Currently, it's no secret that active management is shrinking and places like Fidelity are laying off a lot of their staff which is why I'm wondering:
Would it be a wise decision for a college student to pursue working at an IM firm like Fidelity, Blackrock, PIMCO, Wellington or any of the other top funds? Or are the layoffs going to continue leaving only the top performers? To anyone currently working at a top firm like the ones noted above, would you recommend pursuing AM with the climate it's in today or move on to other things?
Also, is PWM shrinking as well on top of large AM funds? Are PWM places like GS, JPM, MS shrinking and/or laying off people like AM firms?
Ask yourself :is there anything else BETTER than AM?
I Banking: Pros: great money Cons: brutal long hours, work is drudgery, no life, cuts due to automation, very cyclical (you'll prob get fired when the next recession hits)
PE: Pros: CARRIED INTEREST, prestige, less bad hours than I banking, less risk of automation Cons: You won't get in unless you're top of your analyst class at Goldmans, JPM, Morgan Stanley, still brutal work life balance
Consulting: Pros: Brutal hours (slightly better than I banking) , good pay, intellectual work, smart colleagues, less risk of automation Cons: difficult to break into MBB, travel is horrific
AM/HF: Pros: unrivalled money potential if you're a high performer, interesting work, great work life balance, if you have elite phd in STEM can make bank as quant analyst Cons: Passive/ETF taking market share, arguably higher risk of automation than PE/consulting
Tech: Pros: good pay, quirky start up culture, change the world vibe, prestige Cons: Unless you genuinely love coding I wouldn't bother (you won't be as good as an aspergers google software engineer) , pay less good than the above options obviously
Law: Pros: money Cons: you're literally the i bankers spit upon servant, awful tedious work, less prestige than high finance roles, brutal hours
I don't know about PWM tbh to answer your question
Also what about the pressure on fees and the fact that people are going passive? I think I really want to start my career is an asset management firm as a research analyst or equivalent for equities but I get discouraged because it seems like AM is shrinking in equities. Thoughts?
Dude, active investors are always going to be around. Just today at my internship a shop called in interested about our (passive) strategies.. They weren't convinced enough to get onboard, and stuck with active strategies instead.
Long story short, there's always going to be an appetite for active management and as the passive space gets crowded that's only a good sign for active managers to take over.
That was a pretty short story...
Personally, I think PASSIVE AGRESSIVE INVESTING is the future.
I, for one, welcome the popularity of indexing, which I simply call "natural selection." Too long has active management escaped the scrutiny of opportunity cost analysis. Too long have shitty closet indexers charged exorbitant fees for less than mediocre returns. Just as I welcome MiFID II to cull the weak sell-side shops, I look forward to index funds to draw assets away from the poor-performing active funds in the buy-side.
I cringe when I see people calling behemoth funds like Fidelity or Blackrock "top funds." This is not banking; there is an optimal AUM range for asset managers to deliver outperformance. These giant, lumbering "asset accumulators" do not offer differentiated products. For an asset manager to increase its revenues, it has to increase its asset base. How do you increase your asset base? By either sales or by performance. For "asset accumulators," it is far easier to raise assets by sales rather than by outperforming the market (and thereby risking underperforming). Let's suppose you have a $100B fund. You expect to get 10% return in the market this year, so assuming you do nothing, your revenue should increase by 10%. It is MUCH easier to sell $5B of this product than to outperform the market by 500 basis points when your fund is this huge, so if you want to raise revenues by 15% instead of 10%, it would be better (and cheaper) to hire more sales reps than to hire better analysts/PMs!
On the other hand, if you are working at a shop with a long history of consistent, high quality outperformance, you have nothing to fear from index funds. Top-tier value shops generally stay within a targeted range of assets as to not dilute the returns of their existing investors. Also, great investors have enough integrity to return capital to investors when there isn't enough compelling opportunities in the market rather than "reaching for yield" (for fixed income) or "buying on relative valuation" (for equities).
So long story short: if you think you can outperform, do not fear index funds.