Staff cutbacks mount amid turmoil

Money managers said they have laid off or plan to lay off nearly 3,600 staff members as a result of financial market swoons.

Boston-based Fidelity Investments alone reportedly announced plans to cut 3,000 jobs beginning last month through the first quarter of next year; Morgan Stanley of New York plans to lay off 9% of its asset management unit; and MFS Investment Management Inc. of Boston said that it has cut 90 positions, or 5% of its total staff.

Meanwhile, Putnam Investments of Boston plans to lay off 47 staff members, including 14 portfolio managers; Legg Mason Capital Management Inc. of Baltimore in-tends to slash 40 to 50 of its approximately 140 employees, and Janus Capital Group Inc. of Denver plans to eliminate 115 jobs.

Some search firm executives estimated that the money management business in general will eliminate 10% to 20% of staff positions.

“This is the worst environment in the investment world I’ve seen during my 39-year career,” said Richard Lannamann, vice chairman of Spencer Stuart Inc. of Chicago. “In terms of the employment situation, it’ll be more severe and last longer.”

“The market has fallen so far that even the relatively stable asset management sector can’t avoid changes,” said John Siciliano, vice chairman of the merchant bank Grail Partners LLC of New York. In some cases, layoffs might not be a bad thing, because it will make firms more efficient, he said.

Debra Brown, managing director of asset and wealth management recruiting at Russell Reynolds Associates Inc. in New York, believes that massive job cutting is happening only at selected firms. “Not everybody is doing it,” she said.

“Anecdotally, we see some insurance companies who own asset managers are looking to hire people on the general-account level as well as in the business units.”

According to a new study from Russell Reynolds, continued market volatility and anticipated regulatory changes are driving demand for more risk management, legal and compliance professionals. Also, many hedge funds, funds of funds and the alternative-investment divisions of larger money managers are focused on expanding their institutional distribution teams, the study said.

Ms. Brown also said there are opportunities for firms to strengthen their investment capabilities, because people who used to be unavailable or unaffordable are now in the market. She added these professionals are coming largely from the hedge funds and securities firms.

Steven Niss, managing director of RWD Executive Search Inc. in New York, said some portfolio managers are willing to move to less well-paid but more stable jobs at pension funds, such as the $178.8 billion California Public Employees’ Retirement System in Sacramento and the $96 billion Teacher Retirement System of Texas in Austin. “They want a change of pace,” he said.

But if institutional analysts and portfolio managers can’t find jobs after a while, they frequently end up in wealth management. “They either start managing friends’ or families’ money, or join wealth management firms where their institutional experiences become valuable,” Mr. Lannamann said.

Such a scenario is a result partly of high-net-worth investors’ disenchantment with their wealth managers, Mr. Lannamann added.

“There’s always a churn of high-net-worth client business in this situation,” he said.

Others might leave the financial services industry for good. “Whenever you see a major contraction of the Street, it’s normal for people to choose to do something else,” Mr. Siciliano said.

“Now you might see portfolio managers opening sporting goods stores in North Carolina or Vermont,” he said. “I remember many people became entrepreneurs in the late ’80s.”

However, for some people, the question is whether there will be any job at all, Mr. Siciliano said.

Still, recruiters said, many laid-off professionals hope to find positions doing what they did before.

Ms. Brown thinks it’s still too early to quantify how much the industry head count will shrink. “Nobody has gone anywhere yet,” she said.

Jing Zhou is a reporter for sister publication Pensions & Investments.