Clark, Gordon L., Talent, Company Size, and Financial Centres: London and the European Investment Management Industry (September 24, 2014). Available at SSRN: http://ssrn.com/abstract=2500767

“London dominates the European financial services industry, being the centre-point for advanced financial services, skilled labour, and the complex array of services needed to invest beyond Europe’s borders. As in other global financial centres, there is a premium on talented portfolio managers. Large and small investment companies rely upon these types of employees to produce superior risk-adjusted rates of return on the basis of asset-specific and/or style-specific investment strategies while protecting their employers against the downside risks occasioned by market risk and uncertainty. This paper presents a model of ‘talent’ in the investment management industry, integrating the relevant literature from economics, geography, and urban and regional studies. This is the basis for an extended discussion of the relationship between star performers and financial institutions, mediated by the size of the institution and the European market for financial services (global, national, sub-national and regional). It is argued that the market for talent in the financial services industry is geographically and institutionally segmented. It is also argued that these segments are neither self-contained nor their inter-relationships stable — there is evidence of arbitrage by investment management companies and their star performers between market segments and financial centres. Implications are drawn with respect to the status of London in the European market for investment management.”