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The "Gold-Plated" MegaPlexes
Description: The "Gold-Plated" MegaPlexes are mutual fund families that offer a complete or nearly complete range of products. GP MegaPlexes serve significant numbers of retail, institutional and high-net worth (HNW) customers. A GP MegaPlex will have at least 100 billion under management. These firms are well-known throughout the industry.
~Hiring: GP MegaPlexes 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 graduate degree).
Tier 1 Boutiques
Description: Tier 1 Boutiques are firms that specialize in a particular flavor of instrument, industry sector or style. They are nationally or internationally recognized for their expertise in that specialty. A Tier 1 Boutique will have between $500 million to $50 billion under management.
Examples: Real Estate - Cohen & Steers, Aldrich Eastman Waltch
Fixed Income - PIMCO, BlackRock
Technology - Pequot, Weiss Peck & Greer, Firsthand
Hiring: Tier 1 Boutiques hire in a similar fashion to GP MegaPlexes. However, if their specialty is currently out of favor, an especially persistent but untypical candidate can sometimes obtain a position at a Tier 1 Boutique.
~Tier 2 MegaPlexes
Description: Tier 2 MegaPlexes are large fund complexes that have a complete or nearly complete product line. However, they are not regarded as highly as Tier 1 MegaPlexes or Tier 1 Boutiques. They will often be attached to a bank (whether commercial or investment), insurance company or other financial conglomerate. Tier 2 MegaPlexes will serve mainly retail and HNW clients.
Hiring: Tier 2 MPs 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.
The Old-Line Firms
Description: Old-line firms are firms that were often started in the 1930's (or even before). They are generally value/fixed-income shops and focus on capital preservation. They will have a mix of old-money very-HNW clients and local institutions.
Hiring: OLFs hire at top-10/15 MBA programs. Occasionally, they may also hire laterals from other (value-oriented) firms that are also located in the same city.
Universities, Foundations, Pension Plans
Description: These are (generally) tax-exempt pools of money. In most cases, the great majority of assets is outsourced to various outside Tier 1/Tier 2 firms. The investment staff at these institutions selects and monitors these outside managers. Small portions of the assets can be managed internally.
Examples: Stanford Management Company, Ford Foundation, CALPERS
Hiring: The top-tier institutions prefer to hire recent MBA graduates who have spent a number of years (post-MBA) at a premier buyside or sellside firm, but who would like to reduce their working hours.
Description: 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.
Examples: State Farm, Allstate, Cigna
Hiring: 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.
Description: Financial-planning firms focus on HNW/higher-end retail customers. These opportunities focus on extensive interaction with customers to solve tax/estate/personal financial planning questions. This function does not generally select individual securities but performs asset allocation into mutual funds.
Examples: PCS Groups of banks and brokerage houses, independent financial-planning firms
Hiring: FPF will hire almost anyone with a bachelor's degree.
Questions and answers:
1. You haven't talked about hedge funds or venture capital. Why not?
Venture capital is not investment management as conservatively understood. Venture capital is actually closer to investment or commercial banking, in that a VC's main function is to sell her firm's money to high-quality potential entrepreneurs. An investment manager focuses on investing in public equities, not selling her firm's money.
Hedge funds are very similar to mutual funds and investment advisory firms. The fee structure is different (and extremely rewarding to the partners of a hedge fund) but functionally, below the partner level, employees at hedge funds do similar functions and will be paid equivalently to employees at other mutual funds or investment advisory firms. Hedge fund jobs are not necessarily more prestigious than many other opportunities available. More importantly, the industry generally does not truly distinguish between a hedge fund specializing in, say, energy and a mutual fund that does so. Each fund will be judged according to their performance, size, reputation, quality of personnel - and not on the ownership structure. Since hedge funds are relatively small (the largest hedge fund families manage roughly 10 billion), they are simply classified as whatever rank of boutique that they are.
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