1. Overview of this career area (“Why”)
Asset management
Asset management describes managing money on a client’s behalf. The financial institutions managing the money are called asset managers, and they develop and execute investment strategies that create value for their clients. Broadly, this process involves “putting money to work” by buying, holding and selling financial assets with the potential to achieve a client’s investment goals. Examples of financial assets include stocks, bonds, commodities, shares in private funds and more. In the broadest sense, an asset is anything that delivers value to its owner and the stakeholder(s) it serves. Stocks, bonds, residential properties and commercial office buildings are all examples of assets.
Wealth management is essentially asset management where the client is an individual or family. It’s all of this, plus understanding an individual or family’s entire balance sheet, cash flows, budgets, goals and other detailed elements of their financial situation. This can include terms of employment, funds held in trust or holding companies, insurance needs and charitable giving. The top five asset management firms globally are:
- BlackRock (USA)
- Vanguard Group (USA)
- Fidelity Investments (USA)
- State Street Global Advisors (USA)
- Morgan Stanley (USA)
Source: Refinitiv as of March 31, 2022
The "buy side"
Asset management, the “buy-side,” aims to increase the value of a client’s investments over time, and they receive a fee for their services. Unlike hedge funds, which “hedge” investments and try to make money even when markets fall, asset management firms typically “go long”—they invest in products in the hope that their prices will rise. For this reason, they are also known as “long only investors.”
- Large asset management firms manage money for pension investors around the world.
- The role most people aspire to is that of portfolio manager, where you manage a pool of funds yourself on behalf of clients.
- You don’t necessarily need to be highly mathematical for these roles—unless you work for a quant fund.
Broadly speaking, there are two basic kinds of fund within the asset management industry:
Passive: Also called “index-trackers.” Exchange-traded funds (ETFs) are a good example of passive investment. They track an index, or a basket of assets, but are also a tradable security, so their value goes up and down like a stock on a stock exchange.
Active: This is where human skill and experience comes into the fund management industry. A team of portfolio managers, analysts and researchers use their expertise and a plethora of research, quantitative analysis, forecasts and judgement to make a decision on what assets to invest in with the aim of beating the market.
Careers in Asset Management
Portfolio managers or fund managers are the kings and queens of the asset management world. This is the pinnacle of an investment career, and you’ll need to work your way up. The roles on offer in the asset management industry include the following:
Investment jobs: This is where you find the portfolio managers who run the investment strategies. They tend to specialize in one asset class, whether that’s equities, fixed income or property, and manage the day-to-day investment decisions across the funds they look after. Supporting them are teams of buy-side research analysts. Their role is all about generating investment ideas for portfolio management teams to act upon.
Distribution: While investment teams deal with the money management side of the business, distribution teams are all about bringing client money into the fund.
Sales, or business development professionals deal with large institutional investors, find out what their investment needs are and try to recommend the products of their employer.
Product development/management roles ensure that a fund manager is present in all the markets and asset classes they should be, has the right funds available to investors in the right markets, and that there are no obvious gaps. They also liaise with the risk and compliance teams to ensure any new products will keep regulators happy, that a fund’s pricing structure is correct and that a firm isn’t falling behind their competitors in any areas.
Marketing professionals make sure that the right messages about the products reach potential and existing clients.
Business operations roles are back-office functions as well as IT, HR and accounting positions.
Skills
Skills needed in Asset Management
Unlike at investment banks, where analyst is only the first rung on a much shorter career ladder, analysts in fund management learn the trade. They study the financial results of companies, consume huge amounts of information and news on the companies and sectors they cover, and—when they’re good enough—make investment recommendations. Some people choose to stay as analysts throughout their careers.
During your formative years, it’s likely that you’ll be studying for your chartered financial analyst (CFA® Institute) designation. This is an industry standard on the buy-side.
Graduates don’t necessarily need a degree in mathematics, economics or computer science to get a job as an asset manager. They do need to show critical thinking and a genuine deep curiosity about how companies work and what drives human behavior.
Some regard asset management more as an art than a science, and humanities subjects can often be just as good a way of acquiring critical-thinking skills.
Asset managers must also be aware of a whole range of factors that drive growth and performance, particularly big trends such as environmental, social and governance (ESG) factors as climate change becomes a big area of focus for the pension fund clients of investment management firms.
Global Markets
Global markets is also often referred to as sales and trading. It’s the part of an investment bank that connects buyers with sellers and that stands in the middle to take a piece of the action for itself. At a sales & trading division of an investment bank, your main job will be “market making.” This is the term banks use for making markets—or, to put it more simply, enable clients to buy and sell securities.
What will you buy and sell in a sales and trading job? The answer is more or less any kind of financial product. Some banks will even have physical commodities operations where actual metals, hydrocarbons and shipping services are traded as if they were stocks and bonds. But the three main categories of tradable securities are equities (shares, which represent part ownership of companies), fixed income (any sort of tradable debt, like bonds) and derivatives (securities where nobody literally owns anything, but the two sides agree to a contract to make payments to one another based on a predetermined formula).
Although we often hear about roles in sales and trading (S&T) lumped together, in reality the jobs of sales and trading are very distinct, demanding different skills and responsibilities. However, in most banks, the salespeople and traders work together in a symbiotic way; traders depend on salespeople to help them buy or sell the securities they would like to trade. Salespeople depend on their traders to help make prices for securities that their customers would like to transact.
Skills for sales & trading
Global Markets or Sales and Trading jobs
Generally, sales jobs in investment banks are slightly more strategic than trading jobs. In sales, you have to understand the big picture and to maintain relationships with your clients. The better you understand the big economic drivers and market trends, the more likely you are to be able to anticipate the investors’ needs and to give them useful advice. Trading jobs are more focused and intense. To be a trader, you’ll need to understand the structure of supply and demand at any given moment in time; some of the best traders actively avoid information about longer timeframes as a distraction from what they can see happening on the screen in front of them.
- Sales and trading is a very results-focused job where good or bad performance is immediately obvious.
- To succeed, you’ll need energy, concentration, and coding and math skills.
- Sales and trading jobs working with products like fixed income, equities or derivatives are very well paid, but job security is limited. A single bad year, and you could be replaced.
- Entry to the best trading desks is super competitive; investment banks tend to hire a lot of juniors and promote the ones who perform best.
- The best salespeople and traders go on to work for hedge funds or family offices.
Global markets open early every day; you need to be in the office even earlier, and at any given minute something could suddenly turn into a crisis. Sales and trading jobs don’t tend to require the punishingly long hours that are associated with investment banking, but the hours can still be very intense.
Sales in particular is a noisy, people-focused job which is more suitable for extroverts than introverts, because although dominated by computers, the people making the decisions are human beings and successful salespeople need to be able to form relationships with them on a human level. Sales and trading jobs also need concentration and attention to detail. Some structured products and algorithmic roles also need advanced quantitative skills. There’s not much room for “big picture” types in sales & trading; everything is either a profit or a loss, worked out to the last fraction.
AVERAGE COMPENSATION BY SENIORITY IN SALES AND TRADING, US$
COMPENSATION