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2013 Business Expense Benchmark Survey
change occurring at the $10.0 billion threshold and to
continue beyond that point, a major realignment of
skills is taking place.
By far the largest jump in personnel at the $10.0 billion
AUM threshold occurs in operations and technology.
The number of heads cited for these functions
increases from 20.8 to 55.9 in our model—a 169%
rise as firms grow from $5.0 billion to $10.0 billion
AUM. Risk and compliance heads are the next largest
category of growth, rising from 6.9 to 13.3 individuals—
an increase of 93%. Regardless of whether the firm
is pursuing an expansion from a single to a multi-
manager platform or looking to extend their product
range, there is a fundamental change required in their
operational processes and technology platforms,
as well as their risk and compliance capabilities to
support that shift in approach.
Marketing-related heads also increase, but only from
6.3 to 10.6 individuals. The big gain in marketing
headcount occurs in the next wave of growth. Our
average number of marketing personnel for firms
>$10.0 billion AUM is 31.7 heads—triple the level seen
at $10.0 billion AUM. This sharp increase confirms
to us that these larger firms are now repositioned
to support multiple product lines to potentially new
client bases, and are ready to resume their focus on
capital raising.
The impact of this investment in building out new
capabilities at the $10.0 billion AUM threshold is
noticeable when viewing the dollars of AUM realized
for every dollar spent on investment support and
business management. This is illustrated in Chart 18.
As shown, once firms surpass the $500 million AUM
mark, there is a gradual build-up in the effectiveness
of their expenditures toward supporting increased
amounts of AUM. At $500 million AUM, a firm
realizes $134 dollars of AUM for every dollar spent
on investment support and business management.
At $1.5 billion, that figure increases to $160, and at
$5.0 billion it nudges up to $169. This is where the
growth stalls.
As firms move from $5.0 billion to $10.0 billion AUM
and their ratio of investment support to investment
management personnel spikes, there is a modest
contraction in the dollars of AUM realized for every
dollar spent on investment support and business
management. Levels decrease from $169 to $157.
Yet, the increased focus on investment support pays
off dramatically from that point forward.
Dollars of AUM realized for every dollar spent on
investment support and business management
more than double, rising from $157 for firms with
$10.0 billion AUM to $374 for a hedge fund with
$36.4 billion AUM. This 138% growth is similar to the
185% growth noted when hedge funds move from
$100 million to $500 million AUM and they begin
their first wave of build-out. This confirms to us the
importance of the $10.0 billion AUM threshold as
another launch point of growth for the firm.
Chart 16: Ratio of Investment Support to Investment Management Personnel
Source: Citi Prime Finance. Total dataset examined (124 firms, $465 billion AUM)
.70
1.00
1.10
1.20
1.30
1.40
1.50
1.60
RATIO
1.70
$100M
$500M
$1.5B
$5B
$10B
>$10B
.90
.80
1.20
.88
1.17
1.01
1.69
1.14