- Investment banking. We won't discuss investment banking here -- Vault's Investment Banking community is its most active one -- we will discuss how starting in investment banking can be leveraged into investment management.
Investment banking is the only other industry that deals with securities directly. The analytical skills, industry knowledge and many contacts you'll gain in investment banking are highly useful in investment management. Generally, the most applicable functions in investment banking to investment management are research (equity or fixed-income), proprietary trading and corporate finance, in that order.
- Investment consulting. Investment consulting is an area that many job seekers overlook. Investment consulting firms provide analytical advisory services to institutional investors. Warning: Retail brokers often call themselves "Investment Consultants". True investment consulting firms are never brokerages.
Firms to consider:
- Frank Russell Company
- Ennis Knupp + Associates
- Callan Associates
- Cambridge Associates
- Wilshire Associates
- Ibbotson Associates
Generally, staff at these firms perform studies that help large institutions perform asset allocations. These firms will offer opinions on market conditions and market segments, maintain databases on promising investment managers and monitor and analyze the performance of managers selected by their institutional clients.
The upside of investment consulting is that it is generally much easier to obtain positions at these firms. In addition, since you will be reviewing managers there is some opportunity to get to know the personnel of the firms you are reviewing. The downside is that you will not be directly investing or even analyzing individual securities.
- Management consulting. A large number of investment managers are former management consultants. Like investment bankers, MCs have high-level analytical skills, as well as in-depth, multi-company knowledge of the industries they focused on.
- Marketing research. A surprising number of the top investment managers have started at marketing research firms, in particular the IT research firms, such as Gartner or IDC. The appeal of marketing research (beyond that it's relatively easy to obtain a position) is that you are analyzing competitive marketplaces of products. For example, a market research analyst may look at whether Seibel, E.phiphany or Oracle is succeeding in the CRM space. Such knowledge of products, companies and industries is extraordinarily valuable. In addition, many market research analysts interact frequently with investment managers and can use that network to shift into investment management.
- Treasury positions. Large corporations maintain a group within their finance departments known as the Treasury group. The Treasury monitors the firm's cash (including foreign-currency) positions and may invest the firm's funds into longer-term instruments. However, most treasury departments invest only in extremely low-risk, short-term instruments. If you do decide to go this route, take two pieces of advice into account: One, the bigger the better. The bigger the company and the bigger the pile of money the treasury oversees the better for you. Two, the longer the better. The longer-term the instruments the treasury department is allowed to invest in, the more interesting and useful the experience will be to you.
Every recruiting season ends with disappointed job seekers who hoped to land a position at an investment management. What those potential investment managers don't under stand is that most students coming out of undergraduate school will not be able to obtain a job in investment management, at least at a Tier 1 firm. That doesn't mean you should throw in the towel with the dollar-sign logo. There are several routes that people who want to enter the investment management at a later point in time should consider for now: