Asset management is the industry within finance that manages other people's money in the hopes of outperforming the financial markets, usually the stock market. It is often referred to as 'the buy-side' because firms in this industry are involved in buying securities and assets.
The typical asset manager is a mutual fund manager. Mutual funds contain the vast majority of actively or passively managed assets around the world. These funds pool together investments from regular individuals or institutions and invest them into financial securities. Each fund has one or more asset managers and several employees work together to maximise investors' returns.
Asset management in Bangladesh: The financial services industry of Bangladesh is still in its early stages. When people invest in the stock market here, they usually go through brokers and buy individual stocks. This kind of investing strategy can, at times, be harmful or very stressful for the general populace. Individual investors often find themselves outmatched by the market and lose interest in investing altogether. The stresses of managing one's own portfolio alongside a day job can be too much for many. This is where professional fund managers come in. Often referred to as 'smart money', professional or institutional fund managers dedicate their working lives to better understand the markets and outperform them.
In 2020, institutional asset managers outperformed the Dhaka Stock Exchange Broad Index (DSEX), the key metric for Bangladeshi stock market performance, for the first time, returning 10.7 per cent, compared to the DSEX's 8.5 per cent return. This portrays great potential for mutual funds and their managers.
Freshers are absorbed into asset management companies as analysts. Asif Khan, CFA, managing partner of EDGE Research and Consulting, and the chairman of EDGE AMC, sheds some light on the daily life of an asset manager. "Employees in asset management companies usually have a research or a portfolio management role. A majority of their time is spent on analysing stocks, tracking market activity, and looking at the news flow impacting the markets."
He further adds that every fund manager tracks incremental changes in the market and changes his/her hypothesis about the stock market. Analysts usually research specific sectors i.e., banking, power, and so on to provide relevant information to the portfolio manager.
The challenges: As with all other lucrative careers, asset management also comes with its challenges. "It is not a workforce intensive business like banking. Having one good portfolio manager can help a firm make great returns. The organisational structure is also flat and turnover is low. So, it is difficult to get an opening," Asif shares his insight.
After getting through the high barrier to entry, young asset managers face a new set of difficulties. Moving from a theoretical setting to a practical one is difficult in and of itself. But they also have to face a steep learning curve."Asset management requires continuous learning. While this is rewarding to some, it can be challenging for others. Every single industry is different and even companies within the same industry can operate differently," Asif Khan opined.
Another challenge in this industry is stress. Asset management is a challenging career. Fund managers have to continuously watch the market alongside the returns generated by their competitors. A downturn in the capital markets can easily add to that stress.
Advice for the new generation: According to Asif Khan, youths interested in entering asset management should do four things. First, they should acquire a basic understanding of finance and accounting. Without basic accounting knowledge, one cannot understand and analyse financial statements. And without knowledge of finance, one cannot make investment decisions. Secondly, someone interested in asset management should have good communication skills. Good verbal and writing skills are necessary for research associates to effectively convey their ideas and information to the decision-makers of the fund. And thirdly, he advises future asset managers to get practical experience. They can start reading annual reports from companies, try trading with small amounts of money to see the market flow and learn to study industries and companies. Moreover, he suggests interested individuals take up internships or apprenticeships in asset management firms to gain some direct exposure to this industry. Finally, he recommends interested candidates to connect with alumni or acquaintances working in asset management. This can help them get their foot through the door in the industry.
Becoming an asset manager is challenging; flourishing in this industry, even more so. But for those who can cross these barriers, a lucrative and glamorous career awaits.
The writer is a sophomore at IBA-DU.