Jobs in the Investments Industry II: Investment Management Bryan Sudweeks Fall 2007 1
Jobs in the Investments Industry ü I. Investment Banking • Investment banking, Asset Management, Sales and Trading, Research ü II. Investment Management • Investment Management, Investment Research, ü III. Financial Planning • Investment advising, Insurance, and Estate planning ü IV. Corporate Finance • Pension Fund Administration and Management ü V. Financial Consulting • Pension Fund Consulting 2
I. Investment Banking and Investment Management ü Objectives • A. Understand the purpose of Investment Banking • B. Understand the purpose of Investment Research • C. Understand the divisions of Investment Management • D. Know where the potential jobs are in Investment Management • E. Know how to prepare for a career in Investment Management 3
A. Purpose of Investment Banking ü An intermediary between the capital markets (investors) and corporations (borrowers) ü Offers strategic advice and financial analysis on Mergers & Acquisitions, Divestitures, and Capital Structure ü Offers Equity and Fixed Income Underwriting (e. g. . IPO’s, High Yield Offerings) ü Provides asset management advice to high net worth individuals and institutions ü Provides Sales and Trading of Equity (Stocks), Fixed Income Securities (Bonds), Derivatives (Options). ü Offers research and advice on publicly listed stocks and bonds to institutional and individual investors 4
Structure of Investment Banks (continued) Investment Bank I-Banking Division (IBD) Asset Management Industry Groups Private Client Corporate Finance Services Product Groups • Work with High M&A Net Worth Individuals High Yield Debt Capital Markets Equity Capital Markets Sales & Trading Buy and Sell Financial Securities and Derivatives Research Analyze all Public information in order to give advice to investors and sales and trading group 5
Structure of Investment Banks (continued) Investment Bank I-Banking Division Industry Group (Corp Finance) Product Group Equity Capital Markets Asset Management Debt Capital Markets High Yield Debt Manage funds for institutions and individuals Sales & Trading Research Private Client Services M&A Equity Consumer Products Technology Telecommunications Real Estate Utilities Health Care Retail Fixed Income Derivatives Economic Equity Consumer Products Technology Telecommunications Real Estate Utilities Health Care Retail Fixed Income 6
B. Purpose of Investment Management ü Major investment management divisions include: • Asset Management • Provide asset management services to investors and institutions including: • Private Wealth Management • Portfolio Management • Asset Allocation • Performance Attribution • Research • Provide research on public stocks and bonds 7
Structure of Investment Management (continued) Investment Bank Asset Management Private Client Services • Work with High Net Worth Individuals Research Analyze all Public information in order to give advice to investors and sales and trading group 8
Structure of Investment Management (continued) Asset Management Companies Investment Bank Asset Management Manage funds for institutions and individuals Equity Fixed Income Consumer Products Technology Telecommunications Real Estate Utilities Health Care Retail Research Private Client Services Derivatives Economic Equity Consumer Products Technology Telecommunications Real Estate Utilities Health Care Retail Fixed Income Derivatives 9
Top 15 Asset Management Companies Rank Firm ASSETS UNDER MGMT (bill. ) 1 Fidelity Investments $853 2 State Street Global Advisors $785 3 Barclays Global Advisors $768 4 JP Morgan Flemming Asset Mgmt. $604 5 Capital Group Cos. $589 6 Mellon Financial $537 7 Merrill Lynch Inv. Managers $529 8 Citigroup $503 9 AXA Financial (Alliance Capital) $481 10 Morgan Stanley Investment Mgmt. $415 11 Vanguard $412 12 UBS Investment Management $405 13 Allianz $383 14 Amvescap (AIM / Invesco) $334 15 Putnam Investments $315 Source: Institutional Investor 10
C. What are the Divisions of Investment Management? ü Investment management divisions include: • • • Investment Management Portfolio Management Operations Investment Research Private Wealth Management 11
D. Potential Jobs in Investment Management ü Where are the jobs in Investment Banking? • Most investment banking jobs are in analysis • Equity market analyst • Debt market analyst • High Yield analyst • Industry Analyst • Consumer products, telecommunications, real estate, finance, etc. 12
Jobs in Investment Management (continued) Asset Management Research Analyst Senior Analyst Portfolio Manager Partner Equity Capital Markets Research Industry Group (Corp Finance) Product Group Debt Capital Markets Assistant Analyst Research Analyst Senior Analyst High Yield Debt Consumer Products Technology Telecommunications Real Estate Utilities Health Care Retail Research Analyst Senior Analyst Assistant Analyst Research Analyst 13 Senior Analyst
Jobs in Investment Management (continued) ü What are the different types of analyst positions? • Analysts position vary depending on who they are doing research for, i. e. , sell-side versus buy-side research ü What are sell-side analysts? • Analysts whose work is used for selling securities to investors, i. e. Research, Sales and Trading, etc. Analysts prepare the research for potential investors in the hope that investors will buy and sell companies through the I-bank ü What are buy-side analysts? • Analysts whose work is used in the process of buying securities for specific portfolios, i. e. Asset Management, Private Wealth Management, etc. Analysts prepare the research and then act on that research to buy companies. 14
The Analyst Position (continued) ü Why are Investment Management analyst positions so hard to get? • They provide instant exposure to senior management teams of the largest companies in the world • They have the highest exposure, learning potential, and salary of any job in the Financial Services Industry (out of college) • They give opportunity to work in small teams, with learning from senior partners • After you have built experience in the field, it offers wonderful opportunities at top business schools and companies 15
Compensation • The median total compensation for investment professionals is $170, 000. Total compensation has increased materially since bottoming out in 2003 due to positive market conditions. Source: CFAI & Russell Reynolds Associates - 2005 Investment Management Compensation Survey 16
The Analyst Position (continued) ü What are the skills gained as an analyst? • Financial modeling and strong quantitative work • Solid Understanding of Corporate Capital Structure & Capital Markets • Solid understanding of companies and industry composition and structure • Professional presentation analysis 17
The Analyst Position (continued) ü What are the responsibilities of an analyst? • Financial Analysis and Modeling • Discounted cash flow and Free cash flow analysis, • Comparable company • Precedent transactions, and • Leveraged buyout • Client Exhibits and Presentations • Market research and competitive analysis • Client interaction • Roadshow execution management 18
The Analyst Position (continued) ü What type of work do Analysts do? • Company Analysis (both buy and sell side) • Financial forecasting • Strategic analysis • Industry Analysis (both buy and sell side) • Strategic analysis • Portfolio implementation, construction, and reporting and attribution • Investment policy statement • Portfolio construction and management • Portfolio reporting and attribution • Whatever is needed to attain company goals and objectives 19
The Analyst Position (continued) ü What are the criteria used to select analysts? • There is a record of achievement • A strong academic record • A balanced individual with extracurricular activities • A good employment history • • • Strong communication skills Evidence of being a team player A tireless work ethic Attention to detail A strong analytical capability (with examples) 20
E. How to Prepare for a Career in Investment Management ü Understand the industry, the positions, and the lifestyle • This is a wonderful but crazy industry • Are you suited for the lifestyle—very long hours ü Start building your contacts • Meet with as many of the visiting speakers as possible ü Do well in your classes • A strong GPA is important • Have a good financial analysis project to leave with potential employers as an example of your best work ü Look to beginning your CFA program • It is looked on highly in the industry 21
A Career in Investment Management ü Don’t get discouraged • Understand yourself and your goals • Work hard and be patient—Faith precedes the miracle ü Keep your priorities in order • Obedience is the first law of Heaven--do what you should • He will help take care of the rest ü Follow the Spirit • Stay worthy of the Spirit • He is your competitive advantage--stay worthy of His help ü Remember the Lord’s hand in your blessings • Always be appreciative of his blessings • Remember to share them with others 22
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