Investment Management Internship

Question

I was wondering if anyone here works in or knows the investment management industry well?

I have a few questions below that I was wondering about. I apologize in advance if these have been answered in another past thread.

1) How open is the Investment Management industry to career switchers with no previous Finance background, no CFA progress, etc.?

2) Is there a heirarchy for how difficult it is to get into different firms? i.e. are Hedge Funds much more difficult to crack than Mutual Funds and large Asset Management firms like Capital Group/PIMCO? Is the selectivity during recruiting more a factor of assets under management than it is fund structure?

3) What are the differences in work environment, career progression, compensation between a) mutual funds / asset managers, b) hedge funds, and c) fund of funds?

4) What personality types and kinds of people thrive in this industry and really do well over the long-term?

5) What is investment management like if you're in the IM division of a big bank?

6) I realize how difficult it is to break into the industry without prior experience, however could someone provide advice in getting an internship? Specifically an internship in investment management or as a stepping stone to break into the industry?

Anyone who can answer any of these questions -- feel free to chime in or PM me. Also, feel free to post any web links or documents you think may help me understand this industry.

Thanks in advance!!

futurestrategist · Answer

I am curious about the answers to these questions too

britguy · Answer

There's no single thread with all the information but you can find lots of tidbits if you scout around.

I'm in the oil business right now but hoping to break into capital markets next year. I'm weighing up Stern v Chicago, although I believe Wharton, Columbia and MIT would be good options as well. Anyway, I've done a lot of networking with current students and a lot of reading so I am happy to share what I've learnt but remember I'm no expert (yet!).

Key roles in IM are research and portfolio management. PM is very tough to get into for the uninitiated. IM firms do hire research analysts with no finance background but these spots too are pretty hard to come by, especially on the buy-side where you might have to recruit off-campus. Bigger firms like Fidelity and T Rowe Price have more regular recruiting needs whereas small funds hire ad hoc and closer to the summer. Sell-side research jobs are slightly more accessible (as a rule of thumb, sell-side recruits on campus, buy-side recruits from sellside).

To get in, have a love affair with the markets. Learn how to value companies and buy stocks. Know and understand your own portfolio and be able to justify your transactions. Everyone recommends "The Intelligent Investor" by Ben Graham, a former Columbia professor who taught, and later hired, Warren Buffett. If you're very green and this is too technical, start with Jim Cramer's "Real Money" then advance. If "The Intelligent Investor" is too simple, get "Security Analysis" by the same author. Also think about Bethany Mclean's "Smartest Guys in the Room" about Enron and "Liar's Poker". Also McKinsey do a great text on valuation which was recommended to me by a current student at Booth.

Next, read the WSJ every day. If you can, get the Economist too, and maybe Barron's and the New York Times. FT is good if you want to work in Europe. Also watch a lot of Bloomberg TV or CNBC (Squawk Box, Closing Bell, Mad Money). I know you have a job and a lot of this stuff airs during the day - I'm lucky and work in Europe so it's late evening when these shows are on and I can catch them online. If you're in the US get Tivo, or go to itunes and download the podcasts. This preparation should be interesting and exciting so if it's a chore, you might not be the right candidate for this career.

Also start networking with current students - it's not too early! Your school will have a finance club or IM club so email them and ask questions. But don't contact alums until you're a stock guru and sound like you know what you're talking about. Personally, I'm waiting till school starts for this.

The CFA is pretty useless for i-banking but it will help in any IM related career. The only difference is how much it will help! Big asset managers love it and if they hire you without it, they will probably expect you to get it done. Sellside may be a little less interested and many hedge funds reputedly don't care about it much at all. I'm taking L1 now, and it's hard work but pretty interesting. I'm planning to put in about 250 hours of study time. Volume is the enemy because there's a lot of material but you can compressed notes from Schweser or Stalla which helps a lot. MBA students report that it's possible to take the CFA alongside school, since there is a lot of overlap if your school's curriculum is finance-heavy. You should definitely register to take the test anyway because it shows committment to your cause (cost is $1000 or so) and you can put "CFA Candidate" on your resume. If you're employed full time it's too late to start for the L1 exam in June, but if you're leaving your job early and can start right now, you could certainly get the L1 test done before school. Pass rates are brutul (approx 40% for L1 and similar for L2, most people fail at least one of the exams).

