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

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.

Asset Managers determine a client’s usually long-term financial goals and the level of investment risk they’re willing to take to achieve them. The manager will then propose a mix of investments that matches the objectives. If the client is happy with the suggestions, the manager will invest their money in assets on their behalf and manage the portfolio day-to-day. While monitoring the portfolio, the asset manager might recommend investment strategies, new security additions or exits, or weighting adjustments.

Broadly speaking, there are two basic kinds of funds within the asset management industry: active and passive. Active managers use the experience and expertise of portfolio managers, researchers and analysts to make decisions on which assets to invest in and when, with the aim being to beat the financial markets.

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.

Asset managers determine a client’s usually long-term financial goals and the level of investment risk they’re willing to take to achieve them.

The manager will then propose a mix of investments that matches the objectives. If the client is happy with the suggestions, the manager will invest their money in assets on their behalf and manage the portfolio day-to-day. While monitoring the portfolio, the asset manager might recommend investment strategies, new security additions or exits, or weighting adjustments.

Broadly speaking, there are two basic kinds of funds within the asset management industry: active and passive.

Active managers use the experience and expertise of portfolio managers, researchers and analysts to make decisions on which assets to invest in and when, with the aim being to beat the financial markets.

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.

Your initial assumption might be that the primary skill for someone working in financial services especially with significant amounts of money, figures, and data—is a strong foundation in mathematics, and a love for numbers is the key skill above all else. While at the very least, confidence with numbers is essential, it's merely the tip of the asset manager skill set iceberg.

Portfolio managers need to be people-oriented. After all, a considerable amount of your time will be spent communicating with clients and collaborating with various teams, potentially spread across the world. This includes working with business owners and potential acquisitions. Therefore, communication skills, the ability to be sociable, inspire, reassure, and foster trust will be essential.

Leadership and project management skills are also crucial. As a key strategic decision-maker for client portfolios and funds, you're at the top of the food chain. The buck stops with you. Being a confident leader of your team and the teams that report to you, as well as the ability to manage acquisition or exit determinations as projects, are vital.

Regarding the financial aspect, a robust background in a finance-related field, either through a degree in finance or a STEM subject, combined with experience gained through work placements and internships at relevant organisations, is essential. This provides a foundation for the analytical and critical thinking skills required for the role—not just in conducting your research but also in effectively communicating with the researchers and analysts who will support you in making significant portfolio decisions.

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.