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After obtaining a finance master’s degree or equivalent, you can pursue various different ‘front office’ careers in investment banking, asset management or private equity. Those terms might seem new to you, but don’t worry, this article aims to define these terms and explain what each career entails.

First of all, being able to tell the difference between various careers and additionally, being able to define what role you specifically like, will make you stand out during a recruitment interview. If you know all roles and the differences, you probably know the workload and skill requirements you need for the job you are applying for and such you can figure out and explain why you fit a particular role.

Asset management

Asset management might be the most familiar role known to students that are interested in investing capital. Asset management is a crucial part of finance where professionals, known as asset managers, help people and organizations make the most of their investments. The main goal is to help clients achieve their financial goals by growing or preserving their investment portfolios. Think of asset managers as the experts who guide clients in making smart investment choices that suit their risk profile.

These experts work with all sorts of clients, like high-net-worth individuals, big corporations, pension funds, sovereign wealth funds and more. They have to create investment plans that fit each client’s unique situation and what they want to achieve.

Asset managers deal with different types of investments, like stocks or shares, bonds, real estate and other financial assets. They have to pick the right mix of investments based on what the client wants and how much risk they’re comfortable with. It’s like creating a recipe that balances getting good returns while taking an appropriate amount of risk.

In a nutshell, asset management is a complex field where experts use their knowledge of money and markets to help clients make more money with their investments. They need to be really smart and experienced to handle all the twists and turns of the financial world while helping clients make the best choices for their money. This guide gives you a taste of what asset management is all about and encourages you to learn more about it if you’re curious.

Roles

Asset management is a big area with various jobs that need different skills and knowledge. Some of the most common jobs in asset management are:

Portfolio Manager, Research Analyst, Trader, Risk Manager, Compliance Officer, Operations Specialist.

Portfolio Manager

A portfolio manager in asset management supervises a collection of assets for clients to maximize returns while minimizing risk. They make investment choices, track market trends, and adjust the portfolio to meet client goals. Effective portfolio managers need strong financial market knowledge, analytical skills, and quick decision-making abilities. They also manage client relationships, communicate strategies, and work with analysts and traders for data-driven decisions. Overall, they play a vital role in helping clients achieve financial goals by making smart investment decisions and managing their assets.

Trader

A trader in asset management executes trades to maximize returns and reduce risks for clients. They collaborate closely with portfolio managers and research analysts to find and implement investment strategies. Traders understand financial markets, analysing trends and news to spot opportunities. They possess strong technical skills and manage trade-related risks by monitoring positions and using hedging strategies. Traders might specialize in specific asset classes, like stocks, bonds or derivatives, often while working within a team. The role is fast-paced and high-pressure, but also rewarding for those interested in financial markets and investments.

Research Analyst (Equity, Bonds, Commodities etc.)

A research analyst in asset management conducts research and analysis on different financial securities to find investment opportunities and suggest actions to portfolio managers or clients. They collaborate with the investment team to understand market trends and use tools like financial statements and news sources for data analysis. They assess company-specific details like financial ratios and management quality to evaluate stock or bond value. Their findings are shared through reports with buy, hold, or sell recommendations for review. The analyst also keeps updated on industry news, meets company representatives, attends events, and connects with experts to gather insights. Overall, they play a crucial role by providing vital research to guide smart investment choices.

Risk Manager

A risk manager in asset management identifies, measures, and handles risks associated with the firm’s investments. Their main job is to make sure the firm’s investments match the risk levels clients are comfortable with and to prevent exposing clients to unnecessary risks. The risk manager works closely with portfolio managers to ensure investment strategies fit clients’ risk preferences. They also keep an eye on market trends and regulations to ensure the firm follows the rules. Overall, the risk manager is crucial in making sure the firm’s investments align with clients’ risk preferences, safeguarding assets, and maintaining client trust.

Operations Specialist

In asset management, operations professionals handle the behind-the-scenes tasks that support investment management. They manage processes like trade settlement, cash handling, fund accounting, and reconciliations. Working with investment experts, they ensure trades are done accurately and settled on time. The specifics of their role can vary based on the firm and services offered, like handling trade confirmations or client reporting. Operations is crucial for accurate records, risk reduction, and efficiency improvement through process automation, which cuts costs and enhances performance.