Best of luck guys! Happy to take PMs if you want more info.

wiseguyMBA · Answer

Excellent write-up.
thanks
WG

cougarblue · Answer

1) Somewhat open, but more difficult than for IB and MC.
2) For the few large HFs that recruit MBAs, very, very difficult. For blue-chip mutual funds, e.g. Cap Group, PIMCO, also very difficult. The largest firms have only a few open spots, and there are dozens of students at each of the best business schools that all want that spot.
3) MF (compared to HF) in general will be a more stable career, possibly less hours, a little less "pay for performance",
4) Independent thinkers, true passion for the business, e.g. you'd be doing this job for free
5) Don't know if it's that much different than an independent IM shop
6) Read, read, read (and please don't read Cramer as was suggested), CFA program, follow stocks (read 10-Ks), etc. If on-campus recruiting doesn't yield results, network like crazy. There are a LOT of small firms out there that would be great places to work, you just need to to find them.

Ginetta · Answer

In fairness to the person who suggested this, for all the BS around Cramer, the book suggested is a great beginning investing book, particularly the cyclical investing and trading diagram around page 100 something.

britguy · Answer

Yeah that business cycle diagram is pretty handy. Also if you've never heard terms like "PE multiple" I think Cramer is a pretty good place to start. His books are basic, but there is almost no assumed knowledge so if you're a total beginner, I think you could do worse.

cougarblue · Answer

Nobody takes him seriously and I'm almost embarrassed to say that I read his first book. I just don't think it's worth the time to pay any attention to Cramer, even if his book might not be as bad as his show. The guy really is a trader, not an investor.

For a beginner try "The Five Rules for Successful Stock Investing". Even if you're in the business, you will get something out of this book. After that, I don't think there's any investment text you couldn't handle...it's not rocket science.

britguy · Answer

Oh, I don't disagree. I'm certainly not trying to extol the virtues of Cramer at all, he can spend the rest of his career doing Iron Man cameos for all I care.

As a beginner though, I did find the guy's book to be genuinely helpful so I don't regret reading it. I mentioned it here since the OP might benefit too. But I didn't know of any decent alternatives at the time, so if any newbies are still looking at this thread I'd point them in the direction of the book cougarblue recommends instead. I'll certainly be checking it out myself as well.

Shawshank · Answer

Hi. I just joined this forum. This topic is very interesting.

I'm currently a trader at a small hedge fund in Chicago, wanting to make the move to a trading desk at an i-bank in NYC. But lately, I've become more interested in research/asset management and am considering reapplying to MBA programs next year (2 years ago I was denied at HBS, wharton, chicago, columbia). I'm also planning on taking the CFA level I in december.

A few questions:

1. If I go to business school, given that I'm a trader, would I need to try to get into a research job at a sell-side institution first? Or is there any possibility of getting into the buyside after an MBA?

2. My understanding was that most top hedge funds and asset management firms recruit at the top programs? I know for a fact that citadel, PIMCO, blackrock, etc., all visit wharton, uchicago, and columbia.

3. Assume that I get rejected from business schools again but I pass the CFA exams and stay in my current trading job. Will that help me make a switch into investment management or is an MBA absolutely necessary since I would be a career switcher?

Thanks a lot for your help.

cougarblue · Answer

1) You should try for buy-side, but will also want to consider sell-side research.
2) "Most" top hedge funds DON'T recruit at top programs, only a few. More will recruit (formally or informally) at HBS than at Wharton or Chicago, and Columbia will have good access to smaller funds in NYC as well. Several top asset management firms (certainly not all, or even very many, but more than hedge funds) recruit at top schools, although, I know for a fact that not all of those firms you listed recruit from all of those schools you listed, i.e. your info is incorrect.
3) I don't know, but going to a top school certainly can help out a lot.

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