What's the key difference between IB's AM departments and Buyside AM?
I am an undergrad student majoring in Economics. I will finish an MSF degree in the end of 2023. After reading hundreds of posts on WSO, I figured that AM is the most suitable domain of finance for me. However, I didn't see much posts about the differences between IB's AM department and Buyside AM. I am a bit confused because IB seems to be on the sell-side and AM seems to be on the buy-side. Please share you insight. I will sincerely appreciate that.
The fact an asset manager is attached to a bank is irrelevant, it is functionally the same business as any other asset management firm.
Thank you for your insight!
I wonder if the buyside characteristics in the AM department make it much more difficult to break into than other departments, such as IBD or S&T. For my understanding, buyside financial institutions seem to prefer people who have two or three years of work experience? If you know a bit on that, would you please elaborate a bit more?
Similar to normal AM firms, bank AMs rarely hire undergrads into research roles.
Also the bank's rep does not necessarily carry to its AM division.
The difference is primarily tied to culture and priority. Within a bank, AM is a business line that will have a range of importance based upon the bank. That effects resourcing, prioritizing, etc. Not unusual for a bank to buy or sell that expertise vs building organically. When you're dealing with s buyside AM shop, that's what they do. All the resources go to that business (the managing of and distributing that managed money). Do they buy and sell of JV, sure, but in the context of growing their business. Whereas in a bank, each business line needs to compete for internal dollars and justify their existence.
Thank you for sharing some insight here!
I plan to (try to) pass CFA level 1 by the end of this year. Many people I know told me that CFA would not help me to get an interview at a decent fund or an investment bank. Whereas quite a few people informed me that CFA is a must-have for ER/WM/AM in both buyside and sell side. I know that both groups of people are not giving me sufficiently accurate depiction of the industry, but I still wish I can gain some advises and understanding from you. Do you have any idea about this problem?
If you're looking to be in an AM investor role (or EQ / Credit analyst at an AM) , the CFA is highly regarded. Some firms will require it. If you're looking to start the path of working as a PM in the AM world, a CFA is pretty common and highly regraded. Otherwise, unless the firm requires / prefers it as a show of interest, it's not necessary.
Pure buyside AM > IB AM arm any day
One of those timeless truths out there.
Dick why are Morgan Stanley Asset Management, Goldman Sachs Asset Management not regarded in the same tier as Capital, Fidelity, Wellington, Pimco?
Look in the financial statement of how much revenue those arms bring to the overall bank vs. their core IBD division. There's a reason why Morgan Stanley and Goldman are view as investment banks, because their core business is IBD advisory. FYI - wealth management for MS / GS are major growth areas and that's not true AM.
I understand the revenue percentage from AM is way lower like you said. I’m just comparing apples to apples so their AM arm to capital, fidelity. I’m not talking wealth management like PWM. Morgan Stanley aum is 3.3 trillion and gs is 2 trillion.
See my first answer and also revenues vs. pure play entities, history, pay, etc. Another way to put it - putting all branding asides, would you (an LP) want to buy a watch (or an investing service) from a pure play entity like Vacheron that specialize in their craft and does it to the highest quality, or a Montblanc which sells everything including watches and more known for their pens?
Is wealth management included in AUM numbers ? Maybe thats the discrepancy?
You're kind of answering your own question with the EV acquisition. They didn't organically build the expertise, they bought it. They could just as easily sell it if they choose to go in a different direction. EV is simply acting as a fee diversification lever. I wouldn't want to be there when/if the regulators change the model. Also, because of all this the culture of MS is MS. They are an IB with other fee arms. Don't want to get in to a whole active vs passive mgr discussion (at least on this thread), but what real expertise does MS have in actively managing money. You previously mentioned something about it's all just index tracking. No No No. In up markets it may appear that way, but in volatile times, expertise in active mgmt is very important. Indexing is ok for a sleeve but by definition, you can't drive alpha that way. You need other levers. Maybe they have it. I don't know. But I do know it exists at Capital Group, Wellington, PIMCO, Fido. If you look at PIMCO as an example (yes FI is their forte), they outperform their tracking indexes 92% of the time over a 5 yr period. That's huge! They also have "equity like" funds that outperform the s/p 500 (after fees) by using the index and actively managing derivatives and a FI sleeve within the fund to grab alpha. Great for qualified money as the alpha grab is largely in dividends. You don't get alot of stuff like that at GSAM, MS, etc. A big chunk of those bank divisions are actually tied to WM, not AM ( I realize they have their own funds too). Don't know the answer to this and would be interesting to learn who the IB PBers use for mgrs of client money, internal or independent AM shops). I suspect A LOT of the latter.
Look I gave you a straightforward answer. This is just how the professionals in the finance community generally sees pure plays vs BB owned asset managers. Nobody in their right mind would take an offer at MS Eaton Vance vs a PIMCO. You obviously seem to prefer BBs so in that case good on you lad. Couldn’t be more wrong on the tracking part, but I’ll let somebody else step in. You’re thinking of a BlackRock. All of Cap, Fidelity, Wellington, PIMCO primarily do active management.
Looks like my job is done.
Something that I think is worth adding here as well is that many who have worked for both a bank's Asset Manager and a pure play Asset Manager find that their careers grow more quickly, their compensation is higher, and they contribute more to the overall business.
It sucks to work for a cost center. Period. Many banks view their asset management arms as an added product to a fully diversified suite of financial products, not a significant revenue generating entity, not something that is defined as their core business. This means that every cost that can be cut from your business will be.
Nobody wants to work for a cost center.
100%
One thing to mention here about working for an independent AM is that you'll always be prioritized and your work will represent far more value to the company on the whole than if you work for a bank's AM arm. You'll have far more resources and be able to do far more things without having to worry about the bank trying to keep costs ultra-low internally
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