Career Paths in Asset Management

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On the buy side, the path you choose can be structured if you like traditional firms, or more dynamic if you prefer alternative investments. Either way, the money's not bad.

Asset management, widely referred to as "the buy side," presents two contrasting career routes for investment professionals, depending whether they work in the traditional or alternative segment of the industry.

Traditional, "long-only" managers offer a predictable, steady progression from analyst to portfolio manager within a single firm, for people who acquire the right credentials. Pay within also follows a predictable path at each level.

Alternative money managers - a catchall term that lumps together hedge funds, private equity, and other asset classes such as real estate and commodities - are an entirely different ball game. Today, junior-level compensation at large, successful hedge funds exceeds pay at comparable long-only firms. However, hedge funds offer no "typical" career path, and pay at the middle and upper levels tends to be volatile since fee income rests heavily on fund performance. In turn, this means in the longer term the pay for long-only professionals stacks up quite well: Over a five- to seven-year period, total compensation for the average long-only professional "will be competitive with the average hedge fund and private equity professional," according to Sanjeev Sharma, a recruiter at Michael Page International.

Structure...

In the long-only world, junior analysts can expect to step up to senior analyst after two to three years, then rise to portfolio manager after three or four more, says Tom Kellerhals, senior partner at the Westminster Group, a Chester, S.C., search firm focused on asset management. Such a rise is contingent on obtaining both an MBA from a top school and a CFA designation, he says.

At a large long-only firm, junior analysts currently earn about $150,000 in total compensation. That rises to $300,000 - $500,000 for senior analysts, and $750,000 or more for portfolio managers.

Kellerhals notes that long-only firms offer other career options besides managing investments. After a few years' experience, an analyst who isn't comfortable making portfolio decisions can switch to a supporting role in marketing, sales, client service or compliance. "We happen to place mostly marketing people. That area is growing rapidly, because there is very little difference in performance from one mutual fund firm to another," he says.

...Or Not

In the alternative assets segment, career advancement is less predictable, and junior and mid-level analysts often must move out in order to move up.

Although some hedge funds have programs to develop their professionals in a structured manner, the industry remains "a pure meritocracy," where every individual's compensation rests on their investment results, says Page's Sanjeev Sharma. "An analyst with five years and an analyst with 15 years will both be compensated on the same metrics. If they perform equally, both should earn very similar packages."

Private Equity firms, on the other hand, are structured more like investment banks, Sharma says. Compensation is pegged to a title-based hierarchy that includes analysts, associates, vice presidents and principals/partners. "A key performer can set himself apart, but due to the transaction-based, relationship-based nature of the business, it is difficult for most to break out of the structure," he says.

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