AM vs ER vs IBD
I got accepted to the rotational program at Berenberg in the UK. There, I have the oppertunity to rotate within IBD, Asset Management, Equity Research and S&T, before I choose one final path.
I was wondering why ER and AM doesn't seem to be that interesting for many people. After quick research, especially AM professional make much more than your regular IBD, PE guys. Is that right?
To the AM and equity research - look up MIFID II. Regulations have had a huge impact on the industry - especially the uncoupling of research and how you pay for it.
Prior to this, you could basically roll (or hide) equity research costs in other services. You'll hear the term 'soft dollars' which effectively are a kick back to a manager that they can use for research, bloombergs, whatever - generally tied to trading coasts or similar services.
Now you have to separate them and - surprise! - people aren't willing to pay for them separately. It's either cheaper to bring them in house or, simply put, you don't need similar research from five different firms - thus headcount is getting reduced with pay coming down. Especially in equity research.
More broadly - ER is simply less and less relevant. There's a million sell side research analysts and, largely speaking, they all cover the same companies and provide the same research. Most don't add value and their calls - at best - are suspect. I can go on but you get the point.
As far as Asset Management - I think most people simply don't understand it and/or are turned of by many of the entry level positions which don't, generally, pay as highly as IBD right out of the gate. The vast majority of Asset Management are not investment focused jobs - many are marketing/sales roles with varying levels of investment involvement. The true investment jobs - research analysts (equity or Fixed Income), PM's, Traders, etc. are generally few and far between and challenging to get. Add in consolidation across the industry, automation trends for trading/back office tasks - headcount is coming down. Fee pressure is real and ravaging compensation across the board. If you are an asset manager attached to a bank - that brings it's own issues (along with plenty of benefits) and compensation risks. Oh - and you better perform. Most don't, or can't consistently perform, and they will see even more shake outs as we move forward.
I also think that, broadly speaking, the variety of experiences are all over the place for people - you have firms that specialize in specific strategies, large fund companies that are all over the place, private wealth managers, insurance companies that have AM arms (and specialize in insurance assets), small boutique like advisory companies that consult on endowments, foundations and pension funds. And that's just a sampling. It's such a broad, umbrella term that you really need to dive into it and understand the various areas to figure out what works best for you.
For actual investment professionals in AM, what would you say the average percentage of firm headcount is? My last firm was ~2k people, and depending on definition I'd say it was roughly 300-400 who I'd be comfortable as classifying as 'investment related.' Before that I was at a boutique, and I'd say maybe four or so of the 15 of us did something investment related, but then again, everybody did a little bit of everything. In addition to writing whitepapers and backtesting strategies, I answered the door.
The reason much of this isn't talked about here is that none of these are positions where a inexperienced hire would likely even be considered. Almost everyone has cut their chops somewhere else before hitting in AM. Yes, AM can be an awesome deal, with wonderful work life balance, and weekly working hours that are frequently hovering in the 30s. Getting in is ridiculously tough, and there is always the possibility of that insane week (or month) where you're putting in 16 hour days all seven days long, and don't mess up, it could cost $50M.
As to pay, I'm undoubtedly pulling an outlier here, but rumor had it that the biggest rock-star PM at my old firm was pulling down $30M/YR.