The fallout in the ABS and MBS markets has triggered the development of a new trend: structured finance professionals lending their expertise to asset management shops.
A notable announcement was recently made by institutional asset manager RiverSource Investments, a subsidiary of Ameriprise Financial, announcing the recent hire of a new structured assets team leader, Todd White. White was formerly managing director and global head of MBS and ABS business for HSBC.
James Houston, co-lead of the asset and wealth management practice in the Americas for executive search firm Russell Reynolds, said there is definitely a trend of professionals shifting from the structured finance space to manage institutional dollars.
One reason could be a growing interest in sexier investment strategies, such as those involving distressed debt.
"There is definitely an interest for firms to have a distressed debt capability," he said.
One source in the market said that what makes the crossover such a win-win situation, for both those who have had to pursue a new career path due to the ABS/MBS market blowup and asset management shops, is that ABS and MBS structured finance people bring a plethora of skill sets to the table.
"These people have good experience with going through documents," the source said. "One of the themes is that they have experience with more complex instruments. Looking at the whole variety of factors in evaluating a distressed company, the breadth of that experience is definitely applicable."
Meanwhile, Debra Brown, a senior member of Russell Reynolds' asset and wealth management practice, added, "Very strong credit talent seems to be in demand right now. And organizations that do have the inclination to hire right now are experiencing an opportunity to pick up talent from sides that they couldn't tap into before."
Both Houston and Brown contributed to Russell Reynold's recently released study, titled 2008 Recruiting Trends in Asset & Wealth Management, which noted the trend of structured finance professionals joining asset management shops.
In April, Babson Capital Management acquired the entire distressed debt management unit of Murray Capital Management. At that time, Babson President Clifford Noreen cited the expectation that there would be "strong institutional interest" in distressed investments as a reason behind the purchase.
And just recently, Citigroup announced its acquisition of New Jersey-based distressed debt fund manager Epic Asset Management. According to published reports, Citigroup made the acquisition to expand the fixed-income unit of its alternative investment division.
Additionally, Philadelphia-based Glenmede last week announced the hiring of Benjamin Alimansky as manager of hedge funds and opportunistic investment strategies. "Benjamin will be looking for opportunities in distressed investments as well as other alternative areas," said Glenmede spokeswoman Diane Green.
And indeed, distressed investments are garnering interest among plan sponsors.
The 2008 Consultant Search Forecast, an annual survey compiled by the Darien, Conn.-based investment consultant services firm Casey, Quirk & Associates, noted the emergence of the trend of institutional investors allocating cash to distressed strategies, and alternative investments overall.
"Distressed strategies are expected to be in demand in 2008, perhaps because some believe the aftermath of the subprime crisis and the potential recessionary environment offer attractive investment opportunities for these strategies," Casey, Quirk said in the report.
Nevertheless, Russell Reynolds' Brown, who has also assisted endowments, foundations and plan sponsors with filling key investment positions, said that while funds are kicking out more cash to distressed and structured vehicles, the firm has yet to see a particular trend toward institutional investors hiring in-house staff to oversee assets in that space.
"More of our clients are managing through third-party management and making these adjustments through asset allocation," Brown said.
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