Becoming a portfolio manager- Where do i start?

T.R.'s picture
Rank: Chimp | banana points 2

I find it interesting to research companies, look for trends through technical analysis, and see the macroeconomic influences that affect securities. My main problem is figuring out how to become qualified enough to get started in this career path.

Comments (83)

Aug 22, 2016

Do you go to a target school? Have you had any relevant internship experience? If so, have you secured any offers? You're already a senior in college, so you've missed to boat in terms of your junior internship (assuming you haven't done one, which seems to be the case here). In order to become a PM you need to build a rapport in the finance world. Nobody is going to trust a 22 year old with massive sums of money. You need to start networking now. Assuming BB's are out of the picture, cold call boutiques (both in IB and PE). At this stage, any offer, even if it's BO, will have to suffice. Prove to those that you work for that you are a BSD, work through the ranks, go to business school (H/Y/S/W) move to the buyside (if you previously had a IB gig), prove that you are a BSD/work through the ranks again, and then, if you're lucky & smart, you'll eventually become a PM.

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Aug 22, 2016
Aug 23, 2016

Sorry, I should have added a bit more information about my current position than I did. I updated it now. I was essentially asking what type of specific internships/jobs I should be looking at to get started, but I'm assuming the answer would be finding an investment bank to get started with. Wasn't sure if just getting started with an associates job and working up the ranks to get a better understanding of the industry would suffice. Thanks for the reply.

Aug 23, 2016

Finish the CFA as soon as possible

Best Response
Aug 23, 2016

I'm sorry, I didn't contribute anything useful earlier...

There's essentially three early career paths that can set you up to eventually become qualified to run money. I'd emphasize the "eventually" because being a portfolio manager is really a terminal role in your career, and you should expect it to take 15-25 years after undergrad to reach this level (maybe 8-15 at some hf's).

1) Some type of dealmaking path: e.g. couple years banking followed by couple years PE. This is probably the most common route tbh. People will cut their teeth in finance at a banking analyst program and learn the ropes of how markets operate, how to value companies, what to look for in good businesses vs. not good businesses. In reality most of your time here will be learning Excel keyboard shortcuts and formatting powerpoint decks, but it is still the gold standard in popping your cherry in finance, for most. Very few of these people have made meaningful progress toward the CFA before they switch to AM/HF (simply due to time constraints), so that is a liability since you will be interviewing against candidate who most certainly have the Charter, but ex-bankers can typically tackle this once they make the shift.

2) Some type of research path: this can include equity research at a bank, or research associate programs at the large asset managers, but also extends to a variety of other research driven career paths. My first two jobs out of UG were in economic consulting (think Charles River Assoc/Cornerstone/Analysis Group pre-MBA). You'll develop a really strong command of statistical modelling, and you probably get a more comprehensive understanding of valuation in these roles vs. traditional banking. You'll also do a lot of analytical writing, which comes in handy for analyst roles later. But you'll get less execution experience. You probably won't spend much time meeting CEOs or senior managers within companies, rather you'll be surrounded with finance Ph.D.s who teach at top b-schools. There's lots of others that would fit in this category though... tons of healthcare investors come out of Bio/Chem/Eng Ph.D. programs or MDs, occasionally you will see a corporate lawyer with an interesting skillset. If you're going to take this path, doing the CFA is mandatory imo.

3) Some type of trading path: this is the area I know least about since it's not really my wheelhouse, but there are certainly great PMs out there at the elite HFs that came up through a trading desk. I do think this sets you up much more competitively for a hedge fund role vs. long-only, but alas you can still be an extremely effective investor with this type of background. I would look at trading associate programs at the banks or occasionally the larger HFs will have TAP type programs where they take people straight out of UG. If you're interested in technical analysis, this route might be right for you. These are extremely competitive programs however so I would not expect to land one of these roles unless you are the stone cold nuts.

Anyways, I've rambled on enough. The point is you should pick a path that plays to your particular strengths. All of these are just suggestions for the "junior" part of your career. After that, you will likely either pursue and MBA or transition to the buyside in some type of "research analyst" capacity. 5-10 years as a research analyst developing your own command of industries you cover, relationships etc, and if you are good, you might be given the opportunity to co-manage and eventually lead manage a fund. I'm somewhere in these middle stages right now, and can honestly say it is an amazing career, but you need to be prepared to buckle up and put in your time.

Aug 23, 2016

Thanks, I appreciate the help. I'm honestly just trying to figure out the best path I can take to try and make an attempt at getting somewhere in the finance industry. I'm sure it sounds entitled when I say I want to be a PM, but it's essentially just something I found interesting in finance that I want to shoot for and see where it takes me, being totally aware of the complexity and amount of work involved.

