Listed asset managers, which hit record revenues and assets under management in the first quarter of 2021, are increasing their overall headcount and compensation, according to Casey Quirk, part of Deloitte. The hiring and pay rises come even as global economies have experienced uneven recoveries from the Covid-19 pandemic.
Asset managers are taking advantage of the increase in the value of the assets they manage as well as the rise in their own stock prices. Managers' fortunes are strongly tied to the performance of global markets.
According to Casey Quirk’s analysis of 26 listed asset managers, representing a total of $20 trillion in assets under management, headcount increased at an annualized rate of six percent for traditional firms and eight percent for alternative firms from 2016 to 2020. In the first quarter of this year, compensation rose two percent and operating costs decreased, said Casey Quirk.
The analysis also estimates that around 10 percent of managers are asking employees to return to the office and less than five percent are implementing a virtual model — the rest have pending plans for a hybrid situation.
“Asset management is a relationship business, and firms want to maintain their strong cultures and connectivity with clients and employees,” said Scott Gockowski, senior manager at Casey Quirk. “At the same time, a remote workforce can help firms broaden their talent pools.”
The strong trends in hiring and compensation are driven largely by year-over-year increases in AUM, revenue, and margins. The strategy consultant's analysis shows that revenue increased 20 percent in the first quarter, compared with the same period last year. Assets under management rose 30 percent, compared with the first quarter of 2020. Casey Quirk said the increases are particularly large as they are being compared to performance during last year's pandemic-fueled downward market spiral.
Profit margins recovered from the Covid-19 pandemic, but a “wide gap” still exists between traditional and alternative asset managers, according to the analysis.
“Asset managers are reaping the rewards of strong capital markets, with many firms increasing their hiring and compensation, even with the pandemic as the backdrop,” said Amanda Walters, a principal at the firm. “Because continued market appreciation is far from guaranteed, many managers are focused on identifying growth strategies, such as pursuing new alternative capabilities, expanding packaging options such as ETFs, and developing authentic sustainable investing processes and strategies.”
In the future, Casey Quirk expects remaining firms to announce plans about hybrid work conditions and merger and acquisition activity to increase as managers move deeper into the private markets.