BOSTON (Reuters) - Job losses at U.S. asset managers could rival layoffs in the last big bear markets of 2001-02 and 1991-92 as investors pull record amounts of money out of mutual funds in the financial crisis, experts say.
“These large corporations in asset management clearly are not seeing business rebounding the way they thought,” said Jeanne Branthover, a managing director at Boyden Global Executive Search Ltd, a recruiter in New York.
While more than 130,000 jobs already have disappeared at banks, brokers and other financial firms since mid-2007, asset managers have held up better because they do not commit their own capital. They generate the bulk of revenue from fee income based on a percentage of assets under management.
But those assets are shrinking as Wall Street stock prices languish at five-year lows in the wake of losses in subprime mortgages that snowballed into a global financial crisis.
The world’s biggest mutual fund manager, Fidelity Investments, last week announced its largest layoffs in six years, with nearly 1,300 workers, or 2.9 percent of its staff, being axed this month and more jobs to go in the first quarter of 2009. Many of its rivals are gearing up for similar cuts.
American Century Investments, one of the nation’s biggest fund companies, plans to cut 270 jobs, or about 17 percent of its workforce, starting this week, the privately held Kansas City company said on Monday. Its assets have fallen by about one-third during the financial crisis to $71 billion.
AllianceBernstein Holding LP, which last month announced plans for the largest job cuts in its 40-year history, has already started paring its staff of 5,600 workers, said spokesman John Meyers. Its assets shrank by more than $220 billion, or 28 percent, in the year to September 30.
Janus Capital Group Inc slashed 115 jobs, or 9 percent of its workforce, late last month. No further cuts are planned but “it is something that we continuously watch,” said Janus spokeswoman Shelley Peterson.
The cuts are in stark contrast to an industry hiring binge between 2005 and 2007, when firms added more than 21,000 workers, reaching a record 168,000 employees, according to the Investment Company Institute, a trade group.
In the past year alone, asset managers including Fidelity have cut 2,723 jobs — 1.6 percent of the industry’s size in 2007.
“You have to assume that every single firm is going through the same exercise,” said Henry Higdon, a managing partner of Higdon Partners LLC, a New York-based executive search firm specializing in financial services.
“There’s the skin, then the muscle and the bone. Let’s just cut off the skin right now and see what happens before seeing if we have to go into the muscle,” he said.
Higdon expects industry job losses to surpass those in the bear markets of 2001-02 and 1991-92. “It’s much worse than 2001 or 2002 or even that period in 1991 and 1992. It’s already worse,” he said.
Most of the industry’s cuts are concentrated in support and administration staff — areas that expanded rapidly as the industry boomed. Boston-based Fidelity, which added 15,000 employees over the past five years, stressed that no fund managers or analysts will be affected by its layoffs,
American Century gave similar assurances.
But Higdon, whose clients include Fidelity, said he expects research departments to feel the cuts.
“Even if they haven’t cut portfolio managers, or assistant portfolio managers or analysts, they probably haven’t hired as many of them,” he said. “Or they have let attrition take its course, with people who are retiring or leaving not being replaced.”
He sees the cuts at Fidelity and others as an alarming indicator, suggesting the industry has not yet seen the worst of the crisis and will continue to reposition itself for a sharply reduced asset base. “Most of these organizations expect things to get worse,” he said.
The cuts follow the three worst months on record for stock funds, according to TrimTabs Investment Research. Investors withdrew a total $144 billion from equity mutual funds in August, September and October alone.
One sign of the severity of the cuts: a flood of resumes at executive search companies like Boyden Global in New York.
“We are getting unsolicited resumes at numbers that we have never seen before,” said Boyden’s Branthover, who specializes in placing executives in high-level finance jobs.
“We are known for high level but are now receiving everything. I’m receiving kids out of school. It’s incredible,” she said. “People are doing whatever they can to try to get in touch with anybody they think can help get them a job.”
But not all fund companies are cutting.
Los Angeles-based American Funds, one of the nation’s oldest mutual funds, is continuing with plans to expand its ranks of investment professionals by 6 percent to 8 percent a year, although hiring has slowed at its service centers, said spokesman Chuck Freadhoff.
Jeffrey Hopson, an analyst at brokerage Stifel Nicolaus & Co in St. Louis, called the industry’s job losses so far “moderate” but said they could go beyond past bear markets if the downturn in stocks continues.
“It would depend on how long it goes,” he said.
Additional reporting by Muralikumar Anantharaman and Svea Herbst-Bayliss; editing by Jeffrey Benkoe and John Wallace