Asset management is now more of a big deal at Goldman Sachs. As most investment banks look to scale back headcount, Goldman is expanding its investment management division. Would you really want to work there?
Goldman Sachs Asset Management’s (GSAM) expansion program is not a new development. A spokesperson for the bank tells us that it’s in the final stages of a recruitment spree that has seen headcount increase by 1,000 people globally across distribution, sales and marketing since 2010. Although most of the hiring is now complete, the firm will continue to hire “talented individuals” in areas with “strategic growth potential”.
According to the head of one asset management research consultancy, Goldman Sachs is the one investment bank building in this area. “Morgan Stanley isn’t hiring in anything like the numbers of Goldman, Citigroup has pulled back while Deutsche Bank has been trying to sell its asset management division for years,” he says.
Much of Morgan Stanley’s recruitment has been for its wealth management division this year, and its US adviser headcount has largely remained untouched during recent headcount reductions. Credit Suisse, meanwhile, is dismantling its asset management unit into its private bank, and UBS cut 350 jobs in its fund management arm in August last year.
Still, GSAM is a long way from its hey day, so what are the reasons for wanting to work there?
1. You will be more and more important to the future of the business
A greater proportion of the class of 2012 Goldman partners heralded from asset management – 12%, according to research by Financial News, versus 4.5% in 2010. Our own research suggests that at least 32 (or 12%) of this years’ managing directors are from the investment management division. These include Christopher Keller, head of alternative investment investor services at GSAM and Stephen Warren, global head of fixed income portfolio construction and risk management.
David Viniar, the bank’s chief financial officer, hinted at asset management’s growing importance during the bank’s Q2 results conference call: “While a challenging macro environment may translate into lower industry volumes, our focus on our clients is unwavering as the advice, execution and investment management services that we provide to our global client franchise are more highly valued in a difficult environment.”
Goldman’s investment management division is consistent, and this shouldn’t be underestimated currently. Revenues have hovered between $1.2-1.3bn throughout each quarter of 2012, and have averaged at $1.2bn for every three month period since 2007.
2. It’s pulling in some big names
Although overall numbers have remained relatively consistent, Goldman Sachs Asset Management (GSAM) has added 32 people to the FSA Register in 2012, eight of them in the last two months. According to specialist asset management headhunters its “powerful brand” draws in some big names.
Paul Trickett joined from Towers Watson to lead the bank’s global portfolio solutions team in 2010, which was considered something of a coup, so did Richard Pursglove, the former head of UK retail at Gartner. More recently, it hired Andrew “Buddy” Donohue, the former director of the Securities and Exchange Commission’s investment management division, and Malcolm Mackenzie from Aviva Investors as head of advisory sales.
“In the current climate, the majority of senior asset management professionals are looking to hang on to their job and are unwilling to consider career moves,” says Amin Rajan, managing director of asset management research firm Create. “The employer brand of Goldman Sachs still manages to attract the best and brightest.”
3. It is still hiring
Despite the fact that GSAM says it’s coming out of its recruitment spree, there are still a healthy number of job vacancies. It currently has around 70 open positions globally, predominantly in its US wealth management arm, while jobs in the UK are focused alternative investments, sales and third-party distribution.
Specialist asset management headhunters in London tell us that most of GSAM’s future hiring is likely to be focused on multi asset management and global equities.
“Any firm looking to ramp up in asset management needs three things currently – an exchange-traded funds (ETF) platform, an alternative investments capability and a total return portfolio,” adds Rajan, managing director of fund management think-tank, Create. “Goldman is well-placed for this, while other investment banks are not.”
4. Pay is not going to be as bad as you might think
While the vast majority of standalone asset managers fall into category three or four under the FSA’s remuneration code, which means they’re not susceptible to the most stringent deferral programs, investment banks (classified as tier one institutions) are subject to the full scope of requirements.
However, it’s possible that the asset management divisions of large investment banks could fall under tier three or four, meaning employees escape restrictive deferrals and clawbacks. Still, very senior employees are likely to be categorized as ‘code staff’ – key risk-takers required to defer 40-60% of their compensation over three years when it exceeds £500k – where “is management of a portfolio is capable of causing significant losses to the group”.
“Any fund manager looking towards an investment bank’s asset management division has to accept that deferral programs are likely to be more onerous,” says Richard Parkhouse, managing director of asset management compensation consultancy PRPi Consulting. “However, it’s unlikely that large investment banks will allow themselves to become uncompetitive over pay.”