I was wondering if anyone could provide some insight into good answers for the following asset management interview question! Thanks!
If you had 10 million dollars to invest, how would you invest it in the current market environment?
How to Invest 10 Million Dollars in Asset Management or HF Interview?
This is a common interview question and when answering - what matters is your thought process.
- A smart way to start answering this question is to ask a follow up question: who am I investing the money for? If you're investing money for yourself (a ~20 year old) you will be more aggressive in your allocation than if you are investing for your grandmother.
- Once you've established who you are investing for you should break up your asset allocation into stocks vs. bonds. If you are investing for the 20-year-old you might say that you’d invest in 90% stocks and 10% bonds and explain the rationale that you should be more aggressive as a young investor with a long runway to build wealth. For a middle age person you might propose a 50-50 split between stocks and bonds.
- The next thing to consider would be specific allocations. One way to do this would be to do look at sector investments within the asset class - IE "Within the equity pie, I would look to invest in IT and Healthcare for growth and Utilities for security and dividends.
- Alternatively, instead of doing sector allocations you could have a few specific names / etfs that you would invest behind if you would like to be more specific or if you would like to highlight you interest in stock picking
Within this method, what really matters is your thought process. Explain everything as you go along. Don't make any unspoken assumptions about the client or the environment.
A user shared another good template for answering this question that is more nuanced and appropriate for a more experienced individual that wanted to show some serious finance acumen.
User @Krakauer" shared this template:
Krakauer"If you were given $10 MM to invest, where would you invest it?"A: I would want to know a few things about the overall expectations, duration, liquidity requirements, etc. Then you should expand on a duration and risk appetite by saying something like "Assuming it is a pension fund looking to invest over a 2-year horizon, I would recommend overweight in ____, underweight in ____, etc. Further, some personal equity preferences of mine include x1,x2,x3 (know the companies you pitch).
While this question can be asked in a variety of different interview types, when preparing for an AM interview it is wise to do some research on the strategy of the firm and tailor your answer that way.
BreakingOutOfPWMHaving a smart answer to this question is great. Researching your firm's strategy and making sure that your answer is tailored to whatever their thoughts are on the market is even better. It's OK to have a counterpoint that's grounded in hard data, this can actually be awesome if well argued. But you don't want to be a total counter.
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This question is inherently difficult to answer given how broad Asset Management is. Was the interview within the context of a top-down, bottom-up, macro, equity, credit, special situation, FOF, etc. fund? Not to mention within equities and credit at least, you could be a growth, value, GARP, etc. styles which all further change the answer. The last big thing I would need to know is what the firm's relevant mandate is (i.e. is performance tracked relative to a benchmark, is it an absolute return mandate, does it try to quantify risk in the form of specific ratios, does it have a set timeline/maturity expectation, etc?). A change to any one of these drastically changes the answer.
Having said that, i'll play ball. As an equities guy, if I was managing $10mn of my own money, I'd probably keep at least half of it in cash with the balance entirely in a few high-conviction SMID cap names. While I wouldn't describe the market as overly expensive, it's also not cheap thanks to eternally low interest rates inflating asset valuations. There should be asset bubbles forming somewhere and whenever those pop, there'll be some good buying opportunities. This shouldn't be construed as an attempt to time the market (that's impossible), but more that I haven't seen a lot of names that offer a compelling enough margin of safety to make them worth investing in (i.e. nothing is obviously cheap). This answer implicitly relies on a very long term investment horizon, but I believe that would produce more enduring returns and would be predicated on an absolute return goal as opposed to benchmark tracking.
Having a smart answer to this question is great. Researching your firm's strategy and making sure that your answer is tailored to whatever their thoughts are on the market is even better. It's OK to have a counterpoint that's grounded in hard data, this can actually be awesome if well argued. But you don't want to be a total counter.
Come on, it's obvious...
When asked this question in an asset mgmt interview, the only possible answer is: "I will give the entire 10mm to your wonderful firm to manage!"
If you were given $20 Million in cash, how would you invest it? (Originally Posted: 09/05/2011)
If you were given $20MM in cash, or any large figure of your choosing, how would you invest it?
Would your investment strategy change if $20MM is the only income you'll have in your lifetime, so you're barred from working a job (i.e would you be more risk averse?)
I have no real idea of the kind of connections/deals that would be opened up to me if I had that much change.
live off dividends and interest
This.
make a life size solid gold statue fashioned after my likeness
Go entrepreneurial
Trade futures
Invest it in exotic cars, holidays, houses and women.
uhh dont you mean, EXPENSE it in exotic cars holidays houses and women?
I'd probably become an equity sponsor $1mm-5MM and do what trazer would do with the rest of my cash.
invest in property in mumbai india. The last 10 years the prices have grown ~400%. the apartment my dad bought for ~100,000 is now ~400,000
Or start PE/VC firm. (like that wont happen).
^^ haha thats also a option
Looks like this thread would come in handy then....
http://www.wallstreetoasis.com/forums/best-dividend-paying-stock-list-a…
buy a couple keys from noreaga and chop them on the open market for 100 percent profit
then you can deposit the profits at wells fargo. I hear they offer good services for narcotics dealers
is that a lot of money?.... probably start a hedge
Is that not a lot of money?
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