A wave of job losses is about to hit the fund management industry as tumbling stock markets and departing investors knock the stuffing out of performance and profits.

This could mean that almost 4,000 jobs will have been lost by March next year as funds are forced to streamline. The cuts will hit even the highest-paid managers, whose performances can still earn bonuses in the millions.

Executive sources at leading fund managers believe that these cuts would represent 10 per cent to 15 per cent of the 25,500 employed directly in the UK asset management workforce. One industry source said: “Everyone has been very sensible about this so far, but the current round is not the end of it, by any means.”

Another fund management executive, who is preparing to wield the jobs axe, said: “We have to prepare to manage our way through recession. No one likes job losses; this is a people business.

“But it is a no-brainer. If equities have fallen 30 per cent, that blows a hole in your fees. It is either that or explore whether to put yourself up for sale.”

Managers including New Star Asset Management, Henderson and Aberdeen have already embarked on a round of redundancies.

Yesterday it emerged that Fidelity International was preparing to cut several hundred jobs from its 2,100-strong operations in the UK. This is the second cut this year for the UK operations of the world's largest mutual fund manager.

Fund managers tend to charge fees based on the size of the assets being managed, with 1.5 per cent being the typical charge. The FTSE 100 blue-chip index has tumbled almost 35 per cent from highs of 6,120 in the past 12 months. For funds heavily exposed to equities, this means their earnings will have fallen by a similar amount.

Volatile stock markets have also frightened off retail investors and made it harder to win new investment mandates. Total funds under management in Britain stood at £380 billion in September, according to figures from the Investment Management Association.

This is £46.9 billion lower than the previous month and covers a period before the rollercoaster ride sparked by the collapse of Lehman Brothers and the $150 billion (£101 billion) bailout of AIG by the US Federal Reserve.

Analysts for UBS, the Swiss bank, initiated investment coverage of British fund managers yesterday. They slapped a “sell” recommendation on every traditional fund manager and a solitary “buy” order on Man Group, the hedge fund manager.

Carolyn Dorrett, a UBS analyst, forecast that asset managers' earnings per share would halve over the next 12 months as she noted that the market value of the sectors had fallen by 55 per cent so far this year. She also suggested that managers might have to rethink their dividend policies.

Speculation is taking root about a round of mergers and acquisitions among struggling UK asset managers. This has been spurred by the flotation next month of Resolution, the investment vehicle run by Clive Cowdery, the insurance entrepreneur. Resolution, which is poised to raise up to £1 billion from its December listing, already has acquisition targets in its sights, including British and other Western European fund managers.

On the block

4,000 jobs expected to go in fund management industry by March

£46.9bn fall in value of funds under management in September compared with August

Source: Times research

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