Career that has value proposition for client?
Among other things, I am interested in the money management field. The thing that turns me off about the field, though, is that managed mutual funds do not beat the market (slightly debated but almost fact). I mean, yes, some managers do get lucky but for the most part the market cannot be beat. I guess the counter argument is that Warren Buffet..........
Anyway, on to the point of my post. Keeping with a goal of doing money management that actually has a value proposition for clients, really just leaves private banking and private wealth management and the index fund market. How large is this index fund market compared to the manages mutual fund market? Are there a lot of emplyment opportunities for the index funds? I would think that that would be pretty dry work. Now the topic of how to construct an index fund and mimic the index while avoiding the "issues" (ie. when the bottom stocks in an index keep changing becuase companies overtake each other and then fall back with drops in their stock prices, requiring the fund to keep buying and selling these "bottom feeders," leading to higher costs) seems interesting. Anyway, is working for a position with an index fund a reasonable career goal that will be somewhat interesting? Another thought-- how is managing the funds of, say, a fortune 500 company- is that a large part of the money management field? How do the following degrees rank in the aformentioned areas of interest: MBA, MS Finance, MS Accountancy w/ CPA, other masters degrees in business?
Ok, the market efficiency debate... There is a universe of money managers and the AVERAGE moeny manager does not beat the market (alternatively, he does not beat it consitently over a long period of time). But this is understandable because the market is the aggregate opinion of money managers and therefore it is like an AVERAGE money manager. One cannot beat himself. BUT this debate focuses on an AVERAGE, but performance is rarely averag. Its either better or worse than the average - thats why this job is interesting. An index tracker would be this average manager, but it will not stand a chance against the guy who felt the credit crisis coming and pulled out of stocks in the right time... On the other it will be better than a lot of those who tried and failed miserably. But you dont join the game with the intent of loosing, right?
Additionally - the bashing of mutual funds and the rise of the index fund hurt the efficiency of the markets. If less people are analyzing stocks and more are mimicking the index, than the index trackers leech of a less efficient market. This makes more room for smart people with stock picking/timing skills.
And lastly - investing money is investing money, whether mutual funds, index funds, hedge funds, pe funds, private banks, wealth management. They all vary in the way they operate but have the same goal, and can be either good or bad at what they do (in your words - add or destroy value). If it was as you say - that mutual funds destroy value and thats a fact - then there would be no need for them and they would simply vanish from the markets.
tandaradei, you make some very interesting points there. IN your first paragraph, though, I don't think that I follow 100%. Based on my research, the majority of studies show that if you look at the average return, after expenses, of the average managed mutual fund, it is lower than the average return of non-managed index mutual funds. I don't believe many studies have been done on some of the other money management vehicles, such as hedge funds because there is not a lot of data available as these channels do not disclose performance to the general public as frequently.
Anyway, I am most interested in money management that involves more of a financial planning aspect, as opposed to beating the market aspect. In other words, the client wants to buy something for $1M in 5 years so invest with a 5 year time horizon with that portion of the account. Which of the areas of money management fall into said category?
Wait, I'm confused. Are you saying that mutual funds don't tend to beat the market, but PWM firms do?
Silverthunder: "Anyway, on to the point of my post. Keeping with a goal of doing money management that actually has a value proposition for clients, really just leaves private banking and private wealth management and the index fund market." Econ: Wait, I'm confused. Are you saying that mutual funds don't tend to beat the market, but PWM firms do?
Silverthunder:
I think that a mutual fund could be burdened by the unknown inflows and outflows of cash. Also, I would think that the fund could be burdened by administrative expenses of people that have just 3k in the fund. Lastly, I think that the size large mutual funds can make it tough for them to be able to buy and sell their hundred thousand (?)shares without moving the market and effectively getting a worse price for doing so.
Additionally, with PWM clients, the client's time is worth something rediculous- let's say $500/ hr. The client can pay the money manager firm $200 to do even just silly basic administrative stuff & still be doing okay. 500- 200 = 300 of value.
Depends on your undergrad degree, work experience, interests, etc.
One thing you left off is the CFA, which is probably more useful than any of the credentials you mentioned. Knowing accounting is important if you do equity research (and maybe other things), however, I don't think you need to have a CPA or MAcc level of knowledge, so I'd say those degrees are probably inefficient uses of your time. I think the MSF and MBA are both solid degrees for money management (especially combined with the CFA). Which one is better for you depends on several factors. First and foremost, how solid of an MBA program could you get into? IMO, if it's not a top 50 (or maybe even top 30) MBA, then the MSF is probably better in many cases. The MBA derives most of it's value from the networking opportunities and credential, which you lose as you drop down the rankings. If you can get into a solid MBA program, than I imagine it's better than the MSF, but that's just my opinion. The value of the MSF is that it's more technical and focuses mainly on the stuff you're going to need in your job. The other question is, how will your previous work experience allow you to transition? If you're coming from outside of money management, it maybe hard to break in after an MBA, because you won't have money management work experience. That's not necessarily a big deal, as long as you're okay with a lot of the other jobs that the MBA can lead to. If on the other hand, you'd only be happy with a career in money management, it maybe better to get the MSF for making the transition. (I'm no expert on this stuff, so take my advice with a grain of salt. If someone disagrees, hopefully they'll speak up, so you can hear a variety of opinions.)
P.S. One thing that's turned me off about the MSF degree, is that it supposedly trains one to pass the CFA. In other words, the material from an MSF program and the CFA are probably pretty similar. I feel that I could teach myself the stuff from the CFA on my own, so paying money for a degree with so much overlap sounds less appealing than the broad nature of an MBA. I would still consider the MSF though, if I was having a hard time breaking into money management in the first place. Then I'd mainly be using the MSF to try and get up to speed quickly, in order to get my foot in the door (after which, I could start studying for the CFA). Another way to try and break into the industry at first, is to pass the CFA L1 or L2. That way, you could gain some experience, and get the MSF or MBA a few years down the road.
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