UK & Europe:

As has been well documented through Farrell Associates’ LinkedIn activity, there has been the beginning of a bounce back in hiring by listed asset managers and asset owners. As the macro-economic picture improved at the end of 2023 and interest rate growth started to slow, there has been increased hiring. But it has felt like it is long asked for headcount to help with heavy lifting around stewardship, and also regulatory obligations, rather than to support new product growth. A lot of this hiring has been at the junior end (5-10 years), and we have seen very little hiring linked to product or strategic growth.  
The one area that has seen ‘new’ hires has been natural capital/biodiversity. Firms are up to speed with their climate policy, and now attention is turning to biodiversity as a natural extension of that. The hiring has been around developing strategy and writing policy. Like all new hires, there is not an obvious candidate pool, particularly for the innovators who are first to hire. We have found success in finding the talent who have built climate workstreams, and who have an interest in biodiversity, and who are looking for their next move. Otherwise, you might be asking for someone to move laterally into the same role (which the best people don’t often want to do).

We are seeing a clear bifurcation between active and passive managers. Some active managers are struggling to differentiate their products and raise assets, all while complying with stringent new regulatory measures (much needed). This means there has not been the product growth of 2020 and 2021, meaning that there is a lack of hiring to support this growth. Meanwhile passive managers are posting positive inflows and are quietly building their stewardship teams.
As a direct result of the quieter hiring market, we think that salaries (please reach out if you want more detail) have most definitely plateaued and have most likely gone into reverse.  
Our outlook for Q2 and beyond is positive, because we think (hope) that the macroeconomic picture will continue to improve, and it will just take time for the bigger firms to catch up, release the purse strings, and then we will have the hiring merry-go-round again. 

US:

In 2021 the US as a market made up 70% of Farrell Associates’ revenue, but by 2023, this was down to 10%. We were over-exposed to medium and large US asset managers, who we just enjoyed recruiting for, and we were maybe a bit slow to react to the political pushback. 
We don’t need to talk about that as we all know what happened there, but are we now in a post-pushback phase, or at least the beginning of it? 

Anecdotally, we are receiving more outreach from American asset managers, and companies that orbit the industry, than at any time since April 2022. We think that this is down to the following factors: 

1 – regulatory alignment. Whether it is new SEC regs, or whether firms are choosing to follow SFDR for best practice, there is some clarity now around what will or won’t get you sued. This is perhaps allowing some certainty over what firms can and cannot market and do in practice. 

2 – climate transition. Whether or not firms are excluding names for ESG risk purposes, the majority of  our clients’ end customers accept climate change as an asset value risk, and any real growth in sustainable finance is focused on the Inflation Reduction Act (IRA). Most firms are trying to figure out a way to capitalize on the tax incentives involved, and because no one quite has the answer yet, we see this as the definition of a growth market. 

3 – stewardship. While firms might be at capacity for their research and integration teams, there is still a need for more stewardship people who can research proxy events, and then engage with the companies. A lot of firms try and cover this from Europe, but we know of at least three firms who would like to hire a US specialist. 
In light of the above, it is hard to say what has happened to salaries because there hasn’t been much hiring, but as we have seen in the UK and Europe, salary inflation has most certainly stalled, and has maybe gone into reverse (more about that in Q2 when we fill the mandates we are working on).

Middle East :

Post Cop28 there is an increased buzz around ESG and specifically about climate risk, and the climate transition. Led by sovereign wealth funds and banks, there is a perception across the globe that the Middle East is the main growth area for sustainable finance. 

It is all relative, because while the firms might be earlier in their journeys than organisations in London, Paris, or Amsterdam; there is a lot of resource and commitment to growth. This means that there is a dynamism, optimism, and growth opportunity for candidates that might not be seen in other geographies where poor economic outlooks and the subsequent political pushback has seen strategic product growth, and subsequent hiring trends slowed down, and almost stalled. 
This means that it is a good time for firms in the Middle East to attract international talent. Drawn by the optimism and opportunity for development, and to build something, which is not on offer elsewhere. 
Meanwhile, firms are still trying to hire locals, but this is seen as mostly feasible at the junior end, while more senior hires are focused on bringing over the experience for locations where sustainable finance is more advanced.