Asset and liability management: the prospects ahead

Citation

Walters, R. (2002), "Asset and liability management: the prospects ahead", Balance Sheet, Vol. 10 No. 3. https://doi.org/10.1108/bs.2002.26510cad.001

Asset and liability management: the prospects ahead

Robert Walters

Robert Walters is a leading global recruitment consultant, specialising in, amongst other areas of financial services, asset and liability management and related fields.

Keywords: Assets, Management, Treasury, Risk, Equity, Analysis, Financial services

Abstract This survey shows how the market for senior management in the Balance Sheet world is evolving and changing.

London – Treasury

Market overview

Due to an excess of supply of good quality candidates, salary levels will remain relatively stable over the next six months although exceptional candidates will still demand a premium. Treasury as a sector has not been as badly affected as other areas of the market due to the relatively small teams with defined roles and responsibilities. Coupled with this, companies that are in financial difficulties often depend heavily on the treasury function which raises its profile within the organisation.

We are still seeing a high demand for recently qualified accountants and cash managers. It is interesting to note that more newly qualified accountants are opting for the stability and a more defined career path offered by a corporate rather than choosing the investment banking option. More and more candidates with banking backgrounds are trying to make the transition to a corporate environment.

Most organisations are looking for professional qualifications and many companies are now looking at the Association of Corporate Treasurers (ACT) qualification as a standard, i.e. either they will be ACT qualified or willing to take the exams on coming on board. We have noticed that many employers are not as ready to hire MBAs in this market, preferring to look for practical sector experience as hard proof that the prospective employee has both the aptitude and theoretical knowledge from their studies, as well as a good understanding of the sector or industry in which they want to work. At the senior end of the market there is a move away from the straightforward high base salary to a lower base linked to an improved package and benefits rewarding loyalty to the company. There is also a premium for more commercially focused managers as opposed to their technically minded colleagues, recognising the need for treasury to add value across the business.

"A premium for more commercially focused managers"

Other noticeable trends in corporates seem to suggest further consolidation within the market, an increase in the outsourcing of treasury departments and the continued influx of international candidates who wish to work for corporate treasuries in the UK.

Treasury salaries

Details are shown in Table I.

London – banking and financial services

The senior banking market slowed dramatically after the events of 11 September. For the final quarter of 2001, recruitment was, in the main, put on hold for the rest of the year. The year 2002 has seen an uplift in demand for senior, professional candidates. Although the investment banks are still being cautious with their recruitment needs, there is still demand for core controlling roles and projects are starting to come back on line.

"Demand for strong energy derivatives trading knowledge"

We are experiencing particular demand in the derivatives markets – particularly within credit and equities. Internal audit and high level MIS roles are also areas of movement.

Following the collapse of Enron, many top tier investment banks have increased their energy trading activity to capitalise on exposed markets and this has led to a demand for strong energy derivative trading knowledge.

Salaries on the whole have remained stable. In certain specialist areas, such as credit derivatives, an experienced candidate could command a significant salary; however, this is not the case across all markets. There is optimism for 2002, with market activity increasing and confidence growing. There are still many excellent opportunities for candidates with strong academics, relevant experience and a desire to further a career in banking.

London – asset/investment management and global custody

Market overview

The investment management industry has had a difficult and somewhat interesting year in 2001/2002. A global economic slowdown coupled with increased volatility in financial markets and the continued emergence of hedge funds and boutique investment firms has meant that the asset management sector has undergone a significant amount of change.

However, from a recruitment perspective and relative to other sectors, the asset management industry has performed relatively strongly. The emergence of boutiques as well as hedge funds has ensured that there has been continued demand for high calibre individuals across a variety of roles including front office, research, strategy, product and business development. Also, institutions are starting to focus more on the retail end of the marketplace and as a result require appropriate skills to break into it. From a candidate's perspective, we have continued to see strong interest from high calibre individuals seeking to join the industry from other sectors. Candidates realise the strong growth potential that the investment sector has and want to establish a career in it. The industry is also perceived to be dynamic and diverse which is also a major attraction. From an experienced candidate's perspective, there has been a lot of "company hopping" as firms jockey for new business, re-focus on new markets, are affected by bad performance and new entrants emerge.

"Credit analysts' profile has risen considerably"

Salaries across the industry have fluctuated at the top end of the range as "star" names have been lured to different employers. This occurs because existing firms want to raise their profile, are looking for increased performance or to attract funds or launch new products. New entrants looking to establish themselves have also attracted high calibre individuals. For other roles such as strategy, research, new product development and business development, salaries have also remained strong as these roles are seen as crucial to the success of the business. From an employer's perspective, a variety of skills are sought when looking to employ high calibre individuals. Institutions are seeking strong academics with maths, science, engineering and accounting backgrounds preferred. Further qualifications such as PHDs, Masters of Finance and MBAs are also looked upon highly. The demand for candidates who have the ability to speak a number of languages is also increasing amongst potential employers.

Salaries – London

Details are shown in Table II.

London – banking operations

Market overview

In the last two quarters of 2001 and in Q1 2002 the market has seen an increase in demand for fixed income and derivatives candidates, whilst equities has continued to fluctuate. All areas of operations are still requiring strong, experienced candidates in settlements, corporate actions/dividends and trade support. Candidates with languages or overseas experience are in particular demand throughout the City. After the downturn in the market towards the end of 2001, many of the City's institutions are experiencing an upturn in recruitment levels.

