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Facts & Trends
- Educate Yourself
- If you are thinking of going into money management be sure to train yourself well in fixed-income analysis and strategies. You are most likely to be employed in a job analyzing bonds so be sure that you are familiar with measures of bond price volat
lity, factors which affect bond prices, valuation of bonds (especially with embedded options), yield curve strategies and institutional details of the Treasury, agency, corporate, municipal, euro, mortgage-backed and asset-backed markets.
- Succeeding as a Money Manager is Challenging
- The job requires a combination of intelligence, effort, intuition and discipline to succeed in the long run.
Most people lack the proper combination of these traits.
- Breaking in Tough
- It is hard to break into the business of money management. A good place to start is at a commercial bank
in its trust department or at a state-run pension fund. Insurance companies can also be a good starting point
if you are a strong student.
- Indexing is Gaining Momentum
- Faced with poor results from active management, it is becoming more common for large
pension funds to index their investments. Indexing is the practice of passively mimicking
an equity index such as the S&P 500. Some of the largest fund groups including
Barclays Global Investors, Vanguard and TIAA-CREF are promoting indexing. The result has
been explosive growth, albeit with much lower fees than is being charged by active
managers.
- Hedge Funds Getting Tougher
- Hedge funds have expanded massively in recent years and are now seeing substantial shrinkage as limited partners withdraw funds.
There are, of course, a number of hedge funds that continue to grow.
- Mutual Funds are Enormous
- Mutual funds are pools of financial resources managed by a professional money manager.
The Investment Company Institute reports over 20 types of funds ranging from growth funds to precious metals funds.
Key mutual funds activities fall into trading and order execution, investment analysis, marketing, record keeping
and customer services.
- Professional Managers are Big
- Sanford Bernstein and Co. estimates that over $9 trillion is entrusted to professional money managers.
The business of money management is enormous.
- Pay for Performance Expanding
- A new trend in money management is towards pay for performance. This means your pay will be high when
times are good, but barebones in bad years.
- Money Management is Going Global
- Another growth area in money management is global investing. According to Pensions and Investments, the fraction of international investments by the Top 200 US pension funds increased by over 25 percent.
- The Mutual Fund Business is Facing Ferocious Competition.
- There are now over 6,000 mutual funds in business. However, no-load funds (which do not charge customers an up-front fee) are growing very rapidly.
- On the Whole, Money Managers Don't Beat the Market
- In the last ten years, 74% of equity managers did not beat the S&P 500 index after fees. The old efficient market theory seems to work just like the textbooks say. If you go into this business, then, it is essential to be aware of the difficulties of building a good record and beating the market.
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