Asset allocation goes tactical

Disaffection with balanced mandate funds makes ominous reading for asset allocation specialists. One headhunter says jobs in the area are evolving, as tactical asset allocation becomes the new watchword.

Earlier this week it emerged that F&C Asset Management saw funds under management fall 5% in the second quarter of 2006 as the company's clients withdrew money from its balanced mandate products.

The move is part of an ongoing trend, which has seen institutional clients favour high return funds focused on a single asset class, instead of balanced mandate funds which mitigate risk by spanning a mix of products and regions.

It doesn't bode well for asset allocation specialists, who decide how balanced mandate funds are to be split between products and regions. But headhunters say job losses in the area have already taken place. "There was huge cut back in asset allocation roles about four or five years ago, with a whole layer of people stripped out," says Rebecca Austin, head of the asset management practice at one search firm the Veni Group.

Austin says asset allocation skills are still required today, but the nature of the role is changing. "Asset managers are looking for a different skill set: rather than more traditional asset allocation roles, institutions are now looking to bring in tactical asset allocation talent."

Companies like Schroders, Merrill Lynch Investment Managers and Insight Investment already have tactical asset allocation products. Standard bearers of the new breed include Schroders' Curt Custard and Insight's Johanna Kyrklund.

Unlike traditional asset allocation specialists, Austin says tactical asset allocators need a focus on absolute rather than relative returns. The roles are more demanding and candidates need a strong understanding of derivative products as well as contemporary macroeconomic events. In return, rewards can be generous with six figure pay packages easily obtainable.