You may have noticed recently that sovereign wealth funds in the Middle East have been hiring a lot more in-house investment staff recently. You may have also questioned how, as government bodies able (but unwilling) to pay big salaries or bonuses, they’ve succeeded in attracting the requisite talent.
In the current climate, perhaps, the questions are less relevant – they’re hiring, other firms are firing and therefore it’s natural that the more stable option of a SWF would appeal.
However, according to new research by Stanford University’s Ashby Monk and Jagdeep Singh Bachher from Alberta Investment Management, they still face a lot of challenges.
The hard sell of frontier markets
The study isn’t restricted to Gulf SWFs, but it highlights that salaries often don’t compete with the private sector; most of these funds are based in ‘frontier’ locations which makes them less attractive to financial sector workers; any new hires also need knowledge of these emerging markets (another barrier) and they’re looking for direct ‘investors’, rather than fund managers, and these are harder to find.
So, where are they looking? Basically, they can discount “mid-career professionals that command high salaries in the private sector” and instead target at “the green, the grey and the grounded”.
Essentially, this means that they’re snaring those at the beginning of their career with the promise of rapid progression and multiple opportunities, people with over 15 years’ experience who have made their money and want to escape the rat race and professionals who are tied to the region where the SWF is based.
Targeting candidates early, and very late
This may seem reasonably simply, but it certainly seems to be a tactic employed by the Abu Dhabi Investment Authority. It tracks talented Emiratis at school and sponsors them through university before encouraging them into their training programme and also hires very senior people with experience in international companies (usually in the Middle East) for key positions.
See Eduardo Favrin, its head of Latin America hired in March, who has 24 years’ experience in asset management, most recently at HSBC; Pascal Duhamel, its head of European real estate investments, who has 22 years’ experience and pedigree that included Morgan Stanley and Benjamin Weston – a 30 year veteran latterly at Merrill Lynch Alternative Investments – who joined as global head of alternative investments.
The research is published at a time when more financial services firms are cutting headcount at a rapid rate in New York, London and now Asia. Attracting talent in the future might not be such a problem.