A fierce and broad talent war in the asset management industry is driving a “great negotiation” as employers fight to retain and attract staff, according to the chief executive of JPMorgan Asset Management.
“We have to work more closely to keep people on board” because “people have more options,” said George Gatch in an interview. “I don’t call it the great resignation. I call it the great negotiation,” he added, referring to the elevated rate at which workers quit their jobs during the pandemic.
The breadth of competition for talent has widened beyond the mainstream asset management industry. As well as their traditional rivals, groups such as JPMorgan Asset Management, an active-management house that mostly sells to retail investors, are now competing with alternatives firms that are expanding their footprint in the retail market and are also going head to head with tech companies in the battle to lure engineers.
Gatch, who joined JPMorgan in 1986, said the firm was “working really hard” to appeal to “younger people and particularly tech savvy people”. JPMorgan Asset Management employs 1,500 technologists globally and spends $500mn on technology each year. Overall it has $2.5tn in assets under management.
“It’s about competitive compensation, but as important are the other things as well,” he added, pointing to factors such as a company’s culture, environment, people and opportunities on offer.
In the war for talent, Gatch said the asset management industry needs to do a better job of “conveying the purpose and the fulfilment that could come out of building products and services that are pretty fundamental to people’s lives. Helping people save for college, pay for your child’s wedding, your parents retirement, your own retirement.”
Last year JPMorgan Asset Management bought Campbell Global, an investment manager focused on timberland, to expand its position in alternatives. The previous year it acquired 55ip, a fintech company that allows financial advisers to deliver tax-smart investment strategies at scale.
Now the focus is on organic growth rather than deals. “I don’t really see a gap in our offering or any urgent strategic priorities,” said Gatch. “The hurdle is very high for us to do something. It’s very difficult to be successful integrating strong cultures and integrating two asset management firms. So where we have done acquisitions, we’ve been focused on incremental capabilities.”
Gatch said that while the wider asset management industry is still highly fragmented and scale has become increasingly important, he thinks that large, transformational deals are “less likely” in the current environment of tougher markets. He sees areas such as environmental, social and governance strategies, alternatives and exchange traded funds as the most likely target areas for industry deals, as firms look to tap into strong investor demand for these areas.
Market volatility, Gatch believes, means that “active [management] is back.” He said: “Fundamentals have been reset. And I think that is key for the role that active can play over the next cycle.”
Back in 2014 JPMorgan Asset Management launched its first actively managed ETF business, a type of investment that combines stockpicking normally associated with mutual funds with the convenience and tax benefits of ETFs. It has subsequently grown to almost $90bn in assets.
Gatch predicts that in the long term “ETFs will overtake mutual funds”. Increasingly, he believes, investors are seeing the ETF structure as superior to the mutual fund because of its tax efficiency, lower transaction costs and ease of use. “I think the active ETF industry is at a tipping point in the US and will grow rapidly.”