit continues to be a major source of uncertainty, focus has inevitably begun to shift elsewhere. A key topic currently is the rise of Chinese Fund industry. Chinese investment styles are inherently very different to their western counterparts but the AUM in China has increased drastically since 2013.

Many Asset Managers in Asia have begun to embrace ESG. Take GPIF as an example. Traditionally the main investment style was passive equities, with a new recent shift into tracking Japanese Equities ESG. Despite this surge more still needs to be done in terms of holding companies to account. It is clear that ESG has out performed Non-ESG portfolios. Recent research from Morningstar has indicated that 41 of the 56 (73%) Morningstar’s ESG indexes have outperformed their non-ESG equivalents. So what does ESG include? – Energy use, waste, pollution, natural resource conservation, and treatment of animals. These are just a small handful of what is considered when we think of ESG.

The Asset Management sector has seen many changes over the last few quarters. There has been a complete shift in how millennials want to invest. Asset Managers have responded to this through development of new ESG funds. Some examples include Columbia Threadneedle’s new ETF fund that aims to incorporate responsible investment strategies into ETFs. Many of our clients have responded to the rising trend of ESG through implementation of sustainable strategies. Despite the shift in opinion, it is clear that even though significant progress has been made to push ESG, there is still far to go, including in gender diversity.

A recent survey has shown that in the Asset Management sector, only 9% of senior managers are female. As a recruitment specialist, our aim is to be at a stage where there is a much larger presence of females within front office opportunities such as Equity Research & Portfolio Management. This will only be achieved through empowerment and radical change to the industry.

ROLE PROFILES
Middle and Front office recruitment continued with buoyant activity throughout Q3, with a healthy number of roles across both functions. As we approached the summer period, we experienced the inevitable slow movement across hiring decisions and interview processes; however, despite out of offices being on, roles were still being released.
In Q2 we noticed a drive for Product candidates, specifically Product Managers and Product

Developers, this requirement continued into the third quarter of the year. T.Rowe Price, Legal and General Investments, Aviva Investors and Alliance Bernstein are just a few of the many firms seeking candidates in this field. Further to Product, we have seen consistency in Client Services recruitment at the mid and senior level, and remains our highest volume area of recruitment throughout 2019, with a number of firms hiring new team builds or individual hires.

Equity Research has been another volume area across Q3, equally with clients specifically seeking female talent. Further to this, the Equity Research briefs have included experience in specific geographic coverages such as Emerging Markets or Asia, and also experience in sell side financials.

Across front office recruitment we have seen high demand for experienced Portfolio Managers across several product specialisms which include Bond and Multi Asset. This requirement has been a priority for our smaller to mid sized clients, who are seeking qualified Client Portfolio Managers and also Quantitative Portfolio Managers.

There have been open discussions with clients on the lack of diversity in Portfolio Management. As best said by Andrew Formica (CEO at Jupiter Asset Management) at the seminar ‘Addressing Barriers to Diversity in Portfolio Management’: “To make diversity sustainable in the long term, you need to spend more time on interviewing and case studies”.

PREDICTIONS
Q4 is expected to be busy given that the majority of firms are finalising next year’s budgets. Many firms are still investing in their ESG offerings in line with market trends however some firms are questioning the returns from ESG integrated funds and how far they are willing to continue to grow. With market pressure and the demand for sustainable investing ever rising we envisage firms will have to create a fully fledged ESG offering to even be eligible to get in front of investors.

We have seen a number of organisations taking the opportunity to restructure or reshape their teams with announcements from AXA Investment Management, Investec, Schroders & JP Morgan Asset Management to name a few.

In the wake of Brexit we have also seen a number of firms make redundancies or relocation to predominately move core back & middle office functions to their European subsidiaries. We predict with the Brexit deadline looming we will see firms begin to expand their front office function in preparation for the exit. Aligning to comparable UK Investment teams these are likely to contain a mixture of research, fund management and fund support individuals. It is still unclear what regulations will be put in place and to what extent firms will be required to do so but they are continuing to put contingency plans in place, again in line with Q4 2020 budgeting plans.

MOVERS & SHAKERS
State Street Global Advisors hires ex Blackrock ESG specialist, Carlo M Funk, to head its ESG Investments Strategy.

Brooks Macdonald add 6 to their Investment team.

Schroders has appointed Charles Prideaux as global head of investment amid a raft of changes at senior management level.

BRUIN News
BRUIN is delighted to have won the Deloitte Diversity & Inclusion Award at the TIARA 2019 awards and were commended by the judges for “incorporating D&I initiatives into their recruitment process, the broad range of diversity & inclusion initiatives they are involved with, and the high level of visibility in their market”.

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