Salaries – London

Details are shown in Table III.

London – credit and market risk

The credit and market risk division specialises in sourcing market and credit risk management professionals and quantitative analysts from graduate to director level. These positions vary from front facing to middle office risk control roles. The profiles and skills of candidates lend themselves to positions in/as:

• •

  Credit analysts (all markets and sectors).

• •

  Credit risk managers.

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  Risk methodology.

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  Group risk.

• •

  Heads of risk.

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  Market risk analysis (all asset classes).

• •

  Risk control.

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  Pricing.

• •

  Structuring and origination.

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  Quantitative modelling and verification.

• •

  Risk systems.

Market overview

There has been an increase in demand, by both financial institutions and regulatory bodies alike, for more accurate methods of identifying and measuring risk exposures. The banks are coming to terms with the effects of the new Basel capital adequacy rules on vehicles that banks use to obtain off-balance sheet of treatment of assets.

"Strengthen the compliance function"

The credit analysts' profile has risen considerably during recent events and in institutional ratings. There is a general trend towards banks becoming self-reliant on scoring assessments and implementing more advanced capital efficient methodologies.

There has been a lot achieved with regards to automating the risk capture of portfolios, improved methodology and systems to take care of the bulk of trading. There is, however, much complex trading and large exposures which still need manual attention and for this reason we have experienced demand for more quantitative risk managers. These are typically equipped with MScs and PhDs in scientific-based subjects.

Candidates with strong mathematical flair and a foundation in complex banking products often find themselves in commanding positions just two-to-three years into a risk management career, with opportunities in research, trading and origination available. Since a good risk manager is integral to the capital available, they therefore have a very direct input on potential returns. Banks realise that hiring the best in the market is essential and are willing to pay a premium.

Salaries – London

Details are shown in Table IV.

London – equity analysis

The equity analysis division recruits into both the "sell" (investment banking/stockbroking) and "buy" (fund management) side of equity analysis from graduate through to director level; however, the majority of recruitment tends to focus on the professionally qualified candidate who is now looking for an entry into banking.

Market overview

Recruitment activity within equity analysis, as always, has mirrored the performance of the financial markets. The value of most equities has continued to drop due to the uncertain economic outlook, coupled with the lack of corporate activity, IPO and M&A activity, therefore recruitment has not been the number one priority. Many banks at the start of the year 2001 had offered guaranteed packages to analysts and this has bitten hard into bonus pools. The brokerages have now got to deal with increasing costs and diminishing returns, thus the recruitment for these positions is harder to justify. Many have reached the conclusion that "battening down the hatches and weathering the storm" is the most effective course of action.

The legacy positions around at the start of the year 2001 were mainly looking at the more traditional sectors, with some banks feeling they may have over recruited during the TMT boom. The downturn has also been used as an opportunity for banks to remove "dead wood" from their research functions.

Until the outlook for the world economy improves we do not see equity analysis being a boom recruitment area and feel that there will be no significant change until the last quarter of 2002.

Salaries – London

Details are shown in Table V.

London – insurance

Market overview

Permanent

With a continued hardening of the market, the industry has shown some comeback despite continued mergers and acquisitions and companies going into runoff. A number of insurance firms across all categories are continuing to strengthen. The result is a strong need for experienced and progressive candidates in the financial management of these firms. Salaries rose across the majority of positions earlier in the year but these have now settled and we do not anticipate any major increase due to resistance from companies. With pressure inflicted on the banking and asset management sectors due to the equities downturn, we have seen an increase in people showing interest in the sector for a more stable career move. This has not changed the industry's requirement for insurance experience, and as usual those with London market accounting experience command a premium.

Contract

The contract market continues to offer contractors with industry specific experience a variety of opportunities although there are fewer new project-based roles. We have also seen many clients seeking contract staff who want the flexibility to offer permanent opportunities after the immediate business needs have been met.

There continues to be a shortage of candidates with specialist industry experience and as a result those candidates are still attracting premium rates within the industry. These rates, however, have not changed dramatically since the end of 2001, and generally an upturn in the market is expected.

Salaries – London

Details are shown in Table VI.

London – compliance

Market overview

In light of the present financial markets, recruitment trends in compliance over the past year have remained fairly constant.

The statutory force of the new regime has led many institutions to strengthen the compliance function (especially central compliance) in order to cover the growing range of issues, from the interpretation of regulations and laws overseas to data protection.

With the advent of N2, general compliance became a focal point for financial institutions. As such, many of these institutions have now adequately equipped themselves to cover general regulatory issues. Attention has now turned back to specific business support, e.g. equities and fixed Income, and also to dedicated anti-money laundering positions, where individuals can rise through the ranks to become Money Laundering Reporting Officer (MLRO).

The current market conditions are still relatively ideal for contracting, and organisations are taking full advantage of the headcount flexibility and low costs associated with short-term assignments.

For compliance, base salaries have increased at a slightly lower rate than the equivalent period last year, although areas such as derivatives have seen a marked increase, where experienced candidates can command a premium base salary rate.

Salaries – London

Details are shown in Table VII.

For more information please contact Marisa Kacary on +44 020 7509 8112 or e-mail her on marisa.kacasry@robertwalters.com www.robertwalters.com