Public pension funds and sovereign wealth funds have to attract high-caliber investment professionals and leaders to be successful. However, most public funds today struggle to attract talented investors, which creates a tension between the funds’ mandates and their ability to actually deliver on those mandates. And this raises important questions: Can these funds overcome the bureaucracy and politicization of the public sector to attract the talented investment staff they require to implement a sophisticated investment strategy? And, if so, how?
Jagdeep Singh Bachher and I have attempted to provide some answers in a new paper entitled, “Attracting Talent to the Frontiers of Finance”. In general, we argue that most public funds today are successfully targeting employees in three areas:
- Early career employees that want experience (the green);
- Late career employees that want a change of pace from Toronto, London or Wall Street (the grey); and
- People tied to the region due to family, identity, affinity or even geography (the grounded).
In short, we believe the green, the grey and the grounded offers a useful framework for thinking about who pensions and sovereigns have the best chance of recruiting... at least this offers a useful policy in the short term.
In the long term, however, we think public pension funds and sovereign funds should borrow from the concepts in Michael Lewis’ now famous book, Moneyball. These funds should rethink the very nature of finance and long-term investment to come up with a new profile of ‘ideal employees’ that can ensure long-term success at a much lower cost.
For example, we think long-term investors should be focused on generating lasting value through the creation and development of businesses, buildings, bridges, etc. As such, the people they hire to achieve these goals should be expert in these specific domains. In other words, long-term investors may want to avoid the expensive ‘finance specialists’ on Wall Street and instead hire the (relatively) less expensive industry experts.
In short, pensions and sovereigns will have to re-conceptualize the types of people that best align with their long-term objectives. We thus envision a new era of ‘moneyball’ human resources for institutional investors. Stay tuned!
You can download the paper here. Comments are welcome.
