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The U.S. economy added 227,000 jobs in November, according to the latest jobs report from the US Bureau of Labor Statistics published on December 6. Total nonfarm payroll employment rose by 227,000 in November, and the unemployment rate changed little at 4.2 percent.

The news is positive for the US economy, which has seen the unemployment rate ticking up gradually over the past two years, from approximately 3.6% in October 2022 to this month’s figure.

So, we started to wonder what the jobs situation is like in the world of private investment funds. On Form ADV, the Securities and Exchange Commission requires advisers to submit the number of employees that an investment adviser has in total, as well as those providing investment advisory services specifically.

We collect this data here at 9AT, and the news is better for the private fund folks than it is for the larger population. 

We took data from the last six years and separated it into octiles based on assets under management. As can be seen from the tables below, some trends are apparent. 

First is that advisers in the upper octile are adding headcount over time across the organization. As can be seen in Figure 1 below, the average headcount for advisers in the uppermost octile was 120 in 2018 and is 139 this year, an increase of 15.8%. Indeed, the average headcount has increased every year for this cohort, with the lone exception of 2021. 

They’re also managing much more money: The mid-point AUM of this cohort was $2.421trn in 2018, and is $3.957trn this year, representing a 63.4% increase. 

The story is different, however, for the rest of the groups. While octiles 5, 6 and 7 are showing slight decreases, the bottom two octiles – or, quartile, rather – is showing a slight decrease, meaning that the average smaller investment manager is doing more with less. In 2018, the mid-point AUM for this cohort was $52.66bn, and was $59.45bn this year, an increase of less than $7bn or 12.9% in the last six years. 

Figure 1: US Investment Advisers, Number of Employees, by Year 2018 - 2024

It’s a similar, if not perfect, correlation when comparing the overall employee numbers in Figure 1 above to the investment advisory-only numbers in Figure 2 below. 

Two data points immediately come to mind here. First is that again, the upper octile is the only one where headcount has been added over the past six years: 65 people versus 53, an increase of 22.6%. But in the bottom four octiles, headcount has remained the same or decreased slightly.  

Figure 2: US Investment Advisers, Number of Investment Advisory Employees, by Year 2018 - 2024

What is not clear is the desire to add headcount; that is something we will never know. But we do know that running an investment advisory firm has arguably never been as onerous as it is today.  

But that doesn’t seem to be stopping firms from growing.  

As can be seen in Figure 3 below, the mid-point AUM in the bottom two quartiles has risen only slightly, considering that we are working with a six-year time horizon. Investment management firms in the fourth octile are 5.5 times larger at the mid-point than those in the first octile, but are employing only 50% more staff, implying that there is a certain minimum number of employees required to run an investment firm, despite its size. 

Figure 3: US Investment Advisors, AUM by Octile, Mid-Point

As mentioned above, launching an investment firm in this environment is challenging. Despite a handful of regulatory ‘wins’ that the private fund industry has enjoyed in 2024, the growing and evolving operational due diligence process, alongside regulatory change in the past decade, makes starting out a more costly endeavor than in years past. 

But for those that do take the plunge, as can be seen, scaling their businesses while not having to add significantly more headcount is a very achievable goal. 

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