Fund management &investment consulting

The art, and science, of investing for the long term

At a basic level, you could say fund

management is all about investing

other people's money, and earning a

fee for the privilege - be it from the man on

the street or from huge institutions such as

pension funds.

Broadly speaking, fund managers (also known

as asset managers) fall into two camps: active

fund managers and passive fund managers.

Active fund managers have to use their skill

to beat the market average, and often take

bigger risks with their investments for better

rewards.

By comparison, passive management, or

index tracking, involves selecting a portfolio

of assets whose value will match that of 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 generating

returns that match the market is known as

'generating beta'.

The array of potential fund managers and fund

management strategies is huge and can be

confusing. Pension fund trustees (who are

often not finance professionals) use investment

consultants to help them choose which fund

manager to put their money with.

Key players

The investment consulting industry

has been shaken up over the last year

or so, most notably by the merger

between Watson Wyatt and Towers

Perrin to create Towers Watson.

It remains a key player, as do Mercer,

Hymans Robertson, Hewitt Associates

and Aon Consulting.

Roles and career paths

Jobs in fund management fall into two

broad categories.

Investment roles: These roles are all about

investing the money managed by the asset

management firm. People in investment roles

are usually either analysts - who scrutinise

the best companies and products in which to

invest - or portfolio managers, who have the

final responsibility for investment decisions on a

range of funds across their area of expertise, be

it equities, fixed income or alternatives.

Distribution roles: Distribution covers roles

such as sales, marketing, product development

and client servicing. It's all about selling a fund

manager's services to clients. Most of these

jobs are focused on winning new business or

maintaining existing relationships.

Most graduates starting out in a fund

management firm begin life as a research

analyst. This involves working with the portfolio

managers, visiting companies to assess their

investment potential, and sifting through buy

and sell information and company reports.

As in investment banking, there's also a whole

range of middle-office jobs in fund management

in areas such as compliance, operations and

risk management. However, the higher paying

roles are in investment and distribution.

If you want to work in investment consulting,

there are two key areas - asset allocation and

fund selection. Asset allocation professionals

advise clients on whether to invest in

equities, bonds or other financial products.

Fund selectors spend their days analysing

fund managers and questioning them about

the nature of their investment strategy, then

writing reports for pension funds on the firms'

strengths and weaknesses.

Pay and bonuses

Much like other areas of financial services,

pay is under scrutiny. Traditionally, bonuses

would have been based on individual

performance and could be many multiples

of base salary. Now, however, bonuses are

being more closely aligned to company

performance, and can be deferred over

a number of years.

In the US - home of the world's largest asset

management industry - senior fund managers

can bring in base pay of US$175-250k,

according to the Robert Walters salary survey.

An analyst/AVP should expect US$80-110k.

Experienced portfolio managers in the UK

earn up to US$220k, according to figures from

recruiters Michael Page. Junior investment

analysts can bring in US$60-95k. In Singapore,

senior salaries come in at US$136k+,

according to Robert Walters.

Skills sought

To be a fund manager, you'll need to be

passionate about investing and an expert at

filtering large quantities of data.

"It's an incredibly stressful job," says Douglas Eu,

CEO, Asia at Allianz Global Investors Asia-Pacific.

"You have days off, but you are always working.

You are never really on vacation because you

have a lot of responsibility. You are managing

somebody's money as a fiduciary. It's like being

a student taking a test every single day and the

grade is published every day in the newspaper."

What attributes help you get a foot in the door?

"Getting to grips with annual reports,

company balance sheets, broker analysis and

performance indicators obviously means a

decent level of numeracy is important," says

Richard Barry, HR director at Baillie Gifford.

"That said, generic research skills, which are

often demonstrated in more humanities-based

rather than mathematical and financial degrees

are highly desirable in fund management."

And again, good communication skills are vital.

"You might be speaking to a roomful of brilliantly

intelligent bankers, or asset managers, trustees

or lay people and you'll need to be able to

participate in discussions about complex

financial situations while ensuring clients fully

understand," says Paul Deane-Williams, senior

consultant at Towers Watson.