The most common misperception in the investment management industry is that academic credentials are the rite of passage to becoming a portfolio manager. I earned all the top designations and licenses and managed money for several years. It's not all about having the right letters after your name.
There are a million CFA charterholders, MBAs, PhDs and Master's in Finance degree holders that can’t crack into the industry. If academic credentials were all that it took, then the entire graduating class of MIT would fill every buy-side position. I can say that theory and practice are two entirely different things.
What I have come to learn as a businesswoman is what I wish I had known when I was trying to glean wisdom from my Gordon Growth models. I would have gone so much further if I could have put down my TI-82 calculator and gotten some practical business insight. Instead of grinding out Accounts Receivables ratios and holding them up like they were the gospel, I wish I had spoken to more collections agencies. Instead of projecting out every revenue line on the income statement according to linear forecast, I wish I had taken the time to speak with sales professionals in that particular industry and understood what the market was really going to yield in the future. But I didn’t. I put my head own and journeyed to analyst land, in which linear relationships and formulas rule. The definition of a model is that which is a representation but not the reality.
Those