Young investment professionals venture out in search of greener pastures

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Asset managers struggle to retain young professionals, especially analysts, who are more likely to leave in search of better career opportunities than more experienced professionals.

That’s according to a survey by discretionary fund manager INN8 Invest.

“Analysts tend to leave if it helps them move to the next level, which shows why around 35% were likely to have left for better growth opportunities,” the research says. “Most asset management companies prefer to train analysts, many straight out of college, to portfolio managers.”

INN8 Invest, with R35 billion under management, was formerly part of Stanlib’s multi-manager business.

Some smaller independent firms attribute some of their investment team turnover to poaching by larger asset managers.

Boutiques feel they cannot compete on compensation and many young professionals want to be associated with established brands. However, this could be a perception, since store managers can provide good opportunities for staff to improve their skills and gain a wealth of experience.

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According to the study, some 63% of asset management firms surveyed said their compensation structures were not responsible for exits.

Only 9% of survey respondents said compensation, including stock ownership, was perhaps the reason staff left.

Short-term incentives — like a market-tied salary — are more important for young investment professionals, while longer-term ownership issues hamper senior-level stability.

Emigration

Most of the reasons given by companies to justify the departure of people were emigration, moving to another city, leaving university or to pursue studies, setting up a business or health reasons. The latter together represent 69% of departures.

INN8 Invest says the survey aims to measure the stability of fund management teams, which can impact returns.

Companies don’t take this turnover in bed.

“To improve retention, asset managers put in place clear development paths early in an individual’s career and had analysts manage paper portfolios to enable capacity accumulation and transfer. of skills within the industry,” the research says.

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Other retention measures include improving succession planning and business continuity, as well as reducing the risk of having a single decision maker. Among the management companies surveyed, 78% follow a co-decision process. Some companies have implemented incentives to give employees meaningful responsibility, while paying for training, education, and mentorship programs.

Appointments over the past five years in the industry have targeted previously disadvantaged people, according to the survey.

The challenge for some managers, however, has been finding diverse people. The survey shows the industry has seen notable personnel changes over the past five years, with 59% of managers undergoing some form of restructuring, leading to changes in investment teams and causing some instability.

INN8 Invest’s survey also revealed that senior departures have been replaced by junior appointments, in which, for example, a portfolio manager is replaced by two analysts. This means that while investment teams have grown by 68% over the past five years, the collective investment experience across teams has shrunk.

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