June 21, 2010 12:22 am

Investment management: Qualifications are becoming more important

Asset management has not traditionally been a career for which candidates had to undergo masses of vocational and professional training, but this is changing fast.

“Twenty years ago, employers had no interest in vocational qualifications,” says Rupert Reed, senior partner at Godliman Partners, an asset management executive search company. “As a result, the older generation lacks even a fraction of what younger people have.”

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The result is a two-tier system where years of experience can outweigh formal qualifications. However, although the older generation may have been able to enter the industry straight from university with a humanities degree, or even from school, this will be rare among those now entering the work force.

“New graduates have to have highly vocational qualifications,” says Mr Reed. Employers are looking for workers with first degrees in a relevent discipline such as financial economics or even investment management. A masters degree in a similar area would help, says Mr Reed, while employers also pay attention to which university awarded the degree.

Almost immediately on starting work, a would-be fund manager will probably be expected to enter for the CFA exams to qualify as a chartered financial analyst. This set of three exams, spread out over three years, will take up some 300 hours a year of the candidate’s own time.

If these standards seem exacting, there is scope for different roles within the asset management community, although less than there used to be. And for some roles, expectations of educational achievements are in fact much higher.

There are divisions along two axes: sales and investment, and equities and fixed income. The former in both cases can be less demanding in terms of qualifications, although many asset managers now demand a similar level of attainment across the board.

Traditionally, asset management salespeople, particularly in the UK, were basically relationship managers. They had to build and maintain relationships with the pension fund trustees whose money might be managed by their company.

Since the pension trustees were unlikely to be investment professionals, there was no need for highly qualified salespeople talking complex and sophisticated technical language. That could even be a hindrance.

Now, however, things are different. As consultants have interposed their advice between trustees and asset managers, sales people have had to up their game in terms of technical expertise – formal qualifications have become more important.

“Because these guys [consultants] were all former actuaries, they’re asking a great deal of very technical questions, which require either a fund manager or someone with a very similar skillset to answer,” says Mr Reed.

Equity managers still usually require a lower level of technical mathematical qualification than their fixed income counterparts, although they are now required to be able to process the vast amounts of financial data available to them about companies’ performance.

The exception is quant fund managers, who can invest in any asset class. For them, significant mathematical training is usually a prerequisite, with quant funds the destination for many maths and physics PhDs.

There are a number of mathematically oriented graduate courses aimed specifically at these individuals, although none has established itself as an industry standard.

The emphasis on mathematical training for quants has led to a situation where a large number of the quants employed in London are French, since France has a long established tradition of extremely technical training for asset managers.

As well as considering the requirements for the individual role, employers may also consider the impact of a higher overall level of qualifications for their company. Recent research from SimCorp Strategy Lab, a Denmark-based research outfit, found that asset managers with a higher proportion of MBAs and finance degree holders were better positioned for growth.

“Growth-driven companies employ a higher complement of MBA/finance degree holders than do their counterparts that are driven primarily by risk management and cost control,” according to the Global Investment Management Growth Survey from SimCorp.

It says: “It is very tempting to conclude that companies with a high concentration of staff with MBA and finance degrees have higher growth ambitions and are more focused on business and value creation.”

Since the survey elsewhere claims that cost-driven companies are least likely to achieve revenue growth, the authors draw the conclusion that “holistic business acumen – expressed as a percentage of MBAs in an organisation – is a key harbinger of growth. It seems that while business and finance degrees may not be a panacea to ensure growth, a company’s ability to grow and gain market share is certainly enhanced by a higher presence of MBA and finance degree holders.”

This may be a challenge for buy-side companies, given that their career structures are traditionally less amenable to supporting individuals through MBAs.

“The sell-side has a very different career structure – it tends to be much more choppy. That lends itself much more easily to going off and doing your MBA,” says Mr Reed. “Most fund management companies would not see the value in you going off for two years to study, and they’re certainly not going to keep your job open for you.”

If the SimCorp researchers are correct, this is an attitude that should change.

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