Survey: Fund Managers Aim to Increase Headcount Despite Dire Economic Forecast

(August 18, 2011) — Despite a slow market recovery, 61% of US money management executives surveyed by KPMG are looking to hire over the next year.

In a survey conducted in May and June, just less than half of the 100 respondents predicted an incremental 1% to 3% increase in staff, even though they’re not expecting a “complete” economic recovery for more than two years.

The survey showed that regulatory and legislative factors are largely to blame for the slightly negative economic outlook among fund managers. “The executives told us that the combined impact of the uncertain regulatory and constricted economic environment is significantly inhibiting growth as they try to determine what moves they will need to make to maintain their competitive edge,” said Dave Seymour, head of KPMG’s Investment Management practice, in a statement. “The good news is that they are putting cash into play to improve their infrastructure and to prepare for future business needs,” he said.

Meanwhile, 75% of money management executives surveyed said their firms had significant cash on their balance sheets. About 25% of respondents said they already were investing that cash and another quarter said they expect to begin investing by the first quarter of 2012, with technology, strategic acquisitions and expansion into new markets ranking as leading targets for those investments. “Information technology is among the most important areas for these executives right now because system platform upgrades will be required for many firms to maintain their competitive advantages in addition to meeting new regulatory requirements, such as cost basis reporting, FATCA (Foreign Account Tax Compliance Act), and certain components of Dodd Frank,” Seymour added.

Additionally, the survey noted that transparency and relationships between asset managers and investors are perceived to be improving. More than half (54 %) of the executives surveyed said that transparency has improved between investment managers and investors since the financial crisis, while 38% have seen no real change. Nine percent said it is too early to tell.

When asked to identify what actions they would need to take to comply with regulatory changes, 68% identified improving existing internal policies and procedures, 63% pointed to strengthening information technology platforms and enabling applications, 59% said strengthening risk management processes, 46% identified developing a strong internal training program for staff, and 40% chose enhancing financial reporting procedures.

A recent Bank of America Merrill Lynch Survey of Fund Managers echos findings by KPMG over the future of the US economy. The BofA survey showed that manager optimism about the global economy has declined significantly in August. The firm’s latest monthly study — conducted August 5-11 in a survey of 244 fund managers overseeing $718 billion — revealed that a net 13% of managers believe the global economy will experience weaker growth compared with a net 19% in July who were confident the economy would improve.

“Flows out of equities into cash have reached capitulation levels, especially in the US but it’s significant that a revival in optimism towards China has survived the global correction,” said Michael Hartnett, chief Global Equity strategist at BofA Merrill Lynch Global Research, in a statement. “Investors are waiting for convincing, coordinated action from governments before recommitting their cash to equities,” said the firm’s Gary Baker.