So, where does somebody begin in the business? Leaving aside the marketing, accounting and operations roles, there are three main jobs where most people get their start.
Before we discuss the three jobs, understand that most people do not enter the buyside straight from their undergraduate education. Why? This is a critical issue for you to understand. First, every buyside firm is, in essence, small. The research department at Boston-based Fidelity Investments, by far the largest firm, numbers roughly only 400 worldwide. The other large firms are fractions of that. Most medium-size firms will have only seven to 20 analysts and two to seven traders. There is little need for extra bodies that may only burden the bottom line (since most firms are partnerships, the bottom line gets taken home by the partners). It's a better bargain for buyside firms to hire someone with experience at three times to five times the price rather than train inexperienced people who may or may not work out.
Inexperienced candidates have to show that they will be immediately valuable -- and that they have knowledge or experiences that will be able to generate profits quickly -- knowing an industry that the firm does not understand already, knowing techniques the firm does not know yet, or having access to clients the firm does not have access to.
~OK, turning to the three jobs:
Research assistant or junior analyst
Research assistants are usually relatively inexperienced and do not have graduate degrees. Junior analyst is the same position, but for someone with industry work experience (i.e., worked outside of the buyside) and/or a graduate degree.
These two jobs involve assisting the senior analytical staff with a number of things. You are usually assigned to either one or a small number of analysts. Duties vary considerably. Often, duties include financial modeling, general monitoring of the industry (i.e., reading the industry magazines the analyst doesn't like), reporting on conference calls and other events the analyst was unable to attend, portfolio reporting and analysis tasks and gradually covering smaller-cap companies in the industry. You should have picked up that research assistants are basically grunts. Nevertheless, it's the best way by far to enter the profession as an undergraduate. Firms conceive of research analyst's career path in two different modes: 1. RAs work at the firm for several years and then return to graduate school or 2. RAs gradually, over two to three years, become full-fledged research analysts (or junior analysts, possibly). There are few RA positions and they?re usually (though not exclusively) found in the larger firms.
The junior analyst position is very similar, but is more the traditional entry point -- usually for people just out of graduate business school. Unlike the research assistant, the junior analyst is clearly being groomed to take on a full analyst position in one or two years. With that expectation, the JA is expected to start covering fairly large companies relatively quickly, with the modeling, research, valuation and other skills that that implies. The JA will either work very closely with the analyst on the major issues at hand and/or be given significant individual projects.
Portfolio managers have massive reporting requirements. They prepare reports and analysis of their performance and actions for current clients, government regulators, outside consultants, potential clients, upper management and the news media. Most portfolio managers want to focus on portfolio management. Firms hire portfolio assistants to assist them with these reporting and analysis issues, as well as other random problems that come up.
~Being a portfolio assistant has its benefits and drawbacks. You do get a great overview of what the PM is doing and usually get to interact with the PM frequently. However, you don't get to research individual investments -- which is the point, after all, of the entire business. You need to be careful in considering any portfolio assistant position. Ask them these questions:
- How closely does the PA interact with the PMs? The more closely the better, as the PMs can sometimes be convinced to give you companies or industries to cover if you know them well.
- Are the PAs in a separate department? If so, it's generally a bad thing. You want to be sitting next to the PMs and in their group, not sitting on another floor and reporting to a non-PM (in which case you've probably ended up in risk management).
- What have other PAs done after a few years of being a PA?
The trading assistant helps out the traders. That could mean anything -- getting them lunch (a traditional hazing ritual), answering their phones, doing reports, getting prices and a myriad of other tasks. ou should be aware that, except for fixed-income traders, most traders on the buyside have relatively little input in the portfolio management process. Buyside traders get instructions from the portfolio management team and then "work" the instructions -- trying to find out how best to buy or sell the security the PMs want (or don't want).
Buyside trading promotion is a strange beast. Trading assistants have been promoted to full traders quickly but sometimes wait years for a promotion. It greatly depends on a host of things, including turnover, the volume of trading and how many instruments the firm is trading.
So, there you have it. There are a few other jobs in the business that are less attractive places to start -- risk management, for one, but the above three are where most people should concentrate their efforts.
Unlike most other professions, there are relatively few obvious entry-level positions into the investment management industry. Sometimes, even the most junior jobs will often require some number of years of experience (at least, the ads will say that).