38 Financial Services
Fund Management Pension pots, portfolios and the art of long-term investment
Fund managers invest money on behalf of their clients – including pension funds, institutional investors, retail investors, insurance companies and others – with a view to making it grow over the long term.
Fund managers (also known as asset managers) broadly fall into two camps: ‘active’ fund managers and ‘passive’ fund managers.
‘Active’ fund managers use their skill to build portfolios that can beat the market average and often take bigger risks for better rewards.
By comparison, ‘passive’ management, or index tracking, involves selecting a portfolio of assets whose change in value will match that in a financial index – such as the UK’s FTSE 100, Eurostoxx 50 in the eurozone, the Dow Jones Industrial Average in the US and the Hang Seng Index in Hong Kong. Simply creating returns that match the market is known as ‘generating beta’.
However, within these two categories, the array of fund management styles is huge. For example, two contrasting styles are ‘bottom up’ investing – where a fund manager focuses on analysing individual stocks or securities – and ‘top down’ investing, which relies on analysis of ‘big picture’ trends in the economy, financial sector or individual industries. Some fund managers also focus on investing in fixed income products, while others prefer equities,
key players
Top fund managers by assets under management ($bn) Company
Country of origin
1. Blackrock
2. Vanguard Asset Management
3. State Street Global Advisors
4. Fidelity Investments
5. PIMCO
6.
J.P.Morgan Asset Management
7. BNY Mellon Asset Management
8. Pramerica Investment Management
9. Amundi
10. Deutsche Bank Asset and Wealth Management
US US
US US
US US
US US France Germany AUm
3,808.7 2,151.2
2,104 1,698.6 1,635 1,415.8 1,395.8 1,065.1
965.9 806.3
Source: IPE International Publishers (figures as at 31.12.12) Barry Smith
COO, Institutional client group,
State Street Global Advisors
Decision-making in fund management isn’t often about choosing between the right or wrong path - it’s usually about trying to choose between two equally challenging options.
and portfolio managers often have a particular country expertise, whether that’s the UK, US or emerging markets.
Roles and career paths
Investment roles – investing the money managed by the asset management firm. Graduates start out in investment roles usually as analysts, who scrutinise the best companies and products in which to invest, looking at financial and legal information to assess their growth prospects. The money is actually invested by portfolio managers (otherwise known as fund managers), who are responsible for managing money, often across a range of funds, in their area of expertise, be it equities, fixed income or alternatives. Portfolio managers can also have a sector specialism – say, oil and gas or property – and can focus on particular countries, or groups of locations, such as emerging markets.
Distribution roles – these jobs cover sales, marketing, product development and client servicing, and are about selling a fund manager’s services to the clients who invest their money with it.
As in investment banking, there’s a range of middle-office jobs in fund management in areas such as compliance, technology, operations, performance measurement and risk management. The higher-paying roles are in investment and distribution, however.
Pay and bonuses
The US is the world’s biggest fund management market, and also pays the most. Average pay for fixed income portfolio managers was $530k in 2012, according to a survey by Greenwich Associates and Johnson Associates, and $730k for those working in equities.
In the UK, meanwhile, average compensation for senior investment staff was £220k ($334k), according to PRPi Consulting/PwC.
the overview
Fund managers must combine passion with an ability to absorb a lot of data
Investment and distribution roles pay the most
Junior fund managers are given responsibility quickly
8/10 7/10 7/10 6/10
How hot? Money Kudos Opportunities
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