Aug 23, 2016
Aug 23, 2016

.

let's see Paul Allen's card

Aug 23, 2016

The path is long and hard, where every year new analysts joins the team, but not every portfolio manager retires. And when the PM does retire, a mad rush of analyst scramble to fill that position.

The question is:

  1. As an analyst, working alongside other analyst for a PM, do you have what it takes to be a PM? Skill sets required for PMs and Analysts are lies on both ends of a spectrum
  2. How sure are you that you can beat your peers to be a PM
  3. How much blood will be spilled for PMs who cannot beat the benchmark.

probably give yourself 20 years to be a senior analyst? And if you can, shadow a PM that likes you. I guess that put you in a better stead

Aug 23, 2016
Aug 23, 2016
Aug 23, 2016

Usually macro PMs are former traders, not fundamental analysts. Fundamental analysts that end up in macro roles become asset allocation guys with global market perspectives. Some macro investors come from this type of asset allocation/CIO background from a bank.

Aug 23, 2016

I'm on the credit side but FWIW both of our IG PM's came from research analyst roles. Granted it's a very difficult transition and I am trying to make the move myself...

"Give me a fucking beer", Anonymous Genius

Aug 23, 2016

your a rockstar if you pull that off bro

Aug 23, 2016

11

"I am not sure who this 'Anonymous' person is - one thing is for certain, they have been one hell of a prolific writer" - Anonymous

Aug 23, 2016

I'd give this a 1 (very slow)

All the world's indeed a stage, And we are merely players, Performers and portrayers, Each another's audience, Outside the gilded cage
- Limelight (1981)

Aug 23, 2016

I've seen it done. Basically the track is target undergrad which puts you at 22 by graduation. 2 years ER at a top bank, 2 years as a buyside analyst (by now you should have your CFA), 2 years at a top b- school, and then another year as an assistant PM, and making full PM by 29. It's very rare, but it's certainly doable, you just gotta hit the pavement hard out of undergrad.

Aug 23, 2016

You think that b-school is necessary/ancillary step to becoming PM though?

People demand freedom of speech as a compensation for freedom of thought which they seldom use.

Aug 23, 2016

@Anihilist

An MBA from a top flight program is pretty much a necessity for a PM to have. It gives the fund(s) they manage/co-manage much more credibility & the prestige helps differentiate from competing funds. The exceptions to this are the tiny 1-3 man trading shops.

All the world's indeed a stage, And we are merely players, Performers and portrayers, Each another's audience, Outside the gilded cage
- Limelight (1981)

Aug 23, 2016
Red Barchetta:

@Anihilist

An MBA from a top flight program is pretty much a necessity for a PM to have. It gives the fund(s) they manage/co-manage much more credibility & the prestige helps differentiate from competing funds. The exceptions to this are the tiny 1-3 man trading shops.

You just clarified a question that, despite all my posts and even direct posing of the question, everyone on this forum has failed to answer. Thank you, and I'd give you more SBs if I could. Perhaps I'll go find some of your other posts and lob a few. Actually, I will lol.

in it 2 win it
Aug 23, 2016

I might be wrong here, but iirc @BlackHat is a PM at a quite good hedge fund (definitely not a 1-3 man trading shop) with only an undergraduate degree and under 30 or quite near that.

Aug 23, 2016

An MBA most likely makes things easier but it is no way near a necessity.

Aug 23, 2016

@Kassad
Appreciate it, thanks!

All the world's indeed a stage, And we are merely players, Performers and portrayers, Each another's audience, Outside the gilded cage
- Limelight (1981)

Aug 23, 2016

@hedge the fun

I'm sure there are rare exceptions (more power to these individuals). I should have stated my comment as intended for funds which are QIB (AUM over $100mn), which is what most banks/brokers consider as their targeted clients.

All the world's indeed a stage, And we are merely players, Performers and portrayers, Each another's audience, Outside the gilded cage
- Limelight (1981)

Aug 23, 2016

Consdering that they're not many $50B funds to begin with I'd say it's more like a 15 on your scale. Generally speaking, the larger the fund the larger the team which implies more compeition to get to the top. Several of those $50B+ funds have 20+ analysts and 5+ PMs. That being said, the largest funds today are all US Large Cap, Int-Bond, or Intl Large Cap funds that have been around for quite some time. I think making PM by 30 wouldn't be that uncommon if you were managing a more exotic product, but the assets in the fund would be nowhere close to $50B. Still, you would be doing pretty damn well at 30.

I work for a fund complex with a fair number of 10-25B funds and I don't think there is a PM under the age of 35. I definintely would have heard of any PMs under 30.

