Hiring investment staff and retaining pools of talent remain an issue for most asset owners, especially as they recognise the need to pay more to compete with other parts of the financial sector. For public pension funds California State Teachers’ Retirement System, Japan’s Government Pension Investment Fund and Australia’s Commonwealth Superannuation Corporation, staff retention means “building up people in the investment industry early, coaching and exploring each asset class in-depth”.
During a panel at the CFA Institute Annual Conference in Hong Kong on Tuesday, Christopher Ailman, chief investment officer of the $225 billion US pension fund CalSTRS, said that “culture trumps everything and is the key driver to attracting and retaining staff.”
He explained further that the fund is “building into and all the way down into high schools and colleges to build up people in the investment industry through opportunities and internships”.
The big challenge, Ailman lamented, is that the financial industry in the US still suffers from an image problem, aggravated by Hollywood’s portrayal of finance executives. He added: “I am trying to get that message out and create opportunities for millennials. What I have found is they want to volunteer, they want to learn outside their asset class, and they want exposure to a variety of things. For us, it is all about understanding what feeds into their interest and giving them those opportunities, especially as we go through a generational shift now in my own staff with baby boomers retiring.”
Alison Tarditi, CIO of CSC, highlighted that the A$45 billion ($34 billion; €28 billion) Australian superannuation fund is a big supporter of horizontal human capital growth, adding that one advantage of working for an asset owner like CSC is that it is “purposeful work”. “We have a well-defined member base, we understand who they are and what we are trying to achieve for them. And we see the face of our members.”
Junior staff in CSC’s investment team get rotated around various asset types, giving them the opportunity to learn and explore in-depth each of the asset classes and develop complementary skills. Tarditi described CSC’s investment team as a “barbelled team” – having both younger people and those who come back into the workforce after retirement. “That barbell of talent has proven a very healthy and energetic culture for our organisation,” she pointed out.
For the Japanese pension giant GPIF, which employs about 100 people in its investment team, attracting and retaining talent requires a change in mindset. The $1.4 trillion fund, which can allocate up to 5 percent of its assets under management to alternatives, set up its alternatives investment team less than three years ago. According to GPIF’s chief investment officer Hiromichi Mizuno, the frustration in hiring comes from the perception that “public pension fund managers are seen as second-class investment professionals and accepting lower pay to serve the public.”
To address this challenge, Mizuno said the fund needed to come up with a different perspective. He explained that the external managers are like the “expensive baseball players” and GPIF’s investment team comprises the group coaches, scouts and sponsors.
“I am telling my team, we are going to be the best in class fund of funds manager. I cannot pay [for example] for a major league baseball player, but I can pay for the coach and I can pay for the general manager,” he said.
On compensation, Mizuno said that the fund “pays in line with what Japanese financial institutions pay their employees. The difference, he pointed out, is that the private sector offers lifetime employment, while GPIF offer two to three-year professional contracts.
“Hiring and keeping talent is always a challenge,” he said. “We just need to come up with different perspective, identify the required expertise and what we can best achieve as an asset owner.”