Investment Management

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 10 percent through 2031, 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 9 percent (or faster than the average for all careers) through 2031. Employment for analysts who work for firms that manage funds, trusts, and other financial vehicles is expected to grow by 44 percent from 2021 to 2031. 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. This analysis will help businesses manage their finances, identify investment trends, and deliver new products or services to clients.” Another contributing factor to continued expansion 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.

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. “The rising demand for quants can be attributed to a plethora of factors,” according to Selby Jennings, a financial sciences recruiting firm. “Primarily, it’s the pervasive adoption of data analytics, machine learning, and artificial intelligence across sectors that drives this need. Simultaneously, financial engineering’s increasing complexity, coupled with the advent of high-frequency trading and blockchain and cryptocurrency innovations, has elevated the role of quants to the frontlines of financial strategy.” 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. Ongoing security issues include ransomware, viruses, spyware, malware, denial-of-service attacks, and cloud misconfiguration (which may allow unplanned public access and dramatically increase the chance of a security breach), as well as emerging technology risks related to artificial intelligence. As a result, expect demand for cybersecurity professionals to be strong. Employment of information security analysts is expected to grow by 35 percent from 2021 to 2031, according to the DOL. The computer security association (ISC)² estimates that there is a shortage of 3.4 million cybersecurity professionals worldwide.

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 2022, hedge funds worldwide managed $3.83 trillion in assets, according to Hedge Fund Research. This was a decrease from $4.01 trillion at the end of 2021, but 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 2022, a total of 435 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 300 hedge funds are focused on cryptocurrency. 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. Total assets under management of crypto hedge funds surveyed by PwC for its Annual Global Crypto Hedge Fund Report 2022 were $4.1 billion in 2021, up 8 percent from 2020. The entire cryptocurrency market had a capitalization of $1.06 trillion in 2023, according to Statista.com, up from $237 billion in 2019.

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.

The global private equity market is in an “adjustment period…so returns and fundraising are likely to remain under pressure” in the short term, according to the alternative investment research firm Preqin. Deal totals reached 6,549 in 2022, according to the American Investment Council. This was significantly higher than the 2,376 deals that closed in 2010 soon after the recession but much lower than the record 9,140 deals that closed in 2021. Despite these developments, private equity funds are expected to increase at a compound annual growth rate of 10.2 percent from 2021 to 2027—reaching $7.6 trillion in value by December 2027, according to Preqin, overtaking hedge funds as the largest alternative asset class. 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.

Venture capital firms will continue to be successful in the future. Although risky, they provide a good return for the patient investor. Because of their focus on innovative companies, they typically outperform investment firms in other sectors during good or bad times. There were 4,064 VC firms in existence at the end of 2022, according to the National Venture Capital Association, up from 1,652 in 2012. These firms managed 11,133 venture funds (up from 3,987 in 2012) and had more than $1.1 trillion in U.S. venture capital assets under management (a significant increase from the $255.2 billion in AUM in 2012).

Salaries in the investment management industry are significantly higher than in most industries. Portfolio managers, for example, earn salaries that range from $150,000 to more than $1 million. Partners in venture capital firms can earn tens of millions of dollars when a start-up goes public. Mean annual earnings of financial and investment analysts who were employed in the securities, commodities, and other financial investments sectors were $134,060 in May 2022, according to the DOL. Financial and investment analysts who worked in all sectors earned salaries that ranged from $58,950 to $169,940 or more. The average hedge fund portfolio manager earned total compensation (including bonuses, commissions, and options) of $1,422,784 in 2018 (the latest year for which detailed data is available), according to Institutional Investor’s All-American Buy Side Compensation report, up from $964,025 in 2017. Research analysts had total average income of $678,189 in 2018, which decreased from $710,810 in 2017. Salaries are highest at large companies with a proven track record of investing success.

Growth in the variety of financial products, and the complexity of products being offered, will stimulate demand for professionals who can explain them in layman’s terms to the investing public. As a result, job opportunities should grow for investor relations specialists, marketing workers, and public relations specialists.

Employment opportunities are also on the rise for investment pros who have a professional certification or industry license. The Financial Industry Regulatory Authority is the primary licensing organization, although most of its licenses require sponsorship by an employer. Those who have earned the certified financial analyst credential typically have better job opportunities and receive higher salaries than those who do not.

Client servicing in the years ahead will take on another important function: investor education. A 2022 survey by The Motley Fool found that the average American correctly answered only 48 percent of questions in its 11-question quiz on investing terms and basic concepts. Fewer than 1 percent answered all of the questions correctly. As a result, many people will need guidance on the basics of investing to achieve their investment objectives. Cerulli Associates, a financial consulting firm, says asset managers will be hiring both specialists and generalists to help clients make more informed better choices in selecting investments and investment advisers.

The new world of asset management offers some major opportunities for the firms nimble enough to differentiate themselves and stand out from the crowd. How quickly and effectively they recognize the opportunities in a more competitive global market will help separate the winners from the laggards in the coming years.