Go solo as a Portfolio Manager

Dec 2015

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Portfolio management involves efficient allocation of resources to generate higher return on investment. A portfolio manager manages investment portfolios of people.

portfolio-managementCharles Darwin!!!! When you hear the name what comes to your mind? “Theory of evolution” or “Survival of the fittest” or “Natural selection”. You might be thinking what does Darwin has to do with Portfolio Management. Well it has to do with “selection”. That’s what a portfolio manager has to do. Select assets and allocate resources so that the portfolio generates higher return to the investors. Now, we have been hearing the word “portfolio”. It means a collection of investing tools like equity, debt, commodities, or, may be mutual funds.

I would like to enlighten you about another concept known as active and passive investor. Active investors are ones who are their own portfolio managers, and, they are abreast of what is happening around and manage their investment actively. However, there are another category who tends to give the steering of their investment vehicle to a person whom they trust and ride the journey along with the manager, we would call the portfolio manager.

A portfolio manager’s primary job is identifying the proper investment policy for a client or fund keeping in mind the risk and return matrix and client’s financial need.

 

Required Education

Similar to most other careers in investing world, education in financial discipline at preliminary level is not necessary but desirable. However, one needs to have a strong interest in financial markets, accounting and economics, with strong analytical and quantitative skills. One should have good communication and presentation skills as well. Knowledge in statistical tools is also desirable.

For a career as a portfolio manager, it’s almost mandatory for one to be a Chartered Accountant, or an MBA (Finance). Most of the portfolio managers are also Chartered Financial Analysts or Certified Financial Risk Managers (FRM).

 

Career Path

portfolio-managementCareer Path (10th to Job)

 

Course Details:

For a career in portfolio management services in an Asset Management Company (AMC), one needs to be a post-graduate, preferably those in MBA (Finance) or Chartered Accountancy. Hence, the list of top business schools and other relevant colleges are listed below for a quick reference.

 

Top Institutes (India):

Institute

Locations

Course

Eligibility

Website/Information

Indian Institute of Management

Ahmedabad

Bangalore

Kolkata

Lucknow

Indore

Kozhikode

PGDBM

At least 10+2 in any discipline

 

CAT/GMAT

https://en.wikipedia.org/wiki/Indian_Institutes_of_Management

Indian School of Business

Hyderabad

Gurgaon

PGDBM

At least 10+2 in any discipline

 

CAT/GMAT

http://www.isb.edu/

Management Development Institute

Gurgaon

Murshidabad

PGDBM

At least 10+2 in any discipline

 

GMAT

Mostly, Work-Experience is required.

http://www.mdi.ac.in/

Institute of Chartered Accountants of India

 

Any

Chartered Accountant

Class XII (Any discipline)

www.icai.org.in/

Financial Risk Manager (FRM) from GARP

Any

Financial Risk Manager

Undergraduate (or appearing in final year of UG exam)

http://www.garp.org/#!/frm_program_exams/

 

Top Institutes (Overseas):

Following are the top B-schools in the world:

Institute

Courses

Average Score in GMAT

Country

Website

University of Chicago – Booth School of Business

MBA

720

USA

https://www.chicagobooth.edu/

Stanford Graduate School of Business

MBA

720

USA

https://www.gsb.stanford.edu/

Harvard Business School

MBA

730

USA

http://www.hbs.edu/Pages/default.aspx

University of Pennsylvania-Wharton

MBA

728

USA

https://www.wharton.upenn.edu/

London business school

MBA

700

UK

https://www.london.edu/

INSEAD

MBA

703

France

http://www.insead.edu/home/

University of Oxford- Saïd Business School

MBA

690

UK

http://www.sbs.ox.ac.uk/

HEC Paris MBA

MBA

690

France

http://www.mba.hec.edu/

NUS Business School

MBA

        672

Singapore

http://bschool.nus.edu/

HKUST Business School

MBA

        600

Hong Kong

http://www.bm.ust.hk/

      Source: Financial Times, QS

Other than GMAT/SAT/GRE, it is mandatory for the students to appear for IELTS/TOEFL. Scores above 100 are considered to be good in TOEFL. Again, one should remember that while applying for the MBA schools, the score in entrance is only a fraction of the parameters used for judging a candidate. Everything in the application really does matter, including the application essays and recommendations.

 

Cost in Fees:

The cost for a MBA from a top college in India would range between INR 8.0 lacs to INR 25.0 lacs, including allied costs. An MBA from abroad would range between INR 35.0 lacs to INR 90.0 lacs including allied costs. Executive MBAs, mostly for experienced candidates cost much higher, but the advantage is that the duration of the course is shorter and the peer group is usually better.

 

Job Profiles

Broadly, one has to work in any of the broad categories:

  • Active portfolio management: Active buying and selling of funds
  • Passive portfolio management: Usually, working in Exchange Traded Funds (ETF)
  • Discretionary portfolio management: The fund manager has the power to sell and buy assets at will but keeping the financial needs of the client as priority
  • Non-discretionary portfolio management: Usually advisory role

portfolio-managementThe job roles usually offered are:

  • Asset Manager
  • Fund Manager
  • Portfolio Manager
  • Wealth Manager

The responsibilities of a portfolio manager would typically include:

  • The primary responsibility of a portfolio manager would be to generate positive returns for the client and help his client achieve his financial goal within the stipulated timeline.
  • The portfolio manager takes the key role for planning the investment portfolio of an individual based on the demographic and economic profile of the client.
  • The portfolio manager is also responsible for imparting financial awareness and knowledge to his client.
  • He would also be responsible for providing tailor-made solutions to his clients depending on the risk profile of the client.

 

Opportunities and Growth

The growth and outlook of the asset management companies or the portfolio management companies are in line with the outlook of global and India economy. The last two years were very good for the industry. In the present year, the market has been subdued. But, there has been several Initial Public Offerings (IPO) in the Indian domestic market, which, suggests that the outlook is not too grim. If seen from a global perspective, we can see that the biggest crash in markets occurred in China, while the markets of Europe are on the edge due to the crash.

Thus, helped by the favourable macro factors, India is in a brighter spot in the global equity market. The global scenario might take a while to turn around.

 

 

Industries to Explore

A portfolio manager would be working in the following industries:

  • Banking and Financial Services Industry (BFSI):
    • Mutual Funds like, Franklin Templeton, Mirae Asset, Kotak AMC, HDFC AMC
    • Portfolio Management Service providers, like, PPAS,
    • Brokerage firms, like, Karvy, Sharekhan
    • Investment Banks like, JP Morgan, Goldman Sachs
    • Banks, like, SBI, Deutsche Bank

However, the greatest advantage of being a portfolio manager is that after years of experience, and myriad of contacts in the corporate world, one can start one’s own portfolio management service (PMS), going solo. The sky is the only limit once that starts.

 

The CV of a Portfolio Manager

The key skills that the recruiter looks in a portfolio manager are:

  • Decent writing skills with an ability to comprehend financial reports
  • Knowledge of key macro-economic trends and cycles, various asset classes and financial products
  • Excellent communication and interpersonal skills – The job profile requires regular interaction with the client, discussing their requirements, and, financial goals
  • Ability to work under pressure – A portfolio manager has to work under strict deadlines, and most entry-level profiles are required to stretch long.
  • The individual should be self-motivated, proactive and passionate for investing and financial markets

The other skills that an aspiring portfolio manager should possess to create an edge over the others are:

  • Knowledge about a particular industry, its key players, competitive landscape, macro factors affecting the industry and trends in that industry

 

Earnings

The compensation for the portfolio managers are very good as the profile is mostly for seasoned candidates. Typically, their packages include a substantial bonus component. In India, the average salary for a portfolio manager would be around INR 11.0 lacs, starting from m INR 4.0 lacs per annum in small brokerage firms, to INR 30.0 lacs per annum in the foreign banks or large AMCs. The US counterparts earn more than $100,000 per annum plus bonuses.

 

What Next?       

  • The most desirable exit route would be going solo!!!! Starting one’s own portfolio management service can take one places and one can aim for the stars
  • Few try and move to investment banking or mutual funds (as fund manager)
  • Few move into advisory roles

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