Aug 23, 2016

This is OP speaking.. sorry guys to stir up confusion. The AM firm itself as a whole has over $50B and not the fund the PM would be managing. The fund managed would be more like $150M And I am speaking of an imaginary person.. not that I know of anyone who made it before 30.

Aug 23, 2016

Don't kid anyone, this is an 11. I've been with a buy-side firm and I know what your typical portfolio manager's profile is. I was about to say, the magic number is 35, just as kingtut mentioned above. In any case, there are an extremely limited number of spots, way less than the supply of competent ER analysts.

Aug 23, 2016

Know a guy from my non-target regional school who is a PM in NYC at a $100+ million fund. He's only 26, granted I think he is more of a 'junior' PM sort of thing cause their structure is head honcho, VPs, and then AVPs which is what he falls under.

Frank Sinatra - "Alcohol may be man's worst enemy, but the bible says love your enemy."

Aug 23, 2016

I have never seen someone under the age of 30 be the lead PM for a $50 billion AUM mutual fund before. There are only about ten actively managed funds that have north of $50 billion in assets. If you're talking about $50 billion asset manager complexes, it would still be pretty rare. The only exceptions I could think of would be new funds they're launching with an analyst or junior PM from a bigger fund.

Aug 23, 2016

There's a big difference between being a lead PM and being an assistant pm. Particularly in the bond world, you can have multiple assistant pms under a lead pm. Same thing in equities, although it still very impressive if you can pull it off. In terms of needing an mba, it's definitely shop dependent, many of the older pms have mbas, but new ones have the CFA and that's considered good enough.

Aug 23, 2016

MBA is in no way a prerequisite for being a top PM. That's just false. As far as your question, this is like a 10 b/c the guys who did this likely started right out of undergrad and killed it for 7-8 years before getting handed a fund. Youngest PM I know of in this situation was 27, but that guy was a rockstar and made a lot of money for others as an analyst before getting a fund himself.

Aug 23, 2016

I'll start by echoing the people who have said an MBA is certainly not necessary to become a PM of any kind... hedge fund or asset manager or whatever. Totally false.

But if you think about it, starting a career on the buy side and having good success in an analyst role making decisions and building trust can get you to this position in a matter of 8 years or whatever would keep you under 30. I can name at least 3 guys around my age (still under 30) who are PMs or co-PMs at big asset managers running $1B+ funds. Sure that's not an enormous amount in the mutual fund world but it fits the OP's question. Probably less common to have full discretion, particularly on the hedge fund side I gather, and I can't name a single guy under 30 running that kind of size by themselves.

I'm assuming my present situation is pretty uncommon managing multiples of the $150M mentioned earlier, but I am not sole manager of that money... a lowly co-PM, even though the traders do have to listen to me if I come in and tell them to do something!

I hate victims who respect their executioners

Aug 23, 2016

I know people under 30 without MBA or CFA who are PM's and help to manage large funds. So I can also confirm it is possible. But I would say it's more a matter of perception and trust rather than being brilliant or a rockstar. Also it doesn't hurt to be tall, look older, and suck a lot of johnson.

Aug 23, 2016

It's certainly doable at a smaller fund. I know people $50bn in AuM, are very very small. Firms with that much AuM will already have several experienced analysts that would most likely be first in line for PM. Also, keep in mind that firms with >$50bn AuM have reputations to protect and are unlikely to risk their reputation on some young hotshot.

I think you're greatly underestimating how difficult it is for anyone to become a PM at a large fund, much less for someone to do it by 30.

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Aug 23, 2016
Aug 23, 2016

You say you're almost fluent at English, but your title is completely butchered. It should be "Are my plans realistic to become a portfolio manager"

Aug 23, 2016

Hello opsdude1,
I said this and I say it again : I'm almost fluent in English. Concerning the title, I tried to use a translator because I wanted to post a topic with a perfect title. Unfortunately, the result seems totally wrong ! What you mentioned, "Are my plans realistic to become a portfolio manager", was my first title. So, the next time, I will simply use my own English.

Concerning my questions, have you any answer ?

Thanks,
William

P.S.: if a moderator go there, will you change the title ? Being a new user, the board seems to disallow me to modify it.

Aug 23, 2016

I have very limited experience with French firms. That being said, a colleague at my bank was able to move out of France by attending the LSE. It set him up for US firms in the UK, and even gave him some interviews in the U.S. For wanting to break into London or America, you've got an awful lot of French credentials.

Aug 23, 2016

No amount of education or certification will get you a PM job. You can get on that path though. I think a common stepping stone is to be a research analyst. The companies you mention are sell side firms which i don't think have portfolio managers.

