What is it?
Investment Management, also known as Asset Management is simply the managing of client’s money. An Investment Manager can work for the federal government, an investment firm, or other financial institution such as an insurance firm. If you were to group investment managers by what they do, they would fall into these categories: hedge funds and proprietary trading desk, mutual funds, and other (the government and insurance side of things).
How do they work?
Investment Management is known as the other side of the finance business. They are the “buy side.” Unlike, Investment Bankers, who create stocks and bonds for others to buy, investment managers buy the stocks and bonds for clients in attempts to produce maximum growth. Investment Bankers advise and inform managers of new stocks or bonds being issued along with the research behind the companies or institutions offering the stocks. The manager then decides whether to buy or not from the investment banker. The investment banker gets a commission for carrying out the trade of stock or bond. The investment manager gets paid based on the amount of money he is managing for a client but gets paid whether or not he gains or loses money. Also, investment management is also considered a more stable career because of the constant flow of money in the economy; people almost always have money to invest.
It is very tough to break into Investment Management straight out of just getting your undergraduate degree. Most of the larger Investment Management firms recruit at colleges and top business schools. However, mid sized to small firms are almost non existent. Thus, networking with alumni, family and personal associations will play a huge part in receiving leads and information about positions that are open. Cold calling firms may be time consuming but it is worth the time to bring your great educational background and amazing resume to their attention.
Breaking into investment management right after graduating is extremely competitive. Many investment managers get into the field as lateral hires after coming from a plethora of backgrounds. Asset Management companies typically look for investment bankers because they have quantitative analysis skills, which are necessary to evaluate companies. Management consultants are also valued because they are able to quickly immerse themselves and get to know a given industry. Research professionals from large corporations are sought for their ability to analyze companies and how they are able to compete.
Vault career guides divides asset management employers into 5 categories. Fidelity and Vanguard are examples of pure investment management companies. JP Morgan and Merrill Lynch are examples of asset management divisions of Investment Banks. Citigroup and Barclays are examples of Global Commercial Bank. Mellon and Northern Trust are examples of Domestic Commercial banks. Prudential and Putnam are examples of Insurance Companies. There are also a large number of small but specialized asset management companies. They specialize in specific methods of investment depending on what a client is looking for. These smaller firms as described before, do not actively recruit. It is up to a job seeker to actively seek these firms and market yourself to them.
Positions in Asset Management.
Investment Management firms are generally split into 3 segments of Portfolio Management, Marketing and Sales, and Investment Research.
The Portfolio Management segment is responsible for executing the plan of the firm. Positions within this segment are portfolio managers, associate portfolio managers, and portfolio managers assistant. Recent graduates of undergraduate schools typically start out as manager assistants. MBA graduates typically start in the research divisions and strive to move towards becoming associate portfolio managers after years of experience. Portfolio Managers are responsible for steering the investment strategy of the firm and choosing investments. Portfolio Managers typically have 7-10 years of experience in asset management. An Associate Portfolio Manager has 3-5 years of experience. They work on smaller and less significant portfolios. Those that demonstrate excellence are usually promoted in 2-5 years. Assistants are responsible for screening for possible investments and help in client relations.
Investment Research consists of positions senior research analyst, investment research associate and investment research assistant. They all take part in analyzing a companies, stocks or bonds. They focus on the companies’ ability to repay a bond, or the growth potential of a stock. They play a very important role in informing Portfolio mangers in choosing investments for clients. Senior research analysts are responsible for presenting, writing reports, attending industry conferences, and basically just learning the intricacies of a company or industry to provide essential information to firm. Associates and assistants all provide supporting research information to the senior analyst.
Marketing and Sales
Marketing and Sales Managers are responsible for identifying new clients and maintaining current client relations. They also play a key role in expanding interest in new investment products offered by the firm. They are responsible for reporting reports and presentations to clients. Lower down the line are Market and Sales Associates, who do similar work as managers but at a lower level.
Senior level employees compensation are mainly based on the size of the portfolio they are working on and also have a huge emphasis on bonuses. Mid level employees are paid a salary and a bonus. Bonsues for them are based not on portfolio performance but by individual contributions and overall firm performance. Entry level employees are also compensated by salary and bonus but bonuses are a smaller part of the entire compensation package. Their bonuses are determined by individual contributions as well as firm and division performance.
My Take on Asset Management
It is an exciting field in which you are responsible for millions and billions of dollars. The hours are less hectic than in Investment Banking. According to a quote on vault.com, some say that they average 60 hour work weeks and even less in the summer. This is compared to 80 hour work weeks in Investment Banking. There is also less pressure to perform in Asset Management because you get paid even if losses are made. The risks and rewards in Investment Banking are much higher while Asset Management provides a more steady job. However, opportunities to jump straight into Asset Management are rare. However, like everything in life, if you keep at it and put enough into it, you’ll get it.