This article is an excerpt from the CFA Institute Research Foundation book Investment Management: A Science to Teach or an Art to Learn? written by Frank J. Fabozzi, CFA, Sergio M. Focardi, and Caroline Jonas. This article can also be found in the 2016 CFA Institute Career Guide, titled “How Will Future Professionals Land a Job in Investment Management?”
Jobs in investment management are much sought after and hard to come by. Many candidates pursue the relatively few openings, so employers can be choosy. We asked human resources managers at asset management firms what they look for in terms of profiles when hiring recent graduates. We also asked them whether there is a best path to landing a job in their firms.
Key Skill #1: Analytical Ability
We can see a rise in importance of solid economic reasoning and ability to see the big picture, including understanding the global macroeconomy and the (geo)political world. For example, HSBC’s group chief economist and global head of economics and asset allocation research, Stephen King, had this to say about economists coming into the financial world, typically in research positions:
“Although many financial economists specialize in one particular country or region, increasingly they are expected to analyze the impact of events in one part of the world on other regions. Higher oil prices, slowing Chinese growth, new ‘south–south trade,’ and financial linkages—all have potentially large global effects. Our clients expect us to come up with analysis to cast light on these issues. . . . Despite our regional specialization, we cannot afford to treat each country as an island.
Most firms we talked to now want both math skills and economic reasoning skills in the same person. Many sources said that the graduates they hire with master’s degrees in finance or economics go on to fill positions on asset management teams or in sales and marketing whereas graduates with advanced degrees in engineering, mathematics, or physics are typically hired for multiasset or systemic groups or for roles in trading and risk management, where the ability to work with data and models is of great importance.
Still, firms that are hiring engineers, mathematicians, and physicists like to see that the student has taken some courses in economics or finance along the way. The firms want to hire people who have demonstrated an interest in the field of finance and who can think outside their own specialties.
Firms with a more traditional style of management may be hiring people with very different academic backgrounds. The head of human resources at one traditional asset manager said that the firm has always been open-minded about its new hires’ fields of study. “We look for diversity,” he commented. “We hire graduates with degrees in history, philosophy, the arts. They bring in different skills, have a different way of looking at things.”
Key Skill #2: Broad Knowledge
When asked what asset management firms were looking for in graduate recruits, human resources managers most often replied: broad knowledge, analytical skills, sound (macroeconomic) reasoning, creativity, and out-of-the-box thinking. Michael Oliver, senior lecturer in finance at Open University and cofounder and director of the firm Global Partnership Family Offices, believes that many mathematical finance programs are divorced from events in the real world, which produces economists who can give you an equation for everything but who lack any broader knowledge.
“The most recent financial crisis has created a demand for critical thinking. And broad knowledge opens the door to critical thinking. Someone who has developed interests not only in nance but also in questions of history, political economics, philosophy, science, and even the arts has more tools for critically analyzing theories and events.”
Key Skill #3: Ability to Communicate
The ability to communicate and to convince is important for just about any position at an asset management firm.
With investors, the ability to communicate, to convincingly explain bad performance (whether because of model breakdown or whatever reason), is an important part of an asset manager’s job. The ability to communicate with colleagues inside the rm is also important. Sources remarked on the need to communicate with one’s peers, to question one’s peers, to have conviction (but also to be able to change one’s mind when presented with new facts or a stronger argument). Without strong communication skills, critical thinking may create conflicts and result in the rejection of good but poorly communicated ideas. Broad knowledge helps in finding convincing parallels, in objectivizing positions and ideas, and in placing them in a historical or scientific perspective.
Key Skill #4: Ability to Reason
Another important quality short-listed by human resources managers is the ability to reason, to take in large quantities of information, to separate the true information from the noise, and to analyze the data. Again, good macroeconomic reasoning requires an ability to see the big picture. Sources remarked on candidates’ need to have a toolkit for how to analyze a problem that includes both analytical and mathematical skills. Candidates who pass all the initial hurdles are typically grilled by the hiring firm’s asset managers. The objective is to test the candidate’s reasoning and judgment. A source at a fundamental manager explained,
“The hiring process is based on a series of conversations. We make candidates talk about what they have done, why they made the decisions they made. We need to see through the person’s thinking process. We also make them talk on topics such as current affairs for up to one hour. We want to see how they form their thoughts, test their assumptions, and how they conciliate competing ideas.”
Key Skill #5: Out-of-the-Box Thinking
Out-of-the-box thinking requires the ability to understand, to critique, and to find new angles from which to approach the problem at hand. In a Business Insider interview in 2012, PIMCO’s former CEO and co-CIO Mohamed El-Erian commented that he had been fortunate to have been influenced by ideas that value and promote diversity of thought and perspectives. Most significantly, he added,
“This included the importance of questioning, of pursuing cross-disciplinary work, of appreciating different cultural approaches, and of engaging in detailed scenario building that focuses both on baseline forecasts and also two-sided tail events.”
Key Skill #6: High Interest in Financial Markets
The head of human resources at a large continental firm remarked, “In principle, we target and hire people with a drive, a fire for the industry.” Another commented that the recruit having an interest in, a passion for, financial markets and what drives (global) markets is hugely important. How do firms test the strength of the motivation? One firm’s staff answered,
“We ask questions in the online application process such as: Does the candidate invest personally as a hobby (assuming he or she has the money to do so). Is he or she part of an investment club? Has he or she taken a course in economics / finance together with their major?”
Key Skill #7: Humility
The ideal candidate has a good idea of what can and what cannot be done and can admit that he or she might have made a mistake or might need to revise an opinion. One human resources manager said that the firm looks for persons with confidence, but not arrogance, and with some humility. Another noted that an arrogant person would not be hired. He or she “would not be useful,” this source said.
Gearing up for a job in investment management? If you have questions, just drop them in the comments!