Was wondering if anyone has any insight about potential layoffs for analysts in AM.
I’m on FI Research, large AUM drop from my firm due to rising rates.
Do AM firms tend to make it out well during recessions?
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During the financial crisis, big AMs like Fidelity, Wellington, MFS, Capital, Blackrock, etc., all laid off hundreds to thousands of people, maybe 5% to 10% of their workforce. When their AUM was down, they cut people. AM firms will survive but who knows if you'll be there. None of us are safe.
Investment employees are more insulated than middle or back office and likely the last to get cut, but it happens and did happen during the GFC. And once it starts to happen, everyone starts to question how safe they are. Layoffs are bad for morale so let people go in waves and then it hits the newswires immediately after.
My spidey sense is tingling that it's going to happen the banks already started...
As always, some will make out far better than others from a recession - the best scenario IMO is to have a privately held firm, long term view of the business cycle, partners willing to 'invest' (i.e. not layoff - cut expenses or partner comp or general comp) to keep teams intact, and have a strategic plan to take advantage of any dislocations in the business. That could be hiring talent being jettisoned elsewhere, adding an entire team, investing in your own strategies, etc. etc. Again - exception vs. the rule in most cases.
Otherwise - yes - layoffs are a probability at this point. Large banks have already been doing this across the board, including their AM arms. It's been limited from what I've seen - it's not GFC level cuts - but have happened and I expect more will happen, probably beginning of next year or thereabouts. Expense controls are ramping up, budgets while not cut are at least frozen and headcount adds are extremely challenging if not simply impossible through year end. What's frustrating is that you might very well be having a great year in AM world - but it largely doesn't matter, as you are at the mercy of the bank.
It goes firm by firm outside of that - some 'early' retirements, strategic reductions, elimination of redundancies... that type of stuff. I don't expect GFC level issues but who knows. About the only fortunate part is that it's been a terrible year for most every asset class - FI got smoked, equities got smoked, etc. - so there's some resiliency at the client level to hold off on a change, potentially, if you have good longer term performance and/or strong relationships. I'd go back to how your firm is structured, where you are in the pecking order, how your team/strategy has done - and go from there.
Really the best any of us can do is stay high performing, put in the work for face time and make sure our own personal financial house is in order - the last thing you want is to be counting on a bonus next year that never comes to make ends meet. Get the resume polished, network in order, etc. Junior folks tend to be safer - but even then, it's still a crapshoot.
Agree with your take and this in particular. At my fund our returns are obviously down but we've only had one serious outflow, and even that was a bit weird (decided to withdraw at literally the worst possible time price wise). Other than that we've had consistent piecemeal inflows and AUM is only back to the pre-pandemic level, if last week's inflation print wasn't an anomaly then markets could've reached a bottom already.
Optimism aside though, still looks like a good time to batten down the hatches etc, it's definitely savings season.
Aside from saving, are you applying elsewhere in case of layoffs?
I was recently hired and will begin working in June after I graduate. I feel like I should continue applying to other places just in case. Recession had to happen now 😢.
This is easy for me to say because I'm already employed - but I would do your absolute best to focus on what you can control, your school, enjoying your last year and see how things play out. You are probably a high quality candidate given you landed a junior FI research role out of school - so the good news is that you shouldn't lack options should something fall through. I'd tread lightly if you've already accepted an offer and go applying elsewhere - it's a small world and while it's unlikely word gets back, I don't think at this point it's worth it. I've not been in this situation so you know your risk tolerance, the firm, etc. better than I ever could.
Moreover - things need to get really bad for incoming junior folks to get offers pulled or rescinded. It happens, but it's often the last lever you want to pull as a firm. It looks terrible and, frankly, doesn't save very much money in the scheme of things. The other thing to consider is that generally speaking, finance firms didn't have the hiring bonanza that tech companies and others did from the pandemic - while there's always generally corporate cuts as part of a slowdown, It's reasonable to suspect that they aren't going to go to the 10 or 20% of the workforce like some of the tech companies are.
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