vault guide to investment management

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  • 1.The medias watching Vault! Heres a sampling of our coverage. For those hoping to climb the ladder of success, [Vaults] insights are priceless. Money magazine The best place on the web to prepare for a job search. Fortune [Vault guides] make for excellent starting points for job hunters and should be purchased by academic libraries for their career sections [and] university career centers. Library Journal The granddaddy of worker sites. U.S. News & World Report A killer app. The New York Times One of Forbes 33 Favorite Sites. Forbes To get the unvarnished scoop, check out Vault. SmartMoney Magazine Vault has a wealth of information about major employers and job- searching strategies as well as comments from workers about their experiences at specific companies. The Washington Post A key reference for those who want to know what it takes to get hired by a law firm and what to expect once they get there. New York Law Journal Vault [provides] the skinny on working conditions at all kinds of companies from current and former employees. USA Today

2. CAREER GUIDE INVESTMENT MANAGEMENT INVESTMENT MANAGEMENT 2008 Vault.com Inc. VAU LT CAR E E R G U I D E TO 3. CAREER GUIDE INVESTMENT MANAGEMENT INVESTMENT MANAGEMENT 2008 Vault.com Inc. VAU LT CAR E E R G U I D E TO 4. Copyright 2008 by Vault.com Inc. All rights reserved. All information in this book is subject to change without notice. Vault makes no claims as to the accuracy and reliability of the information contained within and disclaims all warranties. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without the express written permission of Vault.com Inc. Vault, the Vault logo, and The Most Trusted Name in Career InformationTM are trademarks of Vault.com Inc. For information about permission to reproduce selections from this book, contact Vault.com Inc., 150 West 22nd Street, New York, NY 10011, (212) 366-4212. Library of Congress CIP Data is available. ISBN 13 : 978-1-58131-561-5 ISBN 10 : 1-58131-561-9 Printed in the United States of America 5. ACKNOWLEDGMENTS We are extremely grateful to Vaults entire staff for all their help in the editorial, production and marketing processes. Vault also would like to acknowledge the support of our investors, clients, employees, family and friends. Thank you! 6. INTRODUCTION 1 History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 The Industry Today . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 THE SCOOP 9 Chapter One: Buy-side vs. Sell-side 11 Jobs on the Sell-side . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 Jobs on the Buy-side . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 Chapter Two: Financial Research Breakdown 23 Research Styles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 Capital Structure: Equity vs. Fixed Income . . . . . . . . . . . . . . . . . . . . . . . .25 Research Roles: Traditional vs. Alternative Asset Managers . . . . . . . . . .27 Chapter Three: The Clients of Asset Managers 29 Mutual Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30 Institutional Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 High-Net-Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 Chapter Four: Investment Styles 39 Types of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40 Types of Stocks and Their Risk Profiles . . . . . . . . . . . . . . . . . . . . . . . . . . .41 Types of Bonds and Their Risk Profiles . . . . . . . . . . . . . . . . . . . . . . . . . . .44 Portfolio Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46 Summary of Investment Styles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 Table of Contents Visit the Vault Finance Career Channel at www.vault.com/finance with insider firm profiles, message boards, the Vault Finance Job Board and more. ixC A R E E R L I B R A R Y 7. GETTING HIRED 51 Chapter Five: Targeting Your Job Search 53 Getting the Interview: On-Campus Recruiting . . . . . . . . . . . . . . . . . . . . . .53 The Off-Campus Search . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54 Who are the Asset Management Employers? A Basic Breakdown . . . . . .56 A Closer Look: Hiring Process, Uppers and Downers . . . . . . . . . . . . . . . .58 How Do You Know if the Firm is Right For You? . . . . . . . . . . . . . . . . . . .64 Chapter Six: The Interview 67 Getting Ready . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .67 Background Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69 Stock and Bond Recommendations and Valuation Questions . . . . . . . . . .70 Economic Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .75 Financial Accounting Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76 Personality/Fit Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .78 ON THE JOB 79 Chapter Seven: Portfolio Management 81 Senior Portfolio Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .82 Associate Portfolio Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .83 Portfolio Manager Analyst . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .85 Chapter Eight: Investment Research 87 Senior Research Analyst . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .87 Investment Research Associate-Analyst . . . . . . . . . . . . . . . . . . . . . . . . . . .88 Investment Research Associate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .90 Alternative Entry Points . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .91 Vault Career Guide to Investment Management Table of Contents 2008 Vault.com Inc.x C A R E E R L I B R A R Y 8. Chapter Nine: Marketing and Sales 93 Account and Product Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .93 Product Management Associate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .94 Account Management Associate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .94 Chapter Ten: Days in the Life 97 Senior Analyst, Major Mutual Fund Firm . . . . . . . . . . . . . . . . . . . . . . . . . .97 Senior Analyst, Hedge Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .99 Research Associate, Major Sell-Side Firm . . . . . . . . . . . . . . . . . . . . . . . .100 Portfolio Manager, Major Mutual Fund Firm . . . . . . . . . . . . . . . . . . . . . .102 APPENDIX 105 Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .107 Valuing a Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .111 Ratio Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .111 Discounted Cash Flow (DCF) Analysis . . . . . . . . . . . . . . . . . . . . . . . . . .112 ABOUT THE AUTHOR 115 Vault Career Guide to Investment Management Table of Contents Visit the Vault Finance Career Channel at www.vault.com/finance with insider firm profiles, message boards, the Vault Finance Job Board and more. xiC A R E E R L I B R A R Y 9. Do you enjoy following the financial marketswhether it be reading The Wall Street Journal, watching CNBC, or checking stock prices on the Internet? Do you consider yourself to be creative and analytical, opinionated and objective? If that is the case, you may find a career in investment management an appealing option. Imagine an industry that rewards individuals for working independently, thinking on their feet and taking calculated risks. Additionally, how many industries can you think of that broadly impact households all over the world? Very few. That is one of the many exciting aspects of the asset management industrywith household increasing and the demise of Social Security as a tool for long-term savings, more people than ever before are planning for their future financial needs. As a result, the industry is growing and more visible than ever. The asset management community seeks to preserve and grow capital, and generate income for individuals and institutional investors alike. The Vault Career Guide to Investment Management will serve as an insiders guide for careers in the industry. It will provide you with the knowledge to appropriately target your career search and a framework to handle the most challenging interviews. It will also break down the many different career positions that are available to both undergraduate and graduate students. Introduction Visit the Vault Finance Career Channel at www.vault.com/finance with insider firm profiles, message boards, the Vault Finance Job Board and more. 1C A R E E R L I B R A R Y Investment Management vs. Asset Management A quick note about the terms investment management and asset management: these terms are often used interchangeably. They refer to the same practicethe professional management of assets through investment. Investment management is used a bit more often when referring to the activity or career (i.e., Im an investment manager or That firm is gaining a lot of business in investment management), whereas asset management is use`d more with reference to

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