Research this industry further and try not to come off as an arrogant Frenchman.

Aug 23, 2016

There are a lot of questions in there. I'd recommend spending some time reading other threads in this forum for a while so you can get a spectrum of perspectives on various finance career paths. Your first step should be trying to get into that target university (think top 25) though.

Aug 23, 2016

First answer this question: What makes you think you can consistently 'beat the market'?

Some of the smartest and most driven people out there are guaranteed to fail.

There is no way in hell you can answer that question at 16. Odds are, you'll probably never be able to answer that at all.

Nothing personal, that's just the nature of the game.

Aug 23, 2016

To be fully honest it does seem a lot of PMs had short "track records" that are more due to great timing (bull market cycle) rather than active skill throughout all cycles. The only way to learn how to invest is to invest - you can be however great an analyst but at some point you will have to make the transition to actually managing money - personally, I'm still not sure how this transition actually goes. It's CHICKEN EGG problem right? Without actually having managed money, you can't convince someone to give you $. W/o real $, you can't have managed money.

Aug 23, 2016

all i gotta say is figure it out... https://youtu.be/CNUd4kZqjyA

Aug 23, 2016

If you have to ask its too long.

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Life is hard, it's even harder when you're stupid - John Wayne

Aug 23, 2016

Fastest I've seen it done (I worked at an AM for 2 years):

  • Girl graduated NYU Stern at 21
  • Worked with PM team while doing her CFA (was 25 when she got it)
  • Got laid off 2 years later (she was 27)

She still wasn't a PM; all those guys were early 40s at least.

So, I'm sure it can be done faster, but don't hold your breath on being the Patrick Bateman of AM.

in it 2 win it
Aug 23, 2016

If you aren't one already, you aren't gonna get it

I eat success for breakfast...with skim milk

Aug 23, 2016

On average, most people dont get tp PM level.

"...all truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident."

  • Schopenhauer
Aug 23, 2016

There's no timeline...there are different ways to do it..coming in from the buyside, imo, is probably the most difficult to break in because you have to convince the PM that you have good trading ideas etc etc...then he has to appoint you to be his successor when he decides to leave, which could be an indefinite amount of time..

Best route I think is to be a trader, best would obviously be to start on a prop desk where you would work underneath the PM, and if you have a good track record try to start your own hf.

Aug 23, 2016

Would a few years working under a PM at a buyside firm give you the sufficient skills/knowledge to go off on your own, maybe start something yourself?

Aug 23, 2016
PEVAN:

Would a few years working under a PM at a buyside firm give you the sufficient skills/knowledge to go off on your own, maybe start something yourself?

You dont have a track record. hence, sourcing capital will be an issue.

Aug 23, 2016
PEVAN:

Would a few years working under a PM at a buyside firm give you the sufficient skills/knowledge to go off on your own, maybe start something yourself?

No, you wouldn't be able to go out on your own, but you would be able to lateral to another firm as a PM assuming you were an Associate PM or something similar.

"It is hard to fail, but it is worse never to have tried to succeed."

Theodore Roosevelt

Aug 23, 2016

I appreciate the answers, guys. Keep it coming!

Aug 23, 2016

It depends on the firm structure. Some firms have 40 year-old "analysts" that are just like PMs but have an analyst title. At other shops there are more PM titles and you can earn it with several years of good performance post-business school.

Aug 23, 2016

I have been working as an associate in AM. Sadly what they have said is correct. AM is not as structured as sell-side where you expect a progression every 2-3 years. In here you have to build the connections and little by little get to do some trading. I think i am lucky that my shop is relatively small so I get involved in the trades at times.

That said, becoming a PM (at least in Latam) means that first you have to convince the PM you are ready, then you have to wait for him to retire or die.

BUT if you want to become a PM very quickly just come to Latam and I bet you, you can get one in no time as the PM title doesnt mean squat in here (except in true shops) - they use it very losely in here, i mean a recent grad with no exp can be a PM (but it doesnt pay and it is not really PM as someone else will make the shots)

sorry for misspels, i am running into a meeting

Aug 23, 2016

Analyst for AM, assuming it's not PWM but rather something more strategy/allocation related.

Aug 23, 2016

sell side research sets up well for AM and ultimately PM work later in your career. Most PM's are going to have quite a bit of relevant experience because not a lot of firms are going to hand over a book to a fresh college grad. Sell side your pitching ideas/research where AM and PM work is more theory/application/strategy as mentioned above.

Here's the thing. If you can't spot the sucker in the first half hour at the table, you are the sucker.

