A basic breakdown
The investment industry is a vast one, encompassing thousands of firms and tens of thousands of investment groups within corporations, unions, foundations, schools and government institutions. How can you determine whether a particular firm is the right one for you to join? First, you must understand the kinds of firms within the business and how they tend to hire.
First, we'll give you a very general breakdown of investment management employers.
Large generalist firms
The industry has gone through dramatic changes over the last 20 years. Consolidation and the focus on globalization have transformed the industry from its fragmented "specialist" structure. Today, asset management is part of nearly every financial services firm, both in the U.S. and abroad. For the sake of simplicity, we have assigned asset managers to five general categories, and listed a few examples of each.
As you can see, most of the large investment management firms are actually divisions of broader financial services companies. However, in many cases, the asset management divisions are run as entirely separate autonomous entities. In other cases, the parent predicates the culture and focus of the business. As you explore career options in the industry, do your homework about the firm's structure and understand how the division operates.
While the industry has shifted somewhat away from specialist firms, their role continues to be in demand because of the specific expertise they can provide. Today, there are nearly 500 firms that manage between $1 billion and $30 billion. These firms are located throughout the country and usually have relatively smaller staffs and vastly different cultures. Below, we have included a small sampling of "specialists" with a variety of investment focuses.
Generally, the smaller firms do not actively recruit. This means it's up to you to target each firm, research its specialty and contact them directly. A great resource is Pension & Investments' annual issue on "The Leading Money Managers." Additionally, Nelson's Investment Guide lists investment managers by state and asset classes, and provides telephone numbers and e-mail addresses.
Who are the Asset Management Employers? A Closer Look
Now let's take a closer look at the types of employers.
Tier 1 Complexes
Tier 1 complexes are mutual fund families that offer a complete or nearly complete range of products. They serve significant numbers of retail, institutional and high-net-worth customers, and will have at least $100 billion under management. These firms are well known throughout the industry.
- Fidelity Investments
- Putnam Investments
- T. Rowe Price
- The Capital Group of Companies
These firms hire almost exclusively through recruiting at top MBA programs or raiding other Tier 1 or Tier 2 firms. Some will hire BA candidates, but generally only from a top school. Inexperienced hires will be brought on as research assistants/associates (if without a graduate degree) or as junior research analysts (with a graduate degree).
Top-tier boutiques are firms that specialize in a particular type of instrument, industry sector or style. They are nationally or internationally recognized for their expertise in that specialty. A top-tier boutique will have between $500 million to $50 billion under management.
- Real Estate --Cohen & Steers, Aldrich Eastman Waltch
- Fixed Income --PIMCO, BlackRock
- Technology --Pequot Capital Management, Weiss Peck & Greer, Firsthand
Top-tier boutiques hire in a similar fashion to tier 1 complexes. However, if their specialty is currently out of favor, an especially persistent but atypical candidate can sometimes obtain a position at a top-tier boutique.
Tier 2 Complexes
Tier 2 complexes are large fund complexes that have a complete or nearly complete product line. However, they are not regarded as highly as Tier 1 complexes or top-tier boutiques. They will often be attached to a bank (whether commercial or investment), insurance company or other financial conglomerate. Tier 2 complexes will serve mainly retail and high-net-worth clients.
- Franklin Templeton
- AmEx Financial Advisors
- Van Kampen
Tier 2 complexes are often scattered in their hiring --hiring internally, recruiting at the undergraduate level at local universities and at the graduate level at both local and Top 20 universities.
Old-line firms are firms that often were started in the 1930s (or even before). They are generally value/fixed-income shops and focus on capital preservation. They will have a mix of old-money very-high-net-worth clients and local institutions.
- Dodge & Cox
- Loomis Sayles Stein
- Roe & Farnham
OLFs hire at Top 10/15 MBA programs. Occasionally, they may also hire laterals from other (value-oriented) firms that are located in the same city.
Universities, Foundations, Pension Plans
These are (generally) tax-exempt pools of money. In most cases, the great majority of assets is outsourced to various outside top firms. The investment staff at these institutions selects and monitors these outside managers. Small portions of the assets can be managed internally.
- Stanford Management Company
- Ford Foundation
The top-tier institutions prefer to hire recent MBA graduates who have spent a number of years (post-MBA) at a premier buy-side or sell-side firm, but who would like to reduce their working hours.
Insurance companies often manage extraordinarily large sums of money. This money is derived from policy payments and set aside against potential claims. Insurance companies have historically invested mainly in high-grade fixed-income instruments.
Insurance companies generally hire investment staff from local universities. Historically, insurance companies have been unable to attract many candidates of Top 20 MBA programs. Insurance firms will hire at both the MBA and BA levels.