This year the finance industry will continue bouncing back from a dismal 2008 and 2009 that saw hundreds of thousands of jobs disappear from the business. Wealth management firms, commercial banks and firms that extend mezzanine financing are just some that plan to add staff. Here are the five areas projected to make the most hires.
Related: Finance Hiring Outlook 2011 -- Most Active Companies
Related: How to Write a Private Equity Resume
With ordinary loans still hard to come by, companies are turning to mezzanine financing. That means many firms that dabble in this type of lending will expand staff this year to meet demand.
Mezzanine finance is a system of lending that can take the form of unsecured debt or preferred stock. This type of financing is offered by private funds, such as Praesidian Capital, or under the umbrella of a larger firm, such as JPMorgan's Highbridge Principal Strategies.
"Mezz will be a critical component in most buyout capital structures," in the upcoming year, said Michael Hahn, co-founder and managing general partner of BlenCap Mezzanine LP, a Minneaoplis-based mezz firm. Though he stressed that the market is small in terms of active participants, Hahn predicted that "to the extent there will be new entrants to the market, more demand for lending talent at all levels should pick up somewhat."
While the correlation between fundraising and hiring isn't exact, increased activity is prompting more hiring across all levels, lawyers, recruiters and lenders say. Highbridge and New York Capital Life Partners are two that plan to add staff.
In 2008, there were 41 mezzanine funds raising capital, comprising 5% of all private equity fundraising, according to data prepared for FINS by Preqin, an alternative assets research firm. As a result of the crisis, the number of funds shrunk to 20, comprising 3% of private equity fundraising in 2010. There are currently 56 funds raising capital, comprising 5% of such fundraising.
Traditional bank loans are more difficult for growing companies to obtain, according to David Barnitt, an advisor to mezzanine funds, because global financial regulations are discouraging financial institutions from taking on risk. That's resulted in companies increasingly turning to mezzanine financing to obtain loans.
Fred Goltz, head of KKR Asset Management's mezzanine business, agrees. "2010 was a busier year and our capital deployment was significantly higher than we expected," he said. "I think going into 2011 we will continue to be busy. I would anticipate being able to put out capital."
Related: How to Write a Wealth Management Resume
Investors are bouncing back from the financial crisis and need talented managers to oversee their assets.
"The volatility of the past two years is creating demand for good advice," said George Wilbanks, a recruiter who specializes in wealth management at Russell Reynolds, a New York City-based search firm. "Smaller, conservative boutiques and private banks at larger firms are both hiring."
Russell Reynolds said the percentage of searches for wealth management within its buy-side practice grew to 19.5% last year from 7% in 2007. Companies are hiring individuals who have experience with high-net worth and ultra-high net worth clients, rather than retail brokers who might oversee clients with less than a million in assets.
Demand will increase in 2011 as more firms "ramp up and strengthen" their teams, according to Jeannie Hwang, executive director at RMG Associates, a Seattle-based executive recruitment firm, who works closely with high-net-worth and ultra-high-net-worth family advisory firms.
A Global Wealth 2010 report compiled by Boston Consulting Group, the Boston-based management consultancy, found that global wealth increased 11.5% to $115.5 trillion in 2009 from $100 trillion in 2008. Managed assets are estimated to grow an average 6% annually through 2014.
In the U.S., assets under management increased 15.1% to $35.1 trillion in 2009 from $30.5 trillion in 2008. BCG predicts that number will increase to $43.4 trillion by the end of 2014.
Similarly, the number of millionaire households in the U.S. increased 15.1% in 2009 from 2008. Globally, the number of millionaire households increased 17% from 2008 to 2009.
All those newly minted millionaires need top talent looking after their assets.
Related: How to Write a Risk Management Resume
Government agencies, private equity firms, hedge funds, and banks have been gearing up for months to face a rapidly evolving regulatory environment. That trend will accelerate in 2011 as firms race to meet the July 21 deadline of complying with some rules under Dodd-Frank. Hedge funds and private equity firms with over $150 million assets under management must register with the SEC by that time if they have not already done so.
Community banks will have to file more information under the Mortgage Reform and Anti-Predatory Lending Act of Dodd-Frank. The newly created Consumer Financial Protection Bureau will also collect more data from the industry but there's no information on the details of that program yet, said Karen Thomas, senior executive vice president for government relations and public policy at the Independent Community Bankers of America, a Washington, D.C.-based lobby.
And the slowdown won't stop in July. Over the next 18 months, U.S. regulators are supposed to issue more than 100 rules or studies in conjunction with Dodd-Frank.
The firms that didn't have to register before Dodd-Frank or invest heavily in risk management before the financial crisis will have to catch up. Industry participants are expecting thousands of positions to be filled over the next year.
"The industry did not invest enough in risk management in the good times when more risk was being taken," said Bill Githens, the president and CEO of the Risk Management Association, a Philadelphia-based industry group that focuses on advancing the use of sound risk principles in the financial services industry. "The bar is being raised and the expectations of executive management, regulatory agencies and boards of directors are much more demanding."