Compliance Officer

A compliance officer in asset management ensures that the firm follows the legal and industry rules. They follow KYC and AML policies for onboarding new clients and check up on them every once in a while. They also create and enforce policies to keep the firm compliant with laws and regulations. This includes internal audits, reviewing marketing materials, and monitoring trading. Additionally they make sure employees know and follow the rules and report any violations to regulators. Besides external rules, they also enforce internal ethics and conduct policies to protect the firm’s reputation. In short, compliance officers make sure the firm acts ethically, legally, and in the clients’ best interests.

Investment Banking

Investment banking (IB) is a specialized field that serves clients like corporations, governments, and organizations. The main job of investment bankers is to help clients raise capital and manage risk, involving tasks like advising on mergers, IPOs, debt/equity offerings, and financial restructuring.

This role requires a deep understanding of financial markets and complex instruments, along with the ability to analyse data and communicate findings clearly. Investment bankers collaborate in teams, working with colleagues from different departments.

It’s a highly competitive field requiring commitment, very hard work and resilience to handle pressure and long hours. Successful professionals can enjoy substantial financial rewards, including high salaries and bonuses. Beyond that, investment banking offers intellectual stimulation and continuous learning.

Product groups

Within an investment bank, there are various teams that work on a specific product group.

Capital Markets

These teams help companies raise money by issuing debt (like bonds) or equity (like stocks). They work with underwriters to decide how to price and structure these financial offerings. They also assist companies with investor relations and advise them on their financing options.

Mergers and Acquisitions (M&A): M&A professionals guide companies when they want to buy or sell other companies. They do research, figure out how much a company is worth, and negotiate deals. They help companies achieve their strategic goals through acquisitions or sales.

Debt Capital Markets

These pros specialize in raising money for clients by issuing debt securities like bonds. They work closely with clients to structure these debt offerings in a way that helps them access the debt markets at the lowest possible cost.

Leveraged Finance

This is all about raising money for companies that already have a lot of debt or want to take on more debt to fund growth or other big plans. Investment bankers here help structure financing deals, often using a mix of debt and equity to maximize a company’s borrowing capacity.

Equity Capital Markets

Equity capital markets experts are the go-to people for helping companies raise money through the sale of stock or other equity securities. They assist clients in securing equity capital through methods like Initial Public Offerings (IPOs), follow-on offerings, and private placements.

Restructuring and Special Situations

Professionals in this field specialize in advising clients facing financial hardships, such as distressed debt or tricky situations like bankruptcy and restructuring. They collaborate with clients to find solutions to their financial woes and negotiate with creditors. Many of these bankers have a background in distressed debt or bankruptcy law.

Progression of ranks

In an Investment bank there is a very clear hierarchy. Most of those ranks beyond intern could get you over a $100k annual salary but, this usually requires you to work over 80h workweeks according to Glassdoor. If you progress the ladder, the bonuses grow to great numbers. I recommend pursuing to land a job in this industry (maybe even in London or New York if you are extremely dedicated), if enjoy the work and to not mind sacrificing a bit of your social life in order to get a big pay check.

Intern

Right after university, during summer or during your final year of obtaining your degree, finance enthusiasts start their career as an intern at a bulge bracket or boutique bank, nowadays banks allow also for non-business degree holders to join the investment bank division but numerical skills, a high GPA  and relevant experience are helpful.

Interns at investment banks assist with market research, financial analysis, and data organization. They help create presentations and financial models for client meetings and transactions. Additionally, interns support due diligence processes and work closely with analysts and associates on various tasks. This role offers valuable hands-on experience, exposure to real transactions, and networking opportunities in the finance industry.

Analyst

In investment banking, analysts are the rookies. They have a Bachelor’s degree and do research and number crunching for deals. They make financial models, create pitch-books, and investigate stuff. It’s a lot of work, and they often work on many projects at once. Most of them do this for 2-3 years and then become associates.

Associate

Associates in investment banking are the next level up from analysts. They usually have more schooling like an MBA. They work with senior bankers to get deals done and find new business opportunities. Associates deal directly with clients and often manage teams of analysts. They’re also in charge of handling projects and client relationships. Typically, they do this for 3-4 years before becoming Vice Presidents.

Vice President

Vice Presidents in investment banking are like the experienced leaders. They handle deals and clients, working with associates and analysts. They also run the banking team’s everyday stuff. Usually, they get this job after 5-7 years in banking.

Managing Director

Directors in investment banking lead banker teams and handle lots of deals. They work with top bosses to plan bank strategies. Directors also manage client connections and find new business. They usually get this job after 8-10 years in banking.

Private Equity

Private equity (PE) is a type of investment where money from various investors is pooled together to buy ownership stakes in private or potentially soon-to-be-private companies. The main aim of PE firms is to make significant profits for their investors by investing in promising businesses and improving their value.

Unlike publicly traded companies where you can easily buy and sell shares, PE investments are less liquid and require a longer commitment. PE mainly provides capital to high-growth businesses or those in need of restructuring.

PE firms are usually structured as partnerships with general partners (GPs) who run the show and make investment choices. They raise funds from limited partners (LPs), who can be institutions, pension funds, wealthy individuals, or family offices. LPs provide most of the money and trust GPs to invest wisely.

GPs earn a management fee (a percentage of the invested capital) and a share of the profits, known as carried interest, for their services.

Investment types

Private equity is still a broad term, and can be dissected in different investment types which each their unique way of providing service. PE firms can specialize in one or more of these types or have a mix of strategies. I listed a couple of strategies, but there are more.

Venture Capital (VC)

VC is a type of private equity focused on supporting early-stage startups with big growth potential. VC firms invest in these companies in exchange for ownership shares. It’s riskier but can yield high returns if the startups succeed and sold at a higher valuation.

Growth Equity

This type of PE investment targets established companies with revenue and profit histories but still have room to grow. PE firms invest to help these companies expand.

Leveraged Buyouts (LBOs)

Private equity firms use a lot of borrowed money to buy controlling stakes in established companies, often public ones. They aim to improve these companies, cut costs, and boost profits, with the goal of selling them at a higher price or taking them public again.

Distressed Assets

PE firms specializing in distressed investing buy troubled companies or assets at a discount. They work to turn these businesses around and can make substantial profits when things stabilize.

Mezzanine Financing

Mezzanine financing is a mix of debt and equity. It involves lending money to a company in exchange for interest and possible ownership. It’s often used in buyouts or growth projects.

Distressed Debt

PE firms buy the debt of struggling companies, aiming to turn them around. They may convert the debt into ownership or restructure it to make a profit when the company recovers.

Real Estate Private Equity

This focuses on investing in real estate, including properties like commercial buildings or housing projects. PE firms may develop, buy, or renovate properties for income or increased value.

Roles

Broadly speaking, the type of roles within private equity are pretty similar to asset management, for example, both have portfolio managers to keep track of the investments and risk managers to ensure compliance, a deal sourcing and deal execution team to identify, negotiate and execute deals to acquire firms while being assisted by a fundraising and marketing team. However, there is, besides the internal accounting and administration of the PE firm, an operations and administration team that focuses outward, toward the company in the investment portfolio. The day-to-day tasks are probably way different, but the idea of the general roles is very comparable.

Progression in Ranks

Both Investment banking and Private equity share similarities in the hierarchy within the firm. They both have the same career progression from intern to managing director (or even higher to partner level). From what I have read, it is common for investment bankers to go into private equity, because the skills you learn in both are comparable. As an easy example, both are good at modelling (in excel), create presentations, and learn to have client facing relationships.

To wrap it up

In this article I tried to summarize three industries; Asset management, Investment banking and Private equity. Briefly going over the goals of each industry, the types of investments, and the various roles exists within a specific type of firm. For any deeper understanding, I recommend going to google and looking at YouTube videos where industry practitioners explain more details.