I had kind of a productive interview today at an investment fund management boutique (equities + bonds). It’s kind of a smaller fund management company, with just 20 or so employees in total.
My question is simple: what are the future prospects like starting off as an analyst at an investment fund management company? Is it something that could/would lead to something bigger in the future? For those starting off an investment career, is this where you start off as? Is it a desirable starting/entry point?
And from your understanding, what role does an Analyst play in a fund management company? Thanks!
I would go for it unless there is some compelling other opportunity.
Many people here would kill for that opportunity.
There are different kinds of analysts. Most investment analysts are looking at the businesses or macroeconomic factors that underlie the securities the fund is invested in to come up with what the likely scenarios are for how these things will perform as investments as well as look at the risks of it not panning out in order to figure out which have good risk/return characteristics, which may include how correlated their performance is to other stuff that’s being invested in. Wow, that was a long sentence.
Portfolio analysts look at how to construct a portfolio (i.e. how much of each investment to have), what risk and return characteristics can be expected from that, and perhaps stress-test the portfolio to see how it would handle certain types of events like a stock crash or an interest rate spike. They often do analysis on performance attribution to figure out how much of the portfolio performance can be attributed to the market in general vs how much comes from individual asset selection (i.e. how much of your decision making actually contributes to the outperformance of the portfolio)
If it’s a firm that caters to high net worth individuals (which it sounds like it might be), you may also be analyzing the investors’ financial position and risk tolerance to see which products might fit their needs or to see if they have what it takes to stick with you during hopefully-not-frequent down periods.
There are business analysts who do not get directly involved with the investment process, but are responsible for making sure that information flows correctly to the necessary people and stuff gets documented correctly and so forth. You’d probably want to avoid that if you want to do investment analysis, but if you just want to have a comfortable job that pays reasonably well, that isn’t so bad.
The advantage of the boutique firm is that you will likely get to participate in a wider variety of activities and learn more broadly and therefore get exposed to stuff to find out what you are really good at and/or like. The disadvantage of a boutique firm is that these firms are often more fragile and it can be harder for them to survive setbacks. Also, your learning opportunities will only be as good as the people there you can learn from. That said, lots of qualified people move out to start their own firm, so being small doesn’t mean that the people running it are not good people, only that the cushion for setbacks is generally smaller.
I posted about my other opportunity as a Credit Processing Officer in this same forums last week. But I’m not trying to compare the two, I think this question can stand on its own.
I’m speaking about as far as entry points for fresh grads go in the Investment side of things, how “good” is this kind of a role?
The thing is, the starting pay is lower than what banks would pay for a “normal” job to a fresh grad, but at the moment the salary is not the most important thing for me.
I asked the CEIO quite plainly, why would he want to hire a fresh grad like me who has got limited knowledge of investments (I took some related subjects in uni, such as Portfolio Management, but they were pretty basic). His response was that I don’t already have any preconceived ideas and biases, and that it’s better to pick the Apple fresh off the tree.
It certainly sounds better than the credit job, which seems like temp work, not even back office. But look, no one can say if this is a “good” opportunity or not without knowing your decision set. If you’re a stellar graduate who is likely to receive many offers, this job is maybe just ok - possibly bad if you have a shot at working at a more prestigious firm. If your other opportunities are similar to credit processing, then this is fantastic. It really depends.
I think, based on the questions that are being asked, that this is likely a good opportunity to jump at, assuming that the type of analyst is an investment analyst and not a business analyst. I think someone who would be qualified and competitive for much more attractive positions probably would not be asking if this is a good opportunity or not. Someone who is competitive for better opportunities (assuming we are sticking with the investment industry) would know what and where those better opportunities are. Given that you don’t, I would say “go for this one with gusto.”
At the very least, it would provide experience that can be used to make yourself a candidate for better stuff later on. And even if the firm fails for whatever reason, good managers tend to land somewhere useful, and you will have developed professional relationships with them that can be tapped, especially if you find someone to be a mentor.
It’s a fund management company that invests in portfolios consisting exclusively of stocks and bonds for clients. They only have 20 clients (but medium-to-large ones), and they have 3 separate portfolio models, but they’ve been around for a long time in my country and do have a good rep as far as I can tell.
The role of an analyst there as I was explained by the CEIO was doing our own internal research on publicly listed companies - earnings, stock price etc. An analyst will also be speaking to CFOs/CEOs/upper management to get a feel of the direction of the companies. An analyst would need to be able to separate emotions from what the numbers/data/analysis suggests. Analysts have to compare internal projections with that of market research companies like Bloomberg and such. Analysts would have to supply the CEIO with information to “beat” market consensus - be it in terms of buying or selling stocks and need to come as close as possible to the maximum points and minimum points of a stock’s price when selling and buying a stock respectively.
Does that give you a rough idea? Would you be able to advise me better?
My background is Actuarial science. But I’m totally not interested in insurance…so I’ve been applying to banks, investment firms, manufacturing firms (data analyst) and other general companies for a corporate finance role. I’m open to pretty much any kind of an analytical role, have gone to interviews at companies from all the sectors I listed above. All I’m unsure about is which would offer the best growth potential and long term benefits.
Unless you have another opportunity lined up - just take it.
Small IM companies could be dangerous from a career standpoint. They’ll often have a few concentrated investors and/or a few core products. Also, there is often key man risk with those related assets. They may try to diversify with new products and go on an investment spree. There may be generational ownership changes that’s going to shake up management, leadership, ability to execute, and egos.
Key is to grow big enough, unique enough (fixed income and equity isn’t unique), and have a sold performance record that its bought out by a PE firm, broad IM firm (AMG, BoNY), or get lifted out.