Recruiters believe that the initial reluctance to staff up due to uncertainty about what the regulations would require will dissipate in the later months of 2011.
The several thousand hedge funds that were waiting to see what Dodd-Frank held in store are now searching for qualified staff, said Jack Kelly, managing director at Compliance Search Group. He says the demand for compliance personnel across all levels has increased several hundred percent at his recruitment firm since the beginning of last year.
The recent spate of insider trading arrests and investigations has also prompted the need for compliance officers.
"Whether it's an investment bank or a broker-dealer, firms will need to deal with this overarching regulatory wave that's coming. Firms really need to shore up their infrastructure," Kelly said.
Increased demand has enabled firms to specify exactly what they're looking for, according to Matt Kelly, the editor-in-chief of Compliance Week, a trade magazine.
"A lot of the jobs are cross-disciplinary," he said. "You might need an accounting specialist with an appreciation for securities law. It can be very difficult to find someone who has a broader perspective and depths in several fields."
The new trend in risk management centers on this holistic approach, said Kevin Blakely, Chief Risk Office for Huntington Bancshares, the Columbus, Ohio-based bank, and the former president of the Risk Management Association. "One of the lessons we learned is everyone owns risk," he said. "We've put risk officers in each of our business segments that report to the head of each business."
Related: What to Wear to a Bank Interview
It hasn't been the best few years for commercial banking operations, but that's about to change.
"We're seeing signs of recovery," said Bob Seiwert, senior vice president at the Washington, D.C.-based American Bankers Association and the head of the ABA Center for Commercial Lending and Business Banking. "The economy's not completely there, but we're making good progress. With recovery you'll see increased loan demand."
That increased demand will translate into more hiring, said Doug Rickart, a banking division director with Menlo Park, Calif.-based recruiting firm Robert Half.
Another driver of growth is the looming retirement of thousands of baby boomers from commercial banks, Seiwert said. "There are 8,000 banks with people retiring," he added. "Those slots need to be filled."
Although the number of people expected to retire can't be quantified, Seiwert said that traditionally, commercial banks have attracted older workers. Younger ones tend to head to flashy Wall Street firms. Over the next several years, however, those empty spots at commercial banks may attract 20- and 30-somethings.
For the first time since late 2008, weekly commercial and industrial-loan growth hit positive numbers in the first week of January, according to Federal Reserve data. Loan growth saw a percent change of 0.2% in November 2010 and 7.2% in December 2010.
Matt O'Connor, a bank analyst at Deutsche Bank, wrote in a January 7, 2011 note: "Recent loan demand commentary was generally more positive, particularly for C&I [commercial and industrial]."
At JPMorgan, loans to mid-sized companies increased 4% and commercial term loans increased 2% from the third quarter to the fourth.
Related: An in-Depth Look at Hedge Fund Hiring in 2011 | How to Write a Hedge Fund Resume
Glocap, a New York City-based search firm, saw more demand from hedge funds for staff at the end of the fourth quarter and the first week of January. Much of the hiring will take place at established funds looking to start up in new areas, according to Adam Zoia, the firm's founder and CEO.
"Based on our pipeline as a search firm, this year looks to be stronger than last year in terms of amount of people we added to the space," Zoia said.
J. Patrick Gorman, co-founder of iFind Group, an executive search firm, believes that hedge funds will "desperately hire people" this year due to "massive needs." There were layoffs in 2009, regulatory changes in 2010, and thus more hiring should occur in 2011, he said. Gorman believes much of the hiring will happen toward the later end of the year as companies sort out their compliance hiring plans.
Gorman said there was a 30% pickup in hiring for accounting, middle and back office, regulatory, and non-front office from all of his clients between 2009 and 2010. For the big banks and large megafunds, there was a 42% increase.
"The new trend is for small firms to be more institutionalized, he said. "Requirements from investors and regulators means you need a more robust operations platform. You need to hire all these people to be considered a real business."
Gorman expects to do 50% more searches for hedge funds this year than in 2009 and up to 30% more than in 2010.
More hedge funds are being launched. During the first three quarters of 2010, there were 715 funds launched, according to Hedge Fund Research, a Chicago-based company that does hedge fund research and analysis. There were 585 liquidations. For the first three quarters in 2009, there were 554 launches and 858 liquidations.
The number of hedge funds fell from 7,634 in 2007 to 6,845 in 2008. Since then, the industry has been mostly treading water with small increases. At the end of 2009, there were 6,883. By the fourth quarter of 2010, there were 7,164 hedge funds.
The driver for hedge fund hiring stems from institutional investors who want to have diversified portfolio, Zoia said. Though funds didn't have a blow-out 2010, they outperformed the market, "and that's of significant value to pension funds and high-net worth individuals," he said. Zoia said that another driver of hedge fund growth is the amount of assets under management, which grew to $1.917 trillion last year, approaching the peak of $1.93 trillion set in the second quarter of 2008.
Write to Julie Steinberg
Related: Finance Hiring Outlook 2011 -- Most Active Companies