Fund managers prepare for recruitment battle

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Whereas 429 graduates were taken on by investment banks and asset managers in 2003, nearly 4,000 will have been recruited this year, according to the Association of Graduate Recruiters.

This is double last year's total, indicating that numbers are likely to be high again next year, fuelling the war for talent.

The biggest recruiters are investment banks Deutsche Bank, Goldman Sachs, Merrill Lynch, JP Morgan and Morgan Stanley, each taking on hundreds of graduates into their banking and asset management divisions. But mid-sized and smaller fund management firms are recognising the cost-effectiveness of developing their talent pools.

The race to recruit represents a big change from the barren period at the turn of the century. Terence Perrin, head of graduate recruitment at JP Morgan Asset Management, said: "Many investment banks switched off their graduate recruitment or at least turned it right down." JP Morgan has raised its graduate intake in asset management by 20% this year.

The scaling back of graduate schemes has cost many fund management companies dear as they seek to expand in a buoyant market. They are being forced to pay over the odds to hire staff as they compete with rivals, boutiques and the rapidly expanding hedge fund and private equity sectors.

Kim Yates, a director of executive search firm Principal Research, said fund management companies recruited heavily when assets under management were rising and retrenched at any hint of turbulence. "It goes in waves. After the crash in 1987, everyone cut graduate recruitment and 10 years later there was a big hole in the market. It's not a good move - let's face it, nearly all the guys at the top now were graduate trainees," she said.

A few groups stood firm during the last downturn. Yates said: "Baillie Gifford rarely makes top hires from external sources. The advantage of training people in-house is they come in untainted and can be indoctrinated into the house philosophy."

Schroders also has a long record of bringing graduates through the ranks. Mark Bridgeman, head of equities research, and Giles Neville, head of investment product development, joined from university in 1990. But Schroders lost its graduate programme when it sold its investment banking arm in 2000.

Mark Cowie, head of resourcing at Schroders, said: "We have had to do a lot of external recruiting because the graduate programme was stopped for a time. We want to make sure we are never in that situation again. Whatever the market is doing we intend to keep the programme."

Schroders took on about 10 graduates last year and 23 this year, including 17 in the UK. It has thrown resources at the scheme, including launching a standalone website to attract applicants.

Deep pockets are essential to compete for graduates, particularly when investment banks are fishing in the same small pool. The median graduate starting salary in investment banking and fund management is 36,000 (€53,000), according to the Association of Graduate Recruiters. Schroders said its package was at about that level.

JP Morgan Asset Management also offers market rates but pays a premium of 5% to 10% for investment bank recruits and a signing-on bonus not offered to asset management joiners.

New recruits are treated like royalty in many firms, given access to all parts of the business before deciding in which area to specialise. They work long hours but receive a rounded financial education.

The question is, do the firms benefit as much? After all, there is nothing to stop a graduate trainee jumping ship after three years for a bigger salary.

Yates said there was some incentive to do that. "There is the danger you are always considered the bright young graduate if you stay in one place. It can sometimes take a job change to get a bump-up in credibility and remuneration."

Cowie said Schroders' graduates did not need to fear being left behind in the pay stakes. "It's true that within some companies pay doesn't keep up. But the last thing we want is to provide three years of training, only for the person to be snapped up by a competitor."

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