Aug 23, 2016

Is one more competitive than the other? Also I am not sure whether to apply as an analyst or an associate. I only took a year off between undergrad and law school but have multiple internships with financial firms. Honestly, I'm ok with the idea that I have to pay my dues and get the work experience in, but of course I don't want to shortchange myself. I'm planning on contacting some HR folks regarding this but would love to get the forum's opinion.

Aug 23, 2016

If you're a JD, sell-side will probably hire you as an Associate (post-MBAs come on as Assoc post-MBA and work for a few yrs before making analyst). On the buyside you can probably just join as an analyst assuming your finance and accounting is up to snuff.

Aug 23, 2016

Buy side is harder to get into and far better for most people. Less hours, not a sales job, probably higher pay in most places nowadays. It's more risky, too, as you're beholden to your performance on a scale not seen in the sell side. If you're personable and not an idiot (i.e. do your work and try to come up with novel ideas and stay informed on the firm) you can raise and lower targets on a trailing basis all day long. You won't get fired for being wrong on your $100 PT when the stock falls to $70 from $80. You just reevaluate, put out a new release, and retarget lower.

On the buy side if you consistently mess up you're gonna be fired. Or, even if you're great, if your PM team sucks and they screw up in spite of you, you will be fired as most firms fire the whole squad, not just the PM and keep his analysts.

Aug 23, 2016

I would add mobility is vastly different.

Ultimately you need to be a buy-side analyst before you can be a PM. Sell-side analysts don't get hired directly into PM roles. However, starting out on the buy-side is risky, because as a buy-side associate (or even after your make analyst), you don't have much visibility, and very little professional interaction with buy-siders from other firms. It makes it very challenging to hop between buy side firms. On the sell-side however, visibility is high and you interact with dozens of buy-siders on a very regular basis.

I personally think it can be a great asset to brand yourself on the sell-side, then move buy-side and maintain your vast network of buy-side clients. The downside of course is sell-side work/life balance is generally inferior to that of the buy side, and the imbalance (especially at the associate level) is not generally reflected in compensation. There is also a lot of process driven work and relationship management needed on the sell-side, where buy-side is more of a pure security selection position.

@jankynoname; in research (sell side or buy side) analyst is superior to associate. Don't confuse banking hierarchy.

Aug 23, 2016
jbno1qb:

and very little professional interaction with buy-siders from other firms.

I generally agree with your post, but I have to disagree with this assessment. Buy side analysts and PMs interact all the time at conferences, investor meetings, etc.

If you want to be a buy side PM, your best bet is to go right after becoming a buy side analyst. The next best option is sell side equity research.

Aug 23, 2016

yeah, i'm aware that the analyst is senior to assoc. both on the buy and sell-side. I was just saying that in my experience, most of the BB firms won't hire MBAs directly into an analyst role. You'll need to put in a few years as an associate (sometimes called senior assoc.) and then get promoted to analyst. I think for a JD the path would be similar to an MBA.

Aug 23, 2016

Starting in IB or directly on buy-side would probably be better than S&T

Aug 23, 2016

tip: go to some of the funds' websites, look at their PM bios, there's your answer. there won't likely be any info for HF, but plenty of info for trp, dodge & cox, capital group, BlackRock, etc.

Aug 23, 2016

"that I begin studying for CFA Level 1 in a year or so, so that I can sit when I graduate. Any other suggestions? Does anyone else have experience with beginning their CPA while still in school?"

It's very tough, especially when you study for the CPA and end up sitting the CFA...

Aug 23, 2016

@"Disjoint" Sorry for the typo, but thanks for demonstrating your superb grasp of sarcasm.

Aug 23, 2016

Typo aside, you've been given good advice. CFA level 1 is very doable during school, but don't stress out about it - you have plenty of time. Study (memorize) the ethics section and the rest was mostly already covered in your major. Not sure if they still do this, but you can take it for free if a professor at your university who holds a CFA is willing to sign a piece of paper 'sponsoring' you.

Afterwards, try to find a job out of college that will be useful for investing - doesn't have to be traditional banking/consulting/whatever - anything in industry that will teach you about what makes a good/bad business will be good training. And manage a personal account - doesn't matter how small - so you can practice and form your investment philosophy over time, see what works and doesn't, etc.

Spanish can be useful if you have clients in or look at companies with operations in Latin America or Spain, obviously.

Aug 23, 2016

Currently: clinical psychologist (in training)
Previously: investor relations (top consulting firm), M&A consulting (Big 4), M&A banking (MM)

Aug 23, 2016

Currently: clinical psychologist (in training)
Previously: investor relations (top consulting firm), M&A consulting (Big 4), M&A banking (MM)