A career in asset management is enjoying a rise in popularity over recent years. And yet it stays mystic to a lot of people due to lack of information. In this article we will give you the most comprehensive overview of the Asset management industry and career, as well as what you need to know to start a career in asset management.
1. What Is Asset Management?
Asset Management is the service of managing financial investments on behalf of investors, including risk management, asset selection and other management activities. Asset management can be any firm that manages financial assets – Private Equity, Hedge Fund, Venture Capital – or a division of a financial institution, usually an investment bank.
1.1. Asset Management raises funds for pooled investments
Asset Management firms, including Hedge Fund, Private Equity, Venture Capital, and Mutual Fund & ETFs, raise funds from individual investors and invest in different assets (stocks, bonds, derivatives, etc.) to maximize return without assuming excessive risk in the long run.
Hedge Fund (HF)
Hedge funds pool money from high-net worth individuals to beat market inefficiencies and apply any trading strategies including distressed securities, volatile stocks, derivatives, short selling, etc. The money is locked up long enough (several years) for hedge funds to invest in illiquid assets. Hedge Fund Career Path will give more details about the career in a hedge fund and how to get into this investment fund.
Private Equity (PE)
An equity investment fund invests in private companies that have not been listed in a stock exchange. This institutional investor aims at a specific stage of company: the growing stage or the mature stage. PE will take large stakes in a company and acquire not less than 50% of shares in order to be involved in management and strategies to ensure the growth of a company. To know how PE works, check Private Equity analyst & associate: Job Description, Salary and Career Path
Venture Capital (VC)
Venture Capital pools money from wealthy individuals (angel investors), institutions and venture capital funds to invest in many potential early-stage companies (start up). Unlike Private Equity, VC will take minor control of an invested company.
Mutual Fund & ETF
Mutual Funds & ETFs collect money from individual investors to invest in securities such as stocks or bonds. Mutual funds focus on investments that perform better than the market index (S&P 500 or AXS 100). Whereas, an ETF (an offshoot of a mutual fund) holds a basket of index portfolios that are traded on the stock exchange. These investment funds are not allowed to use more than 5% of total assets for investment.
1.2. Asset Management manages investments on behalf of clients
Asset management can also be a division of a financial institution, usually an investment bank, that manages money on behalf of clients. At its core, that means identifying a client’s financial goals, then working to achieve those goals via investment strategy plan, execution of trades, diversification, reporting, and rebalancing. There are investment minimums, which means that this service is generally available to high net-worth individuals (at least $1 mil in liquid asset), government entities, corporations and financial intermediaries (insurance companies, etc.).
2. What Do Asset Managers Do?
The responsibilities of an asset manager may be categorized into three broad buckets: analyze, transact and manage.
2.1. Asset managers analyze asset classes
- Analyze all asset classes including equities, fixed income, alternative investments, derivatives, multi-asset investments etc.
- Perform risk analysis and mitigation
- Prepare quantitative tools and models necessary for investment analysis
- Assist the sales team with client onboarding activities: This usually means developing comparative portfolio analyses, investment implementation strategies and other marketing documentation for prospective clients.
2.2. Asset managers execute trades
- Execute trades at the right time based on the analysis
- Rebalancing the portfolio in accordance with the client’s investment policy statement
- Respond to specific client requests or changing circumstances, resolve concentrated positions or other dynamic aspects of investment management
- Prepare daily/ weekly/ monthly reports (junior level asset manager’s responsibility)
2.3. Asset managers manage portfolio through periodic reviews
- Perform periodic account reviews of the entire portfolio
- Work closely with the other teams for regulatory compliance and reporting
- Maintain and update the client investment policy statement on the basis of client meetings or any major events.
3. Asset Management: Career Progression & Hierarchy
Asset management’s starting position is an associate, moving up to analyst within 1 to 3 years. An analyst will be promoted to a senior analyst after 2 to 3 years. Top of the hierarchy is portfolio manager. While there is no straightforward path to become a portfolio manager, a top performer takes around 8 to 10 years.
Senior Analyst/ Sector Analyst
4. Asset Management: Salaries & Compensation
On average, an entry-level research associate makes between $100K and $150K in total, while an analyst can earn up to $300K a year. A senior analyst usually gets paid around $500K annual compensation. Portfolio managers are top earners in asset management, who can make as high as $1M a year, depending greatly on their performance.
Asset management salaries are a little tamer than many other jobs in finance, with a lower compensation ceiling and slower advancement.
If a high salary is your goal, you’re usually better off starting at one of the largest firms worldwide with $100+ billion in AUM (asset under management) such as BlackRock, Fidelity, Wellington, T. Rowe Price, and so on. The higher the AUM, the higher the fees, and the higher your potential compensation.
Assuming you’re at a large asset management firm with $100B+ AUM:
- If you start as an Associate (i.e., out of undergrad rather than an MBA program), expect something closer to hedge fund Junior Analyst pay: the $100K to $150K range.
- As a post-MBA Analyst at a large mutual fund, total compensation might be on par with what post-MBA IB Associates earn: around $250K to $350K.
- At the Portfolio Manager level, earning potential is around $1.0 – $1.5 million per year.
At smaller firms, you can assume lower compensation closer to the bottom of these ranges and perhaps much lower, especially at higher seniority levels.
70K – 150K
150K – 300K
Senior/ Sector Analyst
300K – 700K
600K – 1M
Asset Management Salary
5. Asset Management: Work Life Balance
Anyone who places work-life balance at the top of their priority list should go for asset management, as it generally offers reasonable working hours, and subsequently better work-life balance than most other finance jobs in investment banking, private equity and hedge fund.
The lifestyle in asset management is without a doubt its most appealing trait. Most asset management professionals work 50 – 60 hours per week, compared with 60 – 70 per week in hedge funds or 90 -100 hours of an investment banker. They have most weekends off, with only occasional Saturday work.
They can also be somewhat flexible in their working arrangements, being in a less pressured, client-driven environment compared to sell-side staff. Stress levels also tend to be lower because they’re not paid directly based on performance.
Due in large part to the lifestyle in asset management, these funds tend to have a far better culture than the typical finance firm. There’s significantly less turnover and more development/promotion from within.
6. Asset Management: Exit Opportunities
Asset management exit opportunities can be analysts and specialists at other buy-side firms whose strategies are similar such as other mutual funds, wealth management, or private equity (though it’s incredibly hard and very few people are able to pull it off).
For most people in asset management, “exit opportunities” don’t exist because becoming a portfolio manager is the end-game. Sometimes analysts and portfolio managers bounce around to better opportunities and leave for other funds, but other than that, the most lucrative exit opportunity is to start their own fund.
It is unlikely for asset management professionals to get into fields like private equity, investment banking, venture capital, or corporate development because they all require deal experience. They may be able to do it if they’ve worked in one of those before joining a hedge fund or mutual fund, or have completed an MBA, but otherwise, it’s a challenge.
7. Top Asset Management Firms (Updated 2021)
Annually, ADV Ratings released a list of the top 50 asset management firms ranked by global AUM (asset under management). The world’s largest 10 asset managers hold a combined AUM of over 40 trillion USD. You may want to find the detailed report rankings.
Total AUM, US$b
State Street Global Advisors
Bank of New York Mellon
8. How to Get Into Asset Management?
8.1. Preferred background to join asset management
There are 2 main entry points to get into asset management: as a fresh undergraduate or as an MBA graduate. Most asset management firms like to grow their talent from within, so they mainly recruit straight out of school, rather than making lateral hires. However, applying as an undergrad might provide brighter opportunities, because the recruiting class size is slightly larger compared to that of MBA. For example, Fidelity hires approximately 10-20 full-time associates from undergrad, and only 5-10 people for its MBA class.
Despite the common belief that it’s easier to move to the buy side after working in the sell side, it’s not the case for asset management. Theoretically, you can do investment banking first and then enter as an MBA. The banking experience wouldn’t hurt you, but it wouldn’t necessarily help, either, as investing is a pretty different game from banking. In asset management interviews, candidates with previous banking experience rarely get questions about deal experience, or even banking work in general!
8.2. Asset management recruitment process
Asset management recruitment usually happens around September to mid-November for undergrad, and around January to May for MBA. Most major asset managers offer internship programs, such as Fidelity, Wellington, T. Rowe, and they hire most of their full-times from their intern class. T.Rowe, for example, only hires 3 seniors in the country per year. In some cases, firms may not even take applications from rising seniors, because too many of their interns accepted full-time offers.
Boutiques, on the other hand, rarely have openings due to low turnover. These smaller shops don’t do regular recruiting, and they typically hire opportunistically when they need to or when talent comes along.
8.3. Certifications for asset management
The Chartered Financial Analyst (CFA) level certification would, without a doubt, boost your appeal to potential employers. ‘CFA preferred’ is on nearly every job posting for asset management roles, and most asset management professionals would either have the charter, or are trying for the charter.
However, if you are an undergrad, you would need to wait until senior year in college to take it. By this time, you’ll hopefully have a full-time offer under your belt, so unless you want to eventually tackle the CFA, it’s not necessary. The best thing you can do to position yourself optimally is to get a good GPA, network when you can, and secure relevant internships. In the case that you don’t have a full-time offer come senior year, completing the CFA level 1 can only help.
8.4. Asset management resume
A resume is the first part of applying for an asset management position. Through this, the recruiters know more briefly about your skills, experiences and what motivates you to get into the financial industry. Try and highlight skills that are necessary for the job. Getting a shortlist is going to be your first and perhaps biggest hurdle so you really need to focus on your Resume.
The recruiters value 2 crucial factors in your resume.
- Your record of past achievements: They could be your GPA/ test scores, credentials, awards and honors, leadership experience, high-profile work experiences.
- Your genuine passion for accounting and finance: This can be shown through your chosen major, extra coursework, past internships, etc.
No matter how many experiences you have, you must keep them brief within one page. You can share the rest of the story at the interview. After submitting your resume, don’t forget to confirm your application and stay connected with the firm, you will be notified about the next steps if you pass the round.
8.5. Asset management interview questions
Asset management interviews are fairly similar to those of other finance positions, with questions ranging from non-technical (behavioral, cultural fit) to technical ones. Here is a non all-inclusive questions list, however, it will provide you with a rough framework for your asset management interview.
- Walk me through your resume: Make an effort to narrate your story. Lead the narrative to the interview. In other words, why are you there? Know your story and tell it in 2 to 3 minutes.
- Why buy side: This answer should highlight your interest in the industry and should tie into your story if possible. Also, keep in mind that you may receive a variation on this such as “Why asset management?”.
- Why their firm/ Why their investment strategy: Highlight unique qualities of the firm, and avoid answers that make the firm or job position a means as opposed to an end. For the investment strategy question, this should tie in closely to the stock pitch that follows. In order to properly execute that pitch, you will need an understanding of the firm’s strategy (growth, value, long-only, etc.).
- Pitch a stock: Aim this to be 2-3 minutes, and know it extremely well and tailor it to their firm’s strategy. i.e. focus on the tangible book, ROIC, FCF if value fund; EPS/margin upside if growth fund. Be ready to pitch another stock. It’s best to know one name like the back of your hand, and have another name or two that you can pitch – long or short – from a high-level. See our stock pitch template for a more detailed look at this.