Benefits November 30, 2004

Survey: Governance is Hot, Pension Consultants are Not for Plan Sponsors

November 30, 2004 (PLANSPONSOR.com) - With regards to plan sponsors, governance and endowment CIOs are hot in 2004, while pension consultants were not, according to a Russell Reynolds survey.
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The Russell Reynolds survey also looked at seven other domestic sectors to see what was hot and what was not in 2004. Some of the highlights include:

  • In General Management, governance controls are hot, while bravado and excess are not.
  • In Alternative Investments, registered hedge funds are hot, while lack of transparency and single-star management is not.
  • With Fixed-Income Portfolio Management, European and emerging markets are hot, while municipal bond managers and investment grade corporates are not.

Bonus compensation was also up, although only moderately, according to the fifth annual Investment Management Recruiting Trends Survey. Executives only reported increases of 10% -15% in bonuses, usually given in restricted stock and deferred compensation vehicles. Compensation overall is up 10% -20% on average for executives, the survey said. Both compensation and bonuses are geared towards long-term retention and incentive rewards on the whole.

The survey also showed that the investment management industry is experiencing one of the most competitive job markets in years, with asset manager recruitment activity up 12%-15% over last year. Equity portfolio management has seen a shift in hiring practices, with the replacement hiring practice of years past being replaced by expansion hiring practices in 2004. Some of the most aggressive hiring was seen in non-US money management subsidiaries, which helped raise salaries in the industry, according to the survey.

On the other hand, mutual fund manager hiring is off from previous years, almost certainly the result of the market timing and late trading scandal that hit the industry last September.

One interesting fact: while about 50% of CEO hires came from within a company in 2004, 85% of CIO recruitments were external hires.

Many top managers were drawn away by less-regulated investment firms – such as hedge funds – in 2004, according to the survey. Recruitment in this area has focused on general management, operations and compliance as alternative investment vehicles – and more specifically, hedge funds – react to impending regulation by the Securities and Exchange Commission (SEC). However, the survey noted that some hedge fund executives, noting their inability to satisfy continuing investor demands for above-par returns, are moving back to the buy-side.

Russell Reynolds ( www.russellreynolds.com ) is a global executive recruiting firm.

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