The outlook for buy-side hiring on Wall Street in 2017

January 5, 2017 | eFinancial Careers

We’ve given our predictions for sell-side recruitment on Wall Street in 2017, but what about the buy-side? Here’s what recruiters and industry insiders think.

Data scientists are in high demand

The biggest area where Reshma Ketkar, director and head of the long-only investment professionals recruiting practice at Glocap Search, is seeing demand on the buy side is for data scientists.

“We are seeing this demand across a number of different client types, including traditional investment managers, hedge funds, quant funds, fintech firms and big and small technology firms,” she said. “Data scientists make sense of insights found in big data and can use it to make better decisions across a wide variety of disciples.”

Pete Cherecwich, the head of global fund services and the Americas institutional business at Northern Trust, agrees. He believes that data will absolutely become the critical area of focus this year and beyond, both for service providers and asset managers.

“From my perspective, anyone who has an educational background in data analytics or a subject area such as engineering or math that leads to that kind of role will be well-placed,” Cherecwich said. “As the industry becomes more automated, it’s all about understanding all of the data in the warehouse that is available to you and being able to make business decisions off of it.

Buy-side firms want to hire people who understand the math behind all of the data analytics using complex algorithms and can come up with new ways of looking at data to generate alpha.

“You can teach people how the market works, but can they look at data, come up with a hypothesis, look at the structure behind that and test it?” Cherecwich said. “If you can come up with your own theories and generate alpha, you’ll be in demand.”

Cost-cutting to hit investment professionals?

In asset management, the hiring of more portfolio managers and analysts last year needs to be paying off by now, said to Carol Hartman, managing partner in the North American financial services practice at DHR International.

“If those investments are not paying off with AUM growing and margins improving, then you will see retrenchment on those platforms,” she said. “It may be at the expense of products and services to clients depending on the deals that were made.”

The vast majority of the 10,000-plus hedge funds have had another disappointing year of performance, and continue to struggle to justify the classic management and performance fee structures.

Duncan Hiller, director of Paragon Alpha, a recruitment firm that specializes in hedge fund portfolio managers, said he has seen some real winners emerging in the last quarter of 2016.

He said his firm is seeing renewed demand for PMs in Q1 2017 for quantitative expertise. Portfolio managers with the all-important track record are in very high demand, across the spectrum from high-frequency and intra-day to multi-day and beyond, Hiller said.

“The established firms and platforms have been joined by very well-funded start-ups and more nascent funds, meaning there is a real opportunity for individuals and teams to find a very active market for their talents,” he said.

Hillier says that after a tough start to the year, some macro hedge funds have benefited considerably from large movements already in interest rates and currencies, and this is likely to continue in 2017.

And, with the high number of hedge fund closures in 2016, this presents opportunities for others.

“With relatively low performance at big name multi-strategy hedge funds, we predict some of the new startups with CIOs rolled out of top-tier funds will have an opportunity to build assets and talent through 2017 given the right infrastructure, risk controls and a few quarters of positive performance as investors look to reap the benefits of new market opportunities,” Hiller said.

Sell-side research analysts moving to the buy side

With investment banks and sell-side research firms in secular decline, there is an oversupply of sell-side research analysts. Typically, these analysts would be a subset of the candidate pool for buy-side research analyst positions within traditional asset managers.

“The effects on compensation for sell-side equity and credit research analysts are still to be determined, but we predict decreased levels of compensation with excess supply,” Ketkar said. “The big question will be whether buy-side asset management firms decide to hire more sell-side analysts without an investment track record, or if these sell-siders need to find a new home.”

Trump bump?

The incoming Trump administration has talked about ramping up infrastructure projects such as roads, tunnels and bridges, which is a possible boost for the buy-side, including private equity and real estate funds, as more capital is invested back into the markets, according to Paul Webster, managing director and the head of North America at Page Executive.

“The buy side saw a slow year last year, but we do expect more hiring activity this year,” he said. “That includes PE, long-only asset managers and hedge funds. The banks have been lending less money as they are skittish about committing large amounts of capital, which has had a knock-on effect on the buy side, as some firms step in to fill the void.”

Jerry Battipaglia, managing director of the financial services division at the Execu|Search Group, shares that outlook. More specifically, buy-side firms will be looking to hire experienced investor relations and business development professionals, Battipaglia said. In addition, quantitative analysis specialists have been in more demand over the past 12 months.

“Machine learning and quant analysts have been on the rise, as firms are looking to be on the forefront of innovation,” he said.

Automation may be a job-killer, but it also opens up opportunities

As automation has come to dominate the asset management industry more and more over the last 20 years, there are fewer people who understand the full end-to-end processes and infrastructure at any given firm.

“The career advice I give to people now is to learn how the plumbing works in the financial services industry,” Cherecwich said. “Plenty of people know how their one piece of the puzzle works, but very few know how it works in the end-to-end process.

“Even consultants are having trouble finding such people, so that is hugely valuable, because as automation has increased, that knowledge has gone away,” he said. “I have 4,500 people working for me, and while we talk about automation, there is still plenty of work.

“It comes down to people who are hard workers, smart and analytical – we do have roles that you need to be trained in accounting, but we also have roles that you don’t need a finance background. If you have the analytical capabilities, a liberal arts degree is fine – you can still come up from the bottom and learn to master the job over time.”