AM career path decision
Almost at 2yrs in ER. Have potential to move to a decent size AM ($~300Baum) in an associate seat but worried about the shrinking industry of mutual funds overall at this point. Is it even worth going into a long only as a young person looking for a long career with consolidation, fee compression, etc.? I’ve spoken with my mentor and he has advised against it due to the reasons above. Should I be looking to pivot into something different within finance? I am trying to avoid the situation of having non transferrable skills, job cuts, and limited career options down the line. Any insight is helpful.
Based on the most helpful WSO content, it seems like your concerns about the asset management industry are valid. The industry has been facing challenges such as fee compression and consolidation, which could potentially limit career options down the line.
However, there are a few things to consider:
Despite the challenges, asset management is still a significant part of the finance industry and there will always be a need for professionals who can manage and grow wealth.
The industry is evolving, not disappearing. There are opportunities in areas like ESG investing and quantamental strategies, which combine traditional and quantitative analysis.
The skills you gain in asset management can be transferable. You'll learn about different asset classes, how to analyze investments, and how to build and manage portfolios. These skills can be valuable in other areas of finance.
If you're concerned about job security, you might want to consider roles that offer a broader skill set and more career optionality. For example, banking could provide valuable early career skills and the ability to go into private investing.
Remember, it's not just about the industry, it's also about the specific role and company. If the associate role at the asset management firm is a good fit for your skills and interests, it could still be a good opportunity.
In the end, it's a personal decision. You have to weigh the potential risks and rewards, and consider what you want from your career in the long term.
Sources: Fork in the road: Career path in Asset Management, Is Anyone Bullish on the Future of Asset Management???, https://www.wallstreetoasis.com/forum/asset-management/will-asset-management-industry-just-wither-away?customgpt=1
Ignore my title, I work in SS ER and will be going to an AM. Personally, I think this site actually gets it wrong on when is the most attractive time to start certain careers. I think Warren Buffett's quote, "Be greedy when others are fearful and fearful when others are greedy" applies to careers as well. A few years ago, Melvin Capital was one of the most desired places to work at. Now they no longer exist. Same thing happened with the tiger cubs, MM HFs, etc. things ebb and flow.
Personally, I think right now is the most attractive time to join a LO. SMs had their time to shine and that's gone and now it's the MM HFs. Eventually, LO active management investing is going to return to favor, but IMO opinion it makes the most sense to join at the bottom of the cycle. Not the top. 300bn AUM is not a small firm by any means and I don't think they are going anywhere. The markets right now are so dislocated due to the short-term focus of MMs, quant funds, and passive management that I think LOs are primed for future success. Especially as interest rates come down in the distant future. If you can secure a seat at the bottom and get to the point where you're senior enough by the time it gets to peak, I'd rather do that than vice versa. I don't think I'd like being a VP in tech PE right now, where my hypothetical carry is in all fund that was invested at all time peaks, but if you were a VP in 2017 you're likely significantly more senior now, made a bunch of money, and established a track record that you can take anywhere on the street. The current tech MDs and partners all got their starts in the GFC era when everything went to shit, credit markets dried up, and there was little to no M&A activity.
Started my career at a very large AM and disagree strongly with this take. The industry is facing secular, not cyclical pressures. SM/MM hedge funds aren't the issue for active asset managers, they're getting hit by passive taking share from active (unlikely to change) and fee compression.
Despite my points above, I still think an analyst role at a large AM is still one of the top seats in finance, it is just tougher to land one as headcount is not growing.
Does this firm promote associates to analyst roles? Have assets been growing? Is your seat going to be working within the firm's primary strategy (ex: working on a small credit team within a large equity-focused shop vs. working on flagship equity fund)? If the answer to all three of those questions is 'yes' then you should take it, IMO.
Do you think this is also true on the credit/FI side on the LO business?
Posted my take at the same time as you (I’m the below poster). Couldn’t agree more.
As someone who was at an allocator and now is at a large LO, there’s a difference between cyclicality and secular trends. LO AM is a secular loser. It is not going to be “in favor” ever again - outflows may stall here and there but assets are not coming back to this strategy.
There’s still a place for active management / AM but all the money that would ever have come to the space is already here. SM/MM debate is a different one.
My team’s strategy is top quintile performer over most trailing timeframes with recent performance being exceptional and even we are struggling to bring in new assets. There just isn’t an appetite for LO managers today. And when there is, they inevitably try to negotiate lower fees despite net outperformance.
I don’t regret my career decision at all - I’m super happy to have a seat and still paid well especially for the WLB flexibility I have vs other finance jobs. Just have seen your take a couple times and think it’s delusional to think this industry is going to return to the being the money machine it was 20 years ago. PMs can make good money but realistically mid-high six figures is the ceiling for most people’s earnings in this industry and we should be thankful to still get that.
I still disagree with both of y'all's points. Fee compression has existed across HFs and PE as well. Secondly, many of the top HFs have had draw downs in AUM and PE firms and VC firms can't raise money right now and I don't see the same song being sung there. Thirdly, by your logic the only asset classes worth allocating capital to rn is Credit and MM HFs, which doesn't make sense at all. Fourthly, no one is making the money they used to make on Wall Street, not bankers, traders, researchers, or investors across the board so not sure why this is so highlighted in AM, the 90s and early 2000s are over and done with.
Why allocate to PE when the money is illiquid? Why allocate in SM HFs when they have more market risk than MM HFs? Y'all are quite literally proving my point about when people are fearful get greedy. I feel like y'all are the same people that would've said not to be into PE in 2008-2009 when like I said above, those same people are now PE partners.
Empirical evidence (allocators/LPs have the data at hand) strongly opposes your view. There is a massive amount of excess capital sitting with mediocre or even poor performing AMs. Despite lower avg fees vs alternative managers the existence of many AMs is rightly being structural challenged. If it wasn’t for the sales and distribution machinery of the industry, many firms would have shut a long time ago IMO.
There's also massive amounts of capital sitting with average or poorly performing PEs, HFs, VCs, GEs, etc. the issues that you're referencing are applicable to every single buyside industry except the MM HFs rn and once that gets crowded, the money will move elsewhere
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