eFinancialCareers

A game of patience, profits and super funds.

Fund managers are professional investors. They invest money on behalf of their clients, which include superannuation funds, insurance companies, unit trusts (institutional investors) and others, with a view to making it grow.

There are two basic kinds of fund:

1) Passive funds: Also called 'index trackers'. They select a portfolio of assets whose value will track that of a financial index. A fund that tracks the S&P ASX 100 index will aim to follow the value of Australia’s 100 biggest companies, for example. The investment decisions of passive funds are typically made using computers, meaning fund managers working on them have a relatively easy life.

2) Active funds: Active fund managers buy and sell financial products in an attempt to outperform the rest of the market. Active fund managers correspond to most people’s idea of what fund management is: they invest in products they hope will rise in price over time, in order to sell them at a profit.

Fund managers invest in everything from shares, bonds or real estate to commodities, such as oil, wheat or aluminium. Different clients are prepared to tolerate different amounts of risk, so fund managers usually run several funds. Some offer fast growth and high risks; others offer slower growth and smaller risks.

Trends

Australia’s fund management industry has grown rapidly since the Australian government introduced compulsory superannuation contributions from employers in 1992. The contribution rate now stands at 9% of every employee’s income, and in 2006 will result in AU$70bn inflow into managed funds. Favourable tax treatments have also encouraged inflow into managed funds.

In June 2006, the total funds under management in Australia topped AU$1,000bn, generating AU$1.2bn of management fees for the fund management industry.

Key players

The Australian funds management industry is now dominated by the major Australian banks, which have all made significant purchases in the sector in recent years. Commonwealth Bank is the biggest fund manager in the country. However, AMP Capital and Axa Australia also remain significant players and there are numerous mid-sized and smaller players, such as Perennial, Perpetual and Maple Abbott Brown, which were created by fund managers who have left senior positions with major banks or fund management groups, or by stock brokers.

As well as the local players, 17 of the top 20 global asset managers have established a presence in Australia, with brands such as State Street, Barclays Global, Fidelity Investments, Vanguard, PIMCO and UBS Asset Management all prominent. Large money managers from Europe, Asia and the US have made Australia a key part of their Asia-Pacific expansion strategies, using Australia as a base for both investment management activities and related functions, such as custody, investment administration and securities processing. Invest Australia says there are more than 100 “significant” investment managers in Australia.

Roles and career paths

Working as a fund manager used to involve everything from analysing and investing in products to persuading new clients to put money into the fund. Today, however, fund managers focus on the business of managing money and other people are employed to do the rest. If you don’t fancy being a fund manager, you could work as a marketer, research analyst or operations expert.

Fund management marketers wine and dine potential clients in an effort to persuade them to invest money in their fund. They also manage relationships with existing clients, who might threaten to pull their money out. And they meet investment consultants and play a role in the development of new products.

Analysts working in fund management help steer fund managers in the right direction when it comes to choosing assets to invest in. They spend their time scrutinising companies’ results and meeting with management to discuss strategy. They then write lengthy reports communicating their conclusions.

Like their counterparts in investment banks, operations staff working for fund managers do everything from working in IT to settling and reporting trades, project management and customer services. However, many funds have outsourced the administrative aspects of their operations to global custodians (see global custody sector for more information).

Pay

Fund managers and research analysts are the best-paid employees at fund management firms. According to financial services recruiter BSI People, both will be on base salaries of AU$70k to AU$80k plus bonuses within the first few years, rising sharply after that. The top guys can name their salaries,” says BSI People managing consultant Rick Jansz.

Skills

• Rob Patterson, head of Adelaide-based listed investment firm Argo Investments, says good qualifications from an economic or accounting background are essential, and specialist courses such as those offered by the Securities Institute or the US-based Chartered Financial Analyst are highly regarded. “You also need to be street smart. It’s not just crunching numbers, you need to have a good gut feeling for the markets – a lot of it is sizing people up and forming opinions.”

• Frank Villante, chief investment officer of Sydney-based Souls Funds Management, says an “unhealthy obsession” with numbers is one aspect of the job, but by no means the only one. “Almost equally, we look for people who have a sense of perspective and balance, who have a depth of experiences or a depth of interests. We take the view that it’s important that people who analyse and who try to understand people in business aren’t too monotone in their views of the world.”

• Andrew Aitken, senior manager, client services from Sydney-based Ausbil Dexia, says: “As a minimum, we look for a bachelor's degree in a business-related course. However, it is more important to see some evidence of a genuine interest in the funds management industry. That evidence may include knowledge gained from reading the financial press on a consistent basis or further study specific to the industry. But a degree is seldom enough in such a competitive field.”