What is Asset Management? A pathway to a career in investing (2024)

Asset management, the backbone of the financial services industry, is big business.

Asset Managers look after huge sums of money on behalf of their clients, which range from the world’s biggest pension and sovereign wealth funds all the way down to individual retail investors.

After the US, the UK has the largest assets under management (AUM) in the world at $8.8 trillion, according to the Investment Association's (IA) Investment Management Survey..

Asset management, the backbone of the financial services industry, is big business.

Asset managers look after huge sums of money on behalf of their clients, which range from the world’s biggest pension and sovereign wealth funds all the way down to individual retail investors.

After the US, the UK has the largest assets under management (AUM) in the world at $8.8 trillion.

Asset management aims to maximise the value of clients’ investment portfolios while maintaining an acceptable level of risk. Catering to high-net-worth individuals (HNWIs), government entities, corporations, and institutional investors such as pension funds, asset management is a service offered by financial services firms large and small.

Unlike hedge funds, which focus on short-term gains in any market trajectory — up or down — asset management, also known as fund management, generally takes a long view, considering they’re managing people’s savings and retirement funds, aiming to generate consistent returns, as opposed to one-off big wins.

Passive funds, also called index trackers such as exchange-traded funds (ETFs), mirror the performance of large financial indices, such as the S&P 500 or the FTSE 100. ETFs are tradable, meaning their value goes up and down like a security on a stock exchange. Capital invested in index trackers goes into stocks and/or bonds in the same proportion as the index they’re tracking. Fees for these funds are lower than for active managed ones and there’s less chance of human error.

The key role of an Asset Manager is to help clients manage money by investing on their behalf with the aim of making returns over time.

Day-to-day tasks of a portfolio manager include client meetings, research trips, ensuring portfolios are aligned with a client’s financial goals as laid out in the investment policy statement, keeping abreast of investment trends and market movements, and liaising with researchers and analysts.

An Asset Manager’s responsibility is to maintain a portfolio’s performance within an agreed target range — fall below this and you’ll have to answer to the client, while outperformance might suggest too much risk is being taken.Asset management firms sit in the buy-side of financial services — they manage huge sums of client money.

Asset Managers are often specialists, meaning they’ll focus on a specific asset class, mix of assets and/or geography.The three broad asset classes are traditionally equity (stocks), fixed income (bonds) and cash or cash equivalents.

These days Asset Managers also include commodities, such as natural resources and precious minerals, alternative investments like real estate, artworks, cryptocurrencies, and financial derivatives such as futures, into their asset mix.

An Asset Manager’s knowledge to make investment decisions on behalf of clients comes from a lot of research, usually focusing on either top down, bottom up or a mix of the two.

Top-down research goes from the general to the specific, while bottom-up starts at the specific. Top-down research usually starts with the big, global influencers, such as macroeconomics, market trends and socio-political movements, and seeks to exploit opportunities in market cycles.

The bottom-up approach will, if we take equity investing as an example, start by researching local or company-specific variables and work outwards to unearth investment opportunities and good value.

Portfolio managers will perform research themselves, but they will largely be supported by research analyst teams, who will provide them with most of the information they need to make security purchases and exits.

The larger the asset manager, the more versatile and geographically spread its research capabilities.

The key role of an asset manager is to help clients manage money by investing on their behalf with the aim of making returns over time.

Day-to-day tasks of a portfolio manager include client meetings, research trips, ensuring portfolios are aligned with a client’s financial goals as laid out in the investment policy statement, keeping abreast of investment trends and market movements, and liaising with researchers and analysts.

An asset manager’s responsibility is to maintain a portfolio’s performance within an agreed target range — fall below this and you’ll have to answer to the client, while outperformance might suggest too much risk is being taken.Asset management firms sit in the buy-side of financial services — they manage huge sums of client money.

Asset managers are often specialists, meaning they’ll focus on a specific asset class, mix of assets and/or geography.The three broad asset classes are traditionally equity (stocks), fixed income (bonds) and cash or cash equivalents.

These days asset managers also include commodities, such as natural resources and precious minerals, alternative investments like real estate, artworks, cryptocurrencies, and financial derivatives such as futures, into their asset mix.

An asset manager’s knowledge to make investment decisions on behalf of clients comes from a lot of research, usually focusing on either top down, bottom up or a mix of the two.

Top-down research goes from the general to the specific, while bottom-up starts at the specific. Top-down research usually starts with the big, global influencers, such as macroeconomics, market trends and socio-political movements, and seeks to exploit opportunities in market cycles.

The bottom-up approach will, if we take equity investing as an example, start by researching local or company-specific variables and work outwards to unearth investment opportunities and good value.

Portfolio managers will perform research themselves, but they will largely be supported by research analyst teams, who will provide them with most of the information they need to make security purchases and exits.

The larger the asset manager, the more versatile and geographically spread its research capabilities.

To this end, being highly organised is also crucial to the skill set. It allows you to keep abreast of multiple portfolios, target businesses and funds, market movements, and relevant policy or company announcements.

A finance or related (business, economics, statistics, accounting) degree from a good university, beefed up with accounting, statistics and economics courses/modules, will put you on the right track to securing a job interview. This will prove some fundamental technical knowledge, such as financial modelling and accountancy principles.

Careers at asset management firms are highly competitive, so while at university start doing summer internships and work placements at asset management, investment banking, private equity or professional services/accounting firms.

These are almost a prerequisite for entry level roles and the more you do and at reputable firms will only increase your chance of getting a graduate job.

Furthermore, a work placement might lead to a promise of employment upon leaving university.To make it to the hallowed ground of portfolio manager and then to chief investment officer, many people will be Chartered Financial Analyst (CFA) accredited. This is a postgraduate industry standard qualification.

You’ll see many people working in junior and senior roles in asset management with the CFA designation after their names, as well as MBAs.Many people will study for their CFA while paying their dues for at least two years as an analyst, researcher or trader before a firm will consider promoting them to an asset or fund manager role.

You really have to angle your career trajectory towards becoming an Asset Manager, with all its responsibility, so pay attention to networking and mentoring opportunities, courses and secondments, as well as opportunities inside or outside your firm.

A finance or related (business, economics, statistics, accounting) degree from a good university, beefed up with accounting, statistics and economics courses/modules, will put you on the right track to securing a job interview. This will prove some fundamental technical knowledge, such as financial modelling and accountancy principles.

Careers at asset management firms are highly competitive, so while at university start doing summer internships and work placements at asset management, investment banking, private equity or professional services/accounting firms.

These are almost a prerequisite for entry level roles and the more you do and at reputable firms will only increase your chance of getting a graduate job.

Furthermore, a work placement might lead to a promise of employment upon leaving university.To make it to the hallowed ground of portfolio manager and then to chief investment officer, many people will be Chartered Financial Analyst (CFA) accredited. This is a postgraduate industry standard qualification.

You’ll see many people working in junior and senior roles in asset management with the CFA designation after their names, as well as MBAs.Many people will study for their CFA while paying their dues for at least two years as an analyst, researcher or trader before a firm will consider promoting them to an asset or fund manager role.

You really have to angle your career trajectory towards becoming an asset manager, with all its responsibility, so pay attention to networking and mentoring opportunities, courses and secondments, as well as opportunities inside or outside your firm.

Rather than applying for every Finance job available, instead focus on just one division and prepare as best you can for that one division.

This will make it easier to prepare for interviews and you will seem more authentic about why you want to do a given role. You will also be able to spend more time preparing for fewer tests and HireVues, which will lead to a greater success rate.

If you want to learn more about asset management and gain valuable experience to help you get noticed in a financial role, secure a place on the 2024 Summer Analyst Training Programme.

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