While investment and retail banks are seeking ways to pare back technology costs and move jobs to cheaper locations, hedge funds and asset managers are facing rising IT budgets and a skills shortage of talented developers.
Like investment banks, the buy-side has been hit with a series of new regulations, which is weighing heavy on the technology teams. The Alternative Investment Fund Management Directive (AIFMD), Foreign Account Tax Compliance Act (FACTA) and the Retail Distribution Review (RDR) are all prompting the need to invest in technology among fund managers and hedge funds, but they’re also going ahead with more innovative projects, according to a survey of 80 buy-side chief technology officers by Hays Finance Technology.
“Despite the fact that most chief technology officers are concerned with the IT costs associated with increased regulation, the majority of the hiring is driven by product innovation in the front office,” said Nick Finlay, head of investment management at Hays Finance Technology. “Institutional asset managers are definitely in growth mode currently.”
Offshoring isn’t a big concern for fund managers and hedge funds, with chief technology officers instead focused on the skills shortages and the need to attract talent. 54% of those responding to the survey said they were intending to increase headcount, and 42% of those expect to see a rise in employee numbers of more than 10%.
As the chart below shows, the largest skills shortage is in the development space. Finlay says that the biggest demand is for SQL developers as fund managers and hedge funds get to grips with their data.
Many technologists from the sell-side are currently gravitating across to hedge funds and asset managers for greater job security, according to Finlay. It also helps that hedge funds are more likely to pay larger bonuses, typically between 30-60% of base salary. Institutional fund managers are more likely to award 15-30% of base to high-performing technologists, said Finlay.