What exactly does AM at a bank do?
This is probably an obvious question to answer but I wasn't sure what AM at a bank actually does. Since traders are no longer allowed to prop trade at banks after the Volcker, it seems like the banks are just an intermediary for buy side institutions. Still though, when I go online, I see that banks still have asset management divisions. What do these divisions actually do besides private wealth management?
They have similar products like a Fidelity or Wellington, except they are a division of a bank.
So they would essentially offer a variety of funds and have the client invest in some combination of the funds?
Yes, the bank has financial advisors and private wealth folks who do that.
They offer funds of all kinds like ‘pure’ asset management companies would but belong to a bank(ing) group instead of being independent. The bank I work at for example has an AM division that is among the biggest in the country.
Great responses here
If you're talking Volcker rule, I think the answer to your question is that they're running money for external clients (retail and/or institutional) rather than Funds from their own balance sheet (as was the way in prop trading).
A side note - this is where the term 'Asset Management' becomes an issue in and of itself. Wealth management arms of banks are still quite large in many cases, but I'm speaking towards the pure 'asset management' divisions - i.e. JP Morgan AM, Morgan Stanley AM. Not their private banks or large wealth management franchises in this case.
This is not an obvious question anymore. Competition, saturation, regulations and other headwinds have changed how banks think about their asset management businesses. Some are deciding it's not worth it - i.e. Wells Fargo - as competition drives down fees, capex is increasing on non-revenue generating items like technology and compliance. It's a small line item on their overall income statements and isn't often a core service. Unless you have a huge wealth management business that can drive assets within your own franchise to create enough scale for it to be meaningful... it's harder and harder to justify. As was noted the days of GSAM (Goldman's AM) having it's own massive hedge fund trading the firm's, and outside, capital are long gone. Banks are not supposed to be in the excessive risk taking business anymore... ha.
Practically speaking - they are no different than your Wellington's or T Rowe Prices of the world. They have a variety of strategies they manage, funds that they offer and various other services on top of it. Some are equity focused, others fixed income and some are just a mix of everything across the board. As I mentioned earlier much of that is driven by the bank and it's clients. Morgan Stanley decided to add more AM services - acquiring Eaton Vance, as they were already using a ton of their funds in their wealth management business Maybe your bank has a large corporate presence - your AM unit may offer a variety of strategies for them. Could be liquidity for their cash, could be other services. In the case of PNC - they jettisoned their funds business to Federated, sold their blackrock stake but kept a pretty significantly sized institutional advisory business. That's 'Asset Management' in that they provide oversight and management of portfolios, but they use outside managers or funds (vs. some of their own lineup potentially).
Anyway - this is a long, not particularly well thought out post to help illustrate the difference in AM's at banks vs. independent firms. I'd argue the biggest actual difference is their strategic setup - they are beholden to the bank. Your comp is, well, also beholden to the bank. Your budgets are as well. It's not that they are bad, or 'lesser' than a Wellington - but often their focus isn't purely on managing money or being the absolute best performing manager in a given year.
Ok but they therefore are lesser than one of the blue chip independents, let’s be honest. Those constraints mean it’s an inferior environment for a talented investor, and compounded over decades, means the talent levels between the best banks and the best independents isn’t particularly close
I agree with you that over time, talented investors will gravitate towards independent shops whose core focus in on managing money. So I'm probably being a bit too rose colored glasses on the AM arms of banks. I do think they are a good place to start a career, get exposure and certainly wouldn't turn them down - but I'm certainly not spurning Wellington for a bank affiliated manager.
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