Anyone work in a passive shop (Top Tier)? I’m being looked at by a big one, on paper the role looks better than my current one (2nd tier active one), but I’m wondering if switching to passive is career suicide?
I don’t think it is career suicide. I’m sure whoever runs iShares is well regarded in the field.
^Agreed. There are worse things than putting “DFA” or “Vanguard” on your resume.
There are?
Research is, obviously, pretty much non-existent, and PMs essentially manage cash flows.
It’s extremely different.
Yes. There are. You could put CFP on your resume. Or worse–you could work in accounting.
I don’t think it’s career suicide unless you define your career as alpha generation.
However, it’s difficult to figure out how to outperform, so your position may be easily threatened by younger people willing to do indexing at lower comp than you. Outperformance and experience are probably most useful here by knowing how to keep transaction costs low and (if you have an opportunity to do this) how to sell indexing to people who might otherwise be tempted to do active management.
^By “outperform” do you mean relative to other passive managers? Because if you outperform your benchmark, net of fees, you’re doing it wrong and institutional buyers generally frown on that.
I mean outperform in your job role. In traditional active investment, outperforming is beating your benchmark (perhaps with a risk adjustment).
In passive management, beating your benchmark means - as you say - you’re doing it wrong, so you can’t say “I’m really good at my job because I beat my index: see how good I am!”
So then the question is how do you prove that you are doing your job well as a passive manager and justify to your boss that you should not be replaced by a younger person (or computer) willing to do your job for less. The only answers I could come up with are: 1) you are better at figuring out how to cut down on transaction costs, and 2) you are better at marketing/selling your index fund to investors.
There may be more, but I can’t think of them off the top of my head.
or you can say youre better at not losing money
Well you could beat the peer group on a transaction cost basis or by eliminating tracking error.
A lot of passive fund management is logistics work and reporting, so that will be your world. In my prior life as a market risk analyst I had insight into a very similar side of the business and I wouldn’t recommend it unless you are either a very strong accounting or quant hire. Otherwise your career will be capped because those are the types that dominate in those fields. You need to think ahead and play to your strengths over the long haul or you will find yourself trapped on dead end island without transferrable skill sets.
Additionally, for me, I found the lack of individual responsability (everything needs sign offs and is process driven) and the constant flow of mind numbing reportables that you send out into a vast wasteland where noone reads them to be demoralizing which further hurt my prospects in that part of the field. Some mice love the treadmill, others fail to see the point.
That being said, you can definitely be a BSD in the field. I once watched Bogle sit and chastise the Philly CFA society for about an hour at the annual meeting about the stupidity of and societal waste of active management while an MBA intern flipped the slides for him. It was funny due to the degree of awkwardness in the room. But I think those days have passed for a young buck to jump in and pioneer a startup to greatness in that sector.
All valid points I didn’t consider in my initial reaction.
personally I’d never go passive…