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.
It's interesting you ask that - was just debating internally about how people are characterized on ADV's - not that there's really that much consistency on there...
I think it roughly tracks whether you own your own distribution or not. If you do - i'm assuming your former firm did - i think it's that 20-30% range of personnel who are truly 'investment related'. Those roles I consider are all the traders, PM's, research analysts (actual ones like credit, equity, manager - not 'analysts' which are often glorified marketing roles) and then product strategists. In essence - do you have a direct impact on the investment results or not.
Smaller shops or pure asset managers that take allocations from consultants, funds, etc. - they would be on the higher side most likely in the 60-70% range as they don't need as many marketing, sales, etc. My firm probably hit's in the 20-30% range for direct investment professionals - with another 20-30% who end up being integral to the investment process via the variety of things we do for clients and the various strategies that we have out there.
I think you've hit the nail on the head though - you have a lot of places where the roles are pretty intermingled, especially on the smaller side - it gets worse the more product lines you have. Look at some of the firms that have consulting businesses for pension and E&F - I could argue that even the field consultants there are 'investment professionals' since they play a large role in influencing the actual target allocations of portfolios along with a lot of other more service type offerings vs. simply selling an Agg allocation to the board.
Thank you! I did a quick LinkedIn check, and it seems that the int. Graduate program directly feeds into their Portfolio Management (discrete and quantative)
To imagine that there is a "PM Program" is to smoke crack. It's something you win, not something that you check the box as I and a number of MDs don't think that they'll ever be able to throw that title.
Bump, would like to hear more opinions on this.
AM is too broad to compare to the other finance industries. If someone works in IB, PE, HF, VC, CD, IA . . all of those are clear enough labels that I know what the job is.
AM is different because the label alone tells you almost nothing about what the job is. You could be a guy who sells mutual funds to advisors, a guy who manages cash levels in a fund, a guy who picks evaluates outside managers, a guy who meets with pension consultants to go over allocations . . I could go on but bottom line is, nobody can say they work in asset management and feel like they’ve just said what they do for a living. Specificity is needed.
To answer why IB or PE are more sought after, well IB and PE are sought after compared to most things and AM is a vast ocean as I explained, so IB and PE will be competitive compared to any vast ocean. It’s like saying IB vs PE vs Tech . . there are Tech jobs that are better but you’re including the whole industry which is average competitive like any industry.
By your logic:
the allocators at asset owners allocating to PE, VC, HF etc are also part of those career paths
the IR/Cap Raise teams in those firms are also part of those career paths
the FoF allocators to various PE, VC, HF funds are part of those career paths
Clearly, that's not the case.
AM (at least on this board) is pretty simple: investment teams in traditional active asset management firms. Typically referred to here as "long-onlys" or "mutual funds" - typically they don't charge performance fees (think EQ/FI teams at PIMCO, BlackRock, Fidelity etc). There's some argument for including investment teams in passive funds under the AM umbrella but not most of the things you've listed.
I think your examples make my point better than I ever could. Here's the problem, using your examples to illustrate (my #'s correspond to your examples).
2a. Internal IR at a HF is probably gonna have to identify as HF. But on a career-oriented discussion board, I think that's unhelpful. The badges are helpful to identify what the person's job is, not who their employer is. Should a HF receptionist be on here with a HF badge too? Silly example but the point is, what's most helpful to the OP is to know what someone's job is
2b. Cap intro at a bank - do you say they identify as HF too? Same exact talent pool and work as internal IR but probably has a different badge. Not even sure which badge. Problem.
I think the health care analyst at Fidelity identifies as ER on these boards more than AM. Both have issues; ER can be confused as someone working for a bank but I think they often choose ER label because the AM one is so murky. And the funds may not charge performance fees but long term fund performance is indirectly very impactful on the individual's compensation and career.
I think the surest bet to identify as AM is a passive or quasi-passive (smart beta, factor fund etc) investment role. Someone who works at Vanguard or the ETF side of BlackRock is guaranteed to say AM.
Everyone else is uncertain. Compare that to IB where someone says IB and its super clear what they do.
Sorry for my late reply. First of all, thanks for all the help!
After completing the graduate program, the once who choose to stay in Asset Management become "junior portfolio managers" withing different sectors (small cap equities, ESG, discrete AM)
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