Investment management offers opportunities in many different financial sectors and careers, and job prospects are expected to be good overall in the next decade. Employment for securities, commodities, and financial services sales agents is expected to grow by 4 percent through 2029, according to the U.S. Department of Labor (DOL). Opportunities for financial analysts, another popular job in the industry, are expected to be strong—growing by 5 percent (or faster than the average for all careers) through 2029. The DOL reports that "emerging markets throughout the world are providing new investment opportunities, which require expertise in geographic regions where those markets are located. Demand is also projected to increase as the growth of ‘big data’ and technological improvements allow financial analysts to access a wider range of data and conduct high quality analysis.”
In 2020, the coronavirus pandemic caused many investors to focus on passive investment strategies. Business lockdowns contributed to an economic slowdown that is expected to reverse in 2021 and onward, since the rollout of the COVID-19 vaccine. Deloitte reported that the investment management industry experienced less damage than other sectors in the economy, and revenues in the industry remained largely intact. The predominant changes in the industry were in how people worked and the operations and technology used during the pandemic. According to the research group IBISWorld, macroeconomic conditions will improve as the pandemic becomes contained, and investment management operators will benefit from rising assets under management through 2025. Another contributing factor to continued growth in this industry is that the aging U.S. population is helping in the growth of pension funds and other collective investment vehicles, which will in turn increase in value as these individuals near retirement.
Employment prospects will be best for college graduates with a minimum of a four-year degree from a nationally recognized university or college, according to the DOL. Investment firms look for candidates with a background in accounting, finance, economics or a related discipline. For positions as securities, commodities, and financial services sales agents, the DOL says that “certification and a graduate degree, such as a chartered financial analyst certification and a master’s degree in business administration, can improve an applicant’s prospects.” Successfully completing an internship program can be very helpful for those looking to break in and land their first job with an investment firm.
Projected employment growth across the securities industry doesn’t make it any easier for job applicants to land a position with an investment firm. Applicants can face strong competition for most jobs as investment firms continue trimming overhead and cutting salaried positions. Jobs in highly compensated positions, such as portfolio management, will be more difficult to enter than lower salaried positions in compliance reporting, product management, client servicing, and marketing.
When looking for a job, it’s always a good strategy to focus on areas where you can be the most help. The good news this year is that fund firms are eager to hire talent in key areas like trade execution, client servicing, quantitative analysis, information security, investor relations, and product management.
Some of the best opportunities are in the less glamorous areas like back office support, marketing, product management, and client servicing. The Dodd-Frank Act requires hedge funds with assets above $150 million to register as investment advisers, maintain records of managed assets, and have their records available to SEC auditors. Hedge funds and private investment firms are also staffing up to perform in-house compliance reviews, mock audits, and update their compliance manuals. All that paperwork requires experienced talent who know their way around compliance reporting.
According to James Madison University’s Career & Academic Planning, the recent explosive growth in quantitative finance has led mathematicians and other students of all levels to see whether, and how, they can apply an advanced degree in mathematics to a career in investment management. “Quant strategies, driven by increased automation and improved data capture, are one of the fastest-growing areas [in the alternative assets industry]; quant funds are managing a record US$500 billion of assets in 2017," according to The Race for Assets: Alternative Investments Surge Ahead, from BNY Mellon. As a result, there’s growing demand for students with highly quantitative backgrounds to support investment decisions and manage risk as well as take part in portfolio selection and management.
Another growth opportunity is marketing and product development. Private equity, hedge funds, and venture capital firms are reportedly staffing up in this area, hiring product specialists to provide technical support for clients and help out in product development. In 2012, the SEC relaxed its long-standing ban on hedge fund advertising, allowing hedge funds for the first time to actively promote their offerings to qualified investors. Venture capital firms have also been augmenting marketing efforts by hiring additional staffers to handle marketing, branding, and public relations. Other venture capital firms are outsourcing these duties to public relations firms.
Cybersecurity remains a key issue in the investment management industry. Seventy-three percent of private equity and hedge fund executives surveyed by Koger (a financial services software provider) in 2018, believed that cybersecurity threats were the biggest risk to firm profitability. As a result, expect demand for cybersecurity professionals to be strong. Employment of information security analysts is expected to grow by 31 percent from 2019 to 2029, according to the DOL.
The 2008–2009 financial crisis caused many hedge funds to liquidate their assets, and return-on-investment generated by surviving companies declined significantly. The sector bounced back—at least in terms of the amount of funds being managed. In 2019, hedge funds worldwide managed more than $3.6 trillion in assets, according to the research platform eVestment, up from only $1.5 trillion in managed assets in 2006. The Financial Times reports that investors are being cautious about where they invest their money, sticking with big fund firms that promise more stability. This suggests that the number of new hedge funds may grow more slowly than it had in the past. In 2019, a total of 480 new hedge funds launched, according to Hedge Fund Research, down from 735 in 2017 and 1,040 in 2014. These figures are much lower than the peak of 2,073 funds created in 2005. Growing competition for investment capital and rising investor demand for transparency and cost/fee restructuring are causing some finance professionals to think twice about starting new funds.
One noteworthy trend affecting the hedge fund industry is the increasing investing in and trading of cryptocurrency, digital cash that is used as a substitute or complement to traditional currency. Cryptocurrency payments are not processed through a central banking system or trusted third party, but are sent from payer to payee. About 150 hedge funds are focused on cryptocurrency and blockchain technology (a distributed ledger database that maintains a continuously-growing list of financial records that cannot be altered). Indexes have even been launched to track hedge funds that invest and trade in cryptocurrencies. “While the recent performance has been exciting, trading and investing in these evolving areas requires specialized expertise and involves substantial volatility and risks, both real and structural,” advised Kenneth Heinz, president of Hedge Fund Research, in a news release. Despite the risk, Heinz believes that bitcoin and other digital currencies “will continue to grow in an absolute sense and as a component of hedge fund exposures.” The entire cryptocurrency market had a capitalization of $237 billion in 2019, according to Statista.com.
Mutual funds are a popular form of investment for the American public. However, it will be hard to break in as a fund manager. If you want to work in a firm that sells mutual funds or other investment products directly to the public, there’s a good chance you will start your career in customer service call center, answering questions from individual investors.
Private equity funds are expected to grow by 58 percent (to $4.9 trillion) by 2023, according to the alternative investment research firm Preqin, overtaking hedge funds as the largest alternative asset class. The number of private equity deals that closed in 2019 reached nearly 5,000, according to American Investment Council, significantly higher than the 2,376 deals that closed in 2010 soon after the recession. Opportunities should be best at large, well-known investment houses because investors are shying away from perceived risky investments with smaller firms. In 2019, the 20 largest private equity funds received 39 percent of all committed capital, according to Preqin, up from 29 percent of committed capital in 2014. Hugh MacArthur, global head of Bain & Company’s Private Equity practice, says that “investor enthusiasm for private equity endures, leaving the industry awash with cash. This is both a blessing and a curse. Funds have ample money to spend, but the competition for deals is fierce. With deals being done at record-high multiples, the right sort of diligence is more essential now than ever before.”
Preqin surveyed more than 170 of the top firms in the private capital industry in 2017. Seventy-two percent of respondents cited the investments/deal team as the function that was in the greatest demand from a h