In the world of institutional asset owners—especially public pension funds, endowments and sovereign wealth funds—good jobs and interesting careers are plentiful. However, you might have to be willing to take a pay cut or live a little off the beaten path.
There are about 300 state-administered public pension plans in the United States, and about 5,000 public sector and locally administered plans in total, according to Public Plans Data. These institutions, especially smaller and medium-sized public pension funds, often cannot compete with the salaries found on Wall Street or in other financial centers. Many of these funds are also located outside of the large metropolitan areas in which financial professionals are abundant.
“Attracting and retaining talent is a major concern, particularly in those categories where the private sector completely outpaces,” says Hank Kim, executive director of the National Conference on Public Employee Retirement Systems. “[At] some pensions plans, their compensation is closer to what investment staff might want. There are some others that aren’t that close, and maybe their compensation is tied to some regulatory or statutory limit at the state or local level.”
But those allocators are still attracting plenty of talent. Some candidates seek work-life balance; others are driven by the mission of the institutions. Some allocators give junior staff responsibilities they may not have in a traditional analyst program.
Want the latest institutional investment industry?news and insights? Sign up for CIO newsletters. ?
Sidney Baumgartner, a principal in Korn Ferry’s global asset management and alternatives practice, says that younger generations, like Generation Z, are increasingly attracted to mission-driven organizations.
“A lot of these pension plans, endowments and foundations are mission-driven organizations, whatever that mission might be, and that is a recruiting tool, especially if you look at younger generations,” Baumgartner says. “If you’re looking at Gen Z hires who might be in their mid-20s, who are just getting started, that is a really important factor for them as they consider a career.”
At the Alaska Permanent Fund Corp. ($81.5 billion AUM), employees are often driven by a desire to invest the state’s oil revenues for the benefit of Alaskans.
“There’s an idealism, an interest in being part of something that’s more meaningful, rather than strictly making money, like the ‘Wolf of Wall Street’-type depiction of just making money at any expense,” says Deven Mitchell, the Alaska Permanent Fund’s CEO. “I do think that’s a common driver for our staff.”
Asset owners may also hire professionals and give them opportunities in new asset classes, Baumgartner says. Someone on the public markets side could be moved into a private market seat, something that has been happening more often of late, especially with increased interest in private credit and the increasing demand for private credit professionals.
“Public pension plans might take someone from a corporate credit background, a [collateralized loan obligation] background or a leveraged loan background and move them into a private credit seat,” Baumgartner says. This is most common for mid-level hires, rather than for managing directors.
Location Plays a Role
It can be hard to convince top talent to leave finance hubs like New York, Chicago, Boston, San Francisco or Toronto, due to their concentration of high-paying financial and investment roles.
“The challenge is that public pension plans, specifically, they’re not as competitive from a [compensation] standpoint, and they’re oftentimes in not-necessarily-desirable places for an investment person to be in,” Baumgartner says.
One way firms attract talent is by hiring people who were once local or are, in the case of a college or university endowment, an alumnus of that institution. For example, Mark Baumgartner—no relation to Sidney—returned to his alma mater at the University of Florida to serve as CEO and CIO of its endowment after a lengthy career in New York, including serving as CIO of the Dalio family office.
“Who would have gone to [Gainesville, Florida], right? Well, Mark Baumgartner did—he was an alum from there. Florida’s nice; he grew up there. So all of a sudden, the pieces fall together,” says executive recruiter George Wilbanks, the founder of and managing partner in search firm Wilbanks Partners. “There was the perfect fit.”
The University of Notre Dame Investment Office is one of many endowments known for recruiting alumni to manage its investments: Tim Dolezal, its current CIO, is a third-generation “Domer.” His predecessor, Mike Donovan, is also an alumnus, as is his predecessor, Scott Malpass.
But for some, a lower cost of living in a smaller metropolitan area can offset any potential salary reduction from relocation, especially as the cost of living has increased significantly in cities like New York.
“You do make more money if you live in New York City, if you live in San Francisco, especially if you work for a private organization and not a public one,” Korn Ferry’s Sidney Baumgartner says. “But you can basically cut your cost of living in half if you move to Columbus, Ohio, or even more than that.”
“Lovely places to work—Buffalo, Cleveland, Charlotte, Jacksonville, you name it—but it’s extremely difficult to come up with a budget to pay someone competitively and relocate them there,” Wilbanks says of funds with less than $5 billion in assets.
Smaller institutions, Wilbanks says, are increasingly moving their assets to outsourced CIO providers. On the other hand, large funds of at least $50 billion can pay competitively and are increasingly bringing their investment teams in-house.
How about Alaska? Mitchell says many of the APFC’s employees are attracted to the outdoors. While speaking with CIO, Mitchell, who was at a company off-site in the town of Sitka, Alaska, stepped outside to show off the scenic surroundings.
“These types of scenes, they’re not unusual when we live in a place like Alaska, but I think that’s what drives a lot of people to want to venture for a period of their life to contribute to something that’s providing for every one of the people that lives in this town and every other town like it in the state of Alaska,” Mitchell says.
Mitchell also says that while many of APFC’s staff of nearly 70 hail from Alaska, its 30-person strong investment team is more geographically diverse.
More Responsibilities for Junior Staff
To develop employees, many pension funds are giving a wider range of responsibilities to their junior staff, instead of pigeonholing them into typical analyst or associate duties. Often, this is done out of necessity, due to how lean asset-owner investment teams can be.
“A more junior person might move into a seat where they’re doing a role of a much more senior person, per title: You might be an associate or a junior VP on the team, but in some cases, you’re acting as [a managing director],” Korn Ferry’s Baumgartner says. “You’re playing a part in portfolio construction, in leading manager relationships, in covering an entire asset class, and so that’s something you wouldn’t find at a bank. Certainty nothing you would find at a blue-chip investment firm, where associates are still doing the grunt work.”
The size of APFC’s team means that junior staff are able to realize promotions and take on additional responsibilities that might be difficult to obtain at a larger organization.
“As an investment staff, you’re not No. 6 on a bench, you’re maybe No. 2 on a bench, and so you get more direct deployment opportunities than you would at a fund that you might find in the private sector or competitors we look at in the public space,” Mitchell says.
Other Benefits
Work-life-balance is top of mind among many employees, especially younger professionals.
“If you make the move to the allocator world, whether you come from the sell side or you come from another buy-side firm, that is usually a step up in terms of work-life balance, where you’re going from an 80-hour week to a 50-hour week,” Sidney Baumgartner says.
One large public pension plan in the U.S. also offers its employees a defined benefit pension after five years of service, on top of a 401(k) plan. Sidney Baumgartner says younger generations are thinking more about their retirement accounts.
“That’s something that’s also becoming more of a topic with this newer generation,” Sidney Baumgartner says. “They’re thinking about this type of stuff: They’re thinking about their 401(k)s and their portfolio.”
Tags: Alaska Permanent Fund Corporation, Deven Mitchell, George Wilbanks, Hank Kim, Korn Ferry, NCPERS, recruiting, Sidney Baumgartner, Wilbanks Partners
#Asset #Owners #Attracting #Talent #Issues