Risk Management – H1 2016 Market Update – Buy Side

Written by India McPherson on 25/08/2016

Market Overview

During the first half of this year there has been an industry wide reluctance to hire, which although had a greater impact upon sell side institutions, did not leave the hedge fund and asset management space unaffected. The reasons for this hesitancy are essentially related to an overwhelming drive to cut costs amongst the large global banks and the impact of the EU referendum. These factors have had a knock on affect particularly for the large institutional investment managers. In particular asset managers or hedge funds who are headquartered outside of the UK have expressed hesitation specifically with regard to the location of some hires across Europe, although this caution has eased following the initial outcome. The recognition that many key decisions are yet to be made has led to a more relaxed approach although negotiations around passporting and how certain legislation will impact asset managers in the UK will certainly contribute to tactical decisions in the near future. In particular the impact of Brexit for directives like MiFID, AIFMD and UCITS is still yet to be seen.

Candidates who have careers embedded within the buy side are certainly not looking at alternative options at this point however there is increasing competition from disheartened bankers and strong candidates from data vendors or external analytics companies. This competition is driven by developments within the Risk and Quantitative Analytics arena which is becoming a focus for organisations striving to construct more efficient ways of analyzing data, a trend which has grasped the industry as a whole.

Market Trends

Operational Risk

Opportunities within Operational Risk have started to reflect remits seen more frequently within investment banking Front Office Control roles particularly in the larger asset management houses where Operational Risk frameworks are now embedded and control enhancements are ongoing. Over the last 2-4 years there has been a consistent focus on strengthening and growing Operational Risk teams to ensure that a robust and advanced approach is taken towards frameworks, controls and cross-functional interaction. This has involved clear development of the 3 lines of defence with substantial weight given to 2nd line teams. We are starting to see functions moving slightly beyond this model and now looking to strengthen Operational Risk within the 1st line of defence. This is primarily within the larger institutional investment managers where frameworks are generally more advanced, however even in smaller houses and hedge funds we are starting to see Ops Risk knowledge/experience amongst requirements even for market or model risk focused roles.

This increased emphasis on Operational Risk is testament to the importance of having and being able to show the strength of an organisation’s risk culture. 

Investment Risk

Throughout Q3&4 of 2015 the buy side Risk recruitment market was flooded with Investment Risk opportunities and this trend has continued well into 2016. The requirement for Investment Risk specialists within specific asset classes has become the norm and candidates with a clear product focus, dynamism and excellent programming or coding skills are in high demand. The vast majority of opportunities in this space have either been aligned to Fixed Income or Equities and are also more frequently providing candidates with opportunities to take a more strategically aligned role, becoming more involved with investment decision making processes. For roles in this category our clients are looking for individuals with strong communications skills and an element of dynamism, in order to ensure that we can deliver on this it is vital for us to meet all candidates who would hope to be considered.

Other opportunities on the increase within Investment Risk functions are more aligned to Risk Analytics and enhanced collection, analysis and presentation of data. These sort of opportunities require diversity and adaptability in terms of programming languages, software and coding in particular the need for individuals with strong skills in VBA, SQL, Matlab or Python. The key objective is to clean up data and increase efficiency, both in the way it is collected and analysed, to ensure that the Front Office is receiving information in the best way possible. Without advanced knowledge across 2 or more of these structured analytical languages it is very difficult for candidates to become the preferred option in a process for a risk analytics position.

Credit Risk

Credit Risk hiring across the asset management and hedge fund space has been relatively quiet throughout 2016 so far with very few replacement hires and minimal contract opportunities. The focus for functions that have been hiring has predominantly been within Counterparty Risk analysis specifically for NBFI and corporates. Although candidates coming from a similar organization remains the preference individuals from ratings agencies or some peer to peer lending companies are also proving successful in processes within this space.

Compensation

Similarly to the Investment Banking world, base salary and total compensation increases have been moderate compared to previous years. Within the Investment Risk space however increases have been reflective of the high demand and candidates have been able to negotiate above average increases on base salaries particularly where roles have been hard to fill or where the candidate is quite clearly the preferred option. As has traditionally been the case, candidates who can display a developed and diversified skill set, strong communication skills and a strategic mind set are those who are able to negotiate the highest increases. Overall budgetary restraints are tighter across all disciplines and organisations are far less willing to stretch budgets unless the skill set sought is proven to be scarce. From a candidate’s perspective there is an increased focus on value added to the CV and opportunity for progression and we are seeing individuals becoming increasingly flexible on the top end of salary expectations.

Conclusion

Despite the industry wide uncertainty Risk Management is becoming an area with real diversity in the number and type of opportunity available to candidates. As the buy side continues to be more accepting of candidates who have traditionally operated outside of this arena, competition for roles which offer genuine opportunities for creativity, status and involvement with investment decisions is increasing. As a result it is now becoming possible for individuals with a diverse and unique skill set to be successful, further increasing the importance on us to understand candidate and client needs.

 

For a further conversation, confidential consultation or assistance sourcing candidates please contact India McPherson on 0203 301 8712 or alternatively please email india.mcpherson@blackswangroup.com

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