November 6, 2015 – Derek Braddock and Bill Matthews are founding partners of BraddockMatthews, a leading search firm with offices in New York and Boston that specializes in recruiting top leaders for the asset management sector. The firm was selected earlier this year by Executive Search Review as one of the ‘Power 60’ – an exclusive ranking of leading search firms in New York City.
Prior to launching their firm in 2013, the duo were senior partners with HigdonBraddockMatthews. Both began their careers with privately held investment managers Lord, Abbett & Co. and Goodwin Procter, a leading global law firm, before moving onto other professional roles with the investment and financial services industry. In the following interview, Messrs. Braddock & Matthews discuss their approach to recruiting in asset management and provide detailed insight into the nuances of working in this very active and challenging sector.
Derek, your professional career started with Lord, Abbett and Salomon Smith Barney and, Bill, yours began with Goodwin Procter and SunTrust Robinson Humphrey. How important were these experiences in these to how you approach client relationships today?
Braddock: Very important, and not just in what Bill and I have been able to bring to our firm but what the collective experiences of our colleagues have brought as well. We have other senior members of our firm who have worked at organizations like Merrill Lynch, an independent RIA and a private equity firm. We think it’s key that all of our professionals have deep industry experience—it’s a real differentiator for us actually. This is important because having content knowledge, an understanding of how our client organizations work, the challenges they face … all of this is critical, more so than having a background in recruiting. As an example, it’s hard to try to distill the skill of an investor if one doesn’t have the grounding of what makes an investor successful.
Matthews: I also think that leveraging these industry backgrounds goes beyond just evaluating the most skilled investors, business development professionals, etc. in the marketplace. We feel it’s our job to educate and equip our client organizations with the market intelligence they need to make decisions, not just related to a hire. So, more broadly, from a strategic sense our focus is on helping our clients build and grow their organizations.
The asset management Industry, which your firm serves almost exclusively, is a highly active today. What have been the biggest changes you’ve both seen in the last 10 years that have impacted senior-level hiring in this sector?
Braddock: Actually all of our search work is for asset management clients, and that is a strategic decision that we made, in part, because it allows us to have the necessary content knowledge and relationships that would be more difficult to maintain if we worked in other industries and sectors.
Matthews: We both gravitated to the asset management industry years ago because of how dynamic and changing it is. We’re working on mandates today in which our client organizations are trying to capitalize on trends that really weren’t around, at least to the extent they are now, even a couple years ago. For example, we’re bringing more direct investors into fund of funds/allocator shops than manager selection types due to the incredible activity within the co-investment world. Today, scarcity or real assets is a major allocation in many diversified portfolios, whereas even recently, it was just a sliver within a private equity bucket.
Braddock: Over the last couple years, various investor channels have opened up thanks to the growth in liquid alts, UCITS and ’40 Act product, making those institutions historically focused on institutional investors now capitalizing on bank platform and HNW channel relationships. An obvious trend is many of our client organizations are aggressively diversifying their businesses. For example, we’re working with private equity firms offering more liquid products and, therefore, needing public markets portfolio managers and hedge funds looking for investments in the less liquid, even venture capital-like, space. It’s all blurring to some degree. In addition, several leading hedge funds, including a couple of our clients, are also investing in, and getting increased mindshare with, their long only products. This is what makes the industry so exciting … In a couple years, we’ll be talking about very different industry-changing trends.
The transferability of management talent — bringing top talent from one industry or functional discipline to another – became prevalent about 15 to 20 years ago. How often might you recruit from outside of the asset management sector and in what circumstances?
Braddock: To be honest, not a lot—our functional expertise lies in two major functions areas—investments and marketing/sales, which represents over 80 percent of our search work. For these roles, typically our client organizations require significant domain expertise, i.e. needing a portfolio manager to have outperformed in a certain hedge strategy as an investor, or one who has specifically raised assets from E&Fs in the northeastern U.S. These are not ‘learn on the job’ types of roles and though our clients also want individuals who bring leadership and other critical success factors, they often want that key hire coming with a particular expertise too.
Matthews: Even from a regulatory, operational, tech or legal perspective, the market moves so quickly with industry specific trends that our clients want that industry know-how. With that, we have placed executives from the top management consultancies (for president/COO roles), professionals from investment consultants (for allocator roles, in particular), sell-side professionals (for a variety of roles, including recently for a macro-strategist role), and, though rare, even the packaged goods industries (for traditional marketing roles) in the past but that is less frequent. Make no mistake, since we are nimble we are continually thinking about creative ways to problem solve and are willing to look anywhere for talent depending on how we believe we can best help our clients.
How often do you recruit for the private equity sector and how do those assignments differ?
Braddock: We spend a substantial amount of time in the private equity world – approximately 40 percent of our overall search work (with 40 percent in hedge funds and 20 percent traditional firms) is for private equity clients, and that is for a variety of GP and LP organizations. On the GP side, we work with all types, from the early stage venture capital investors to the large buyout firms, and on the LP side we work with fund of funds, endowments and foundations, and family offices. The functional distribution of those searches is similar to other areas – approximately 40 to 50 percent for investment professionals, and 50 to 60 percent for non-investment professionals (investor relations/sales roles, CFOs, etc). Typically, the candidate pool for private equity investor searches is unique to that asset class – rarely are we pulling from outside the private equity world for investment searches. It is more common to recruit investor relations/sales professionals to private equity firms from outside private equity, and certainly that is a trend as the private equity world gets more crowded, and fundraising becomes increasingly competitive.
Matthews: As with other asset classes, the human capital needs of private equity firms are ever-evolving, and often reflect new strategic thinking. For example, as the ability of firms (particularly in the crowded middle market buyout area) to source proprietary deals, or other deals that are not part of a competitive auction process, has become a major differentiator, there is developing a significant demand for professionals who are dedicated solely to sourcing investment opportunities. We have been fortunate to have been involved with almost a dozen such searches recently, and we do not see that trend subsiding. Likewise, as firms anticipate changes in the market, many are developing credit-related strategies, and hiring around those strategies.
Clients handling senior-level and C-level assignments today seem more willing to retain firms like BraddockMatthews with greater frequency. Why?
Braddock: Humbly, we have a good batting average against large firms for multiple reasons. As noted earlier, we have a singular focus in this industry which truly positions us as content experts. We are not blurring into investment banking or capital markets. Also, we form deep relationships with our clients. As an example, among the 52 searches we conducted last year, 14 were for just three organizations. With the attention we put into each relationship, we are becoming a true partner and extension of that organization in the marketplace. We feel great to be a part of our client strategy sessions as they contemplate new strategies, products and organizational structures. To do this, it means we’ve earned their trust and maybe have shown some competence along the way. A side benefit for our clients in bringing our focus, attention and industry knowledge to play is the repeat work we do for our clients. We have substantially smaller off-limits conflicts than larger firms, too.
Matthews: The key word you mention is ‘partner.’ As a firm, we’re a partnership ourselves and we therefore understand the importance of every search for which we are retained. Our clients seem to prefer working with firms like themselves. We dedicate partners to each and every search. We do not pass on the work to junior staff — we don’t have junior staff! That means we have to be selective with the searches we take on but it results in a quality quotient for our clients that is appreciated.
Contributed by Christopher W. Hunt, Publisher, Hunt Scanlon Media and Scott A. Scanlon, Editor-in-Chief, Hunt Scanlon Media