It is hard to break into the business of money management. A good place to start is at a commercial bank in its trust department or at a state-run pension fund. Insurance companies can also be a good starting point if you are a strong student. .
Hedge funds are a growth area in money management. Hedge funds are opportunistic, private funds which invest in stocks, bonds, currencies and derivatives often using significant amounts of leverage. Hedge funds management approximately $50 billion in assets according to MAR Hedge. But because they use extensive leverage, they manage positions in excess of $250 billion.
Mutual funds are pools of financial resources managed by a professional money manager. The Investment Company Institute reports over 20 types of funds ranging from growth funds to precious metals funds. Key mutual funds activities fall into trading and order execution, investment analysis, marketing, record keeping and customer services.
Sanford Bernstein and Co. estimate that over $9 trillion is entrusted to professional money managers. The business of money management is enormous.
A new trend in money management is towards pay for performance. This means your pay will be high when times are good, but barebones in bad years.
A growth area in financial planning and money management is targeting the high net worth individual. PSI, a financial services consultant, estimate that over 4 million US households have a net worth in excess of $1 million.
Another growth area in money management is global investing. According to Pensions and Investments [1/24/94], the fraction of international investments by the Top 200 US pension funds increased by over 25 percent.
The money management business is highly profitable. Fortune in "The Investor Revolt"; [10/31/94] reported that take home profits in money management amount to approximately $3 billion a year.
There are two basic types of pension plans: defined benefit and defined contribution. Defined benefit plans guarantee workers a level of benefits whereas defined contribution plans do not guarantee a level of benefits but they do provide for fixed contributions. Roughly 80 percent of pension fund assets are in defined benefit plans.
The mutual fund business is facing hard times and ferocious competition. There are now over 6,000 mutual funds in business. However, no-load funds (which do not charge customers an up-front fee) are growing very rapidly.
Money managers aren't known for superb investing records. In the last ten years 74% of money management professionals did not beat the S&P 500 index. If you go into this business, then, it is essential to be aware of the difficulties of building a good record and beating the market