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| Asset Management Career Overview If money makes the world go ’round, the Earth would grind to a screeching halt without the asset management industry. Asset management is the business of making money with money—or at least trying to. When we say “money,” we’re not talking about salaries and bonuses (which can indeed be significant), but the gains you endeavor to make for investors who have forked over their cash in hopes that you, through your market savvy and keen instincts, can turn their nest egg into a fancy omelet with toast and hash browns on the side. Asset management companies manage the money of their clients to achieve specific financial objectives within guidelines under which the investment pool is organized. The pool might take the form of a mutual fund, hedge fund, retirement or pension fund, or other institutional fund and, depending on how the fund is organized, could invest in any range of investment vehicles including equities, fixed-income securities, and derivative products. What You'll Do Asset managers manage money—other people's money, and gobs of it. Generally, they convert that money into assets—stocks, bonds, derivatives, and other types of investments—and try to make that money make more money as fast as possible. Mutual funds, for instance, hire asset managers; so do corporations with lots of money sitting around, banks, and high-net-worth individuals. Asset managers have one simple goal: to invest other people's money wisely and profitably. Asset managers use a combination of investment theory, quantitative tools, market experience, research, and plain dumb luck to pick investments for their portfolios, ranging from high-risk stocks to commercial real estate to cash accounts. Who Does Well As an asset manager, you can't just bet your hunches. The profession requires excellent quantitative and analytical skills—if you hated statistics, you may want to look for a career elsewhere. But asset management isn't just a matter of adding up the numbers. It requires the organizational skills—and nerve—to make split-second decisions with millions of dollars riding on the line. The profession is notoriously tough to break into, especially for those who only have an undergraduate degree. MBAs most often start as analysts to prove they have the right combination of caution and chutzpah to make a great asset manager. Competition for jobs is fierce at all levels, but if you have strong quantitative and analytical skills, good nerves, and can consistently beat the market, there's probably a place for you. Networking and a single-minded pursuit of your goal are big helps, too. Requirements Undergraduates with their hearts set on a career in asset management should take as many statistics and accounting classes as possible to prove that they can handle all of the number crunching and financial modeling that the profession requires. Undergraduates may be able to land jobs as researchers, though competition is tough and they may be going up against candidates with MBAs. If you're really serious about the profession, start with a job in sales, marketing, operations, or trading at an asset-management firm, then consider going back for an MBA before switching into asset management per se. You may also consider a 2-year analyst or research position in investment banking. Such jobs are more plentiful and provide excellent training for asset management. Generally, MBAs come aboard as researchers or analysts. Analysts and researchers generally serve at least 2 years before they come up for consideration as fund managers. You are more likely to get an asset-manager position earlier if you run smaller portfolios for institutional asset managers or private banks that offer services to the wealthy. On the mutual-fund side, you might become co-portfolio manager, sharing the management responsibility with a senior manager. The larger the pool of assets, the fiercer the competition. There is no single prerequisite to becoming an asset manager. It all comes down to how much money you can make with other people's money. That said, virtually all successful asset managers possess these skills: Quantitative and Analytical Skills Asset managers have to be able to read spreadsheets and earnings reports. And they have to be able to take those numbers and crunch them into financial models and future projections. Even if you're dealing with less volatile investments such as bonds or real estate, you have to do the math in order to stay ahead of conventional wisdom. Classes in accounting and statistics are a big help, as are jobs that require number crunching, from I-banking to management consulting. Managerial and Organizational Skills Whether you're a researcher or a fund manager, you'll have to keep track of reams of facts in order to glean the really important information. Furthermore, you'll have to be able to make decisions—and execute them—quickly and accurately. Delay can cost big money. Finally, you need to be able to motivate and manage a talented staff of researchers and analysts if you work your way up to portfolio manager. Without their coordinated efforts, you may not have the information you need to make the best decision possible. Professional Licensing In general, asset managers who work behind the scenes and make the big decisions don't need professional licensing. But if you're dealing with the public at all, you probably will, especially if you're in a position to make buy and sell recommendations directly to a client. For example, you may need an NASD license (Series 7, 63, or 65), or certain insurance licenses. Employers will generally give you the time to get such licenses once you're hired and may even pay the costs. Job Outlook Anyone considering a career in asset management should be keenly aware that markets not only go up, but also go down—sometimes way down. There was a time, in another century, when the markets were on a rocket ship to the moon. The year was 1999 and the entire financial industry was, well, partying like it was 1999. Everyone was a financial genius—not just brokers and fund managers, but secretaries and butchers. Even pimply-faced kids in junior high were expert stock pickers. The hangover from all that partying made the financial services industry a much more sober place. The rookies were largely sidelined, and investments became once again the bailiwick of professionals. The market quietly inched back up in late 2003 and early 2004. Worldwide mutual fund investment shot up 9 percent in the last quarter of 2003 to $13.96 trillion, a 30 percent increase over the third quarter of 2002. Still, the upsurge in the market hasn’t translated into commensurate levels of hiring. Indeed, few hired aggressively in the 2001 to 2003 market swoon, while companies like Charles Schwab shed their headcount by nearly 15 percent. “We’re hiring, but it’s pretty conservative,” says an insider. Indeed, Goldman Sachs’s headcount remained static in 2003, while Merrill Lynch’s sank 4 percent. The hiring picture doesn’t look brighter when you consider the merger-and-acquisition activity taking place in the industry. As more and more firms follow Citigroup’s lead by increasing their service offering through the roll-up of second-tier players, you, the job seeker, get hurt by these efficiencies. Bank of America’s acquisition of Fleet Financial at the end of 2003 continued this trend. But don’t get too discouraged. Asset management firms are still hiring, albeit in a more modest capacity than in the past. There is still money to be made, but you will have to make it the old-fashioned way, by earning it. And you will earn it through hard work and a proven ability to create real financial value. Amidst the broken chandeliers and shattered vases of the postbubble financial industry, some potentially exceptional opportunities still lurk. So if you do manage to find (and keep) a job in the industry, you can still expect to make a solid living and retain something of a life, particularly compared to the slave-labor existence of your investment banking peers. Career Tracks Mutual funds, such as Vanguard or T. Rowe Price, are perhaps the most visible road into asset management. Hedge funds—which specialize in high-risk, high-return investments for wealthy clients—also offer opportunities for would-be asset managers. Large investment and commercial banks, from J.P. Morgan Chase to Citigroup, as well as private firms such as Soros Fund Management, offer private banking (i.e., asset management) for wealthy clients with very large private accounts. Some large-scale investment institutions such as universities and retirement funds hire their own investment staffs, though often they rely on mutual funds and other investment management companies to make decisions for them, from Fidelity to the Capital Group. If you prefer real estate to stocks and bonds, you can work for a real estate investment trust (REIT) such as Equity Office Properties Trust. REITs operate like mutual funds, except they buy and sell hotels and shopping malls rather than stocks and bonds. Finally, a number of boutique asset-management firms take money from a small group of wealthy clients and invest in specialized areas such as start-up companies. No matter where you work, asset management boils down to this: researching and analyzing potential investments and deciding where exactly to allocate funds. Of course, companies require a raft of other employees, including corporate managers, IT specialists, marketing and sales people, and back-office staff. But if you want to be on the front lines where big investment decisions are made, you will fulfill one of these three functions: Researcher The job of the researcher is implied in the name: He or she gathers the primary source material from which investment decisions are made, such as SEC filings and quarterly earning reports. As time passes, researchers are granted more independence and may even perform the kind of higher-level analyses that lead to actual decisions about buying and selling. Generally, researchers are hired straight out of undergraduate or B-school programs. MBAs enjoy better odds of getting hired and generally command better salaries. All candidates should have strong quantitative, analytical, and organizational skills. Analyst Analysts take the work of researchers and apply higher-level financial modeling to make specific recommendations to portfolio managers about which securities to buy or sell. In addition to crunching numbers, they may conduct more subjective research, such as meeting with representatives of potential investment companies to assess management style. Or they may pick the brains of sell-side analysts at brokerages and other financial institutions to gather tips about specific investments and to gauge overall market trends. Seasoned analysts may even participate in developing overall investment strategies for their investment fund. Fund Manager Fund managers are the people who decide what, when, and how much to buy or sell. They must work to ensure that their fund's overall investment philosophy is borne out in actual investments and be willing to change course midstream if their strategy isn't working. They must also make sure their decisions are executed, which means following up on the work of traders and other agents. And of course they're responsible for managing the work of researchers and analysts to ensure that the fund manager is receiving the best, most complete information possible. Besides poring over numbers, they spend a great deal of time meeting with managers of companies they might invest in to make more subjective managerial assessments. Finally, they may have to engage in a certain amount of marketing and public relations—for example, helping to design sales strategies or talking to the press. Compensation The following approximate salary ranges apply to positions in the mutual fund industry, investment counseling firms, bank trust departments, and hedge funds:
Asset Management Job Listings Asset Manager Buy-Side Research Analyst Financial Advisor Fund Accountant Portfolio Manager Private Banker Private Client Services Sell-Side Research Analyst Stockbroker Stockbroker Assistant |
