Sovereign Funds on a Talent Hunt

Sovereign wealth funds are raising pay and turning to headhunters as they compete for talent with Western banks and private equity firms.

"Everyone uses headhunters - it is all based on price," an unnamed senior staffer at the Abu Dhabi Investment Authority told the Financial Times.

Often organized as government agencies, sovereign funds still pay less than investment banks in most cases. However, the funds are boosting compensation as they ramp up staffing to manage their fast-growing portfolios. "The use of headhunters represents a shift in strategy as many of the SWFs change emphasis from placing most of their money with outside managers to managing it directly themselves," the FT says. Dubai International Capital, for example, "has 75 professionals from more than 20 nationalities, and expects to raise this by 50 percent in 2008." An unnamed Middle East SWF reportedly has headhunters looking for a new head of private equity.

China Investment Corp. has run one of the more visible recruiting campaigns among SWFs. That $200 billion fund, launched just last September, reportedly took out ads in the Economist, the China Daily, and a number of other publications, along with posting 24 openings on its own recruitment Web site. CIC advertised for fixed-income investment managers for Europe, North America and emerging markets, senior researchers, analysts and public relations managers, according to the FT, which says the ads "were clearly aimed at native Chinese with extensive experience in overseas markets."

The private equity sector appears to be a special target for SWFs' recruiting efforts. To be sure, salary and bonus - when there is a Western-style performance bonus - remain well shy of the lofty amounts PE stars get. But a professional who joins his nation's SWF gains contacts and exposure that can form an invaluable career launch pad.

"For a Chinese citizen returning from overseas, the opportunity to work for such an important, high-profile, ministry-level government department is far more valuable than any bonus," says the FT. "Furthermore, Wall Street and London are filled with talented Chinese expatriates who would jump at a chance to work for CIC, if only for the contacts to be made in government and business."

Along with staff, the funds also seek high-profile Western experts for their advisory boards. John Thornton, a former co-chief operating officer at Goldman Sachs, recently joined the advisory board of Singapore's Temasek fund. CIC is rumored to be trying to land former U.S. Fed chief Alan Greenspan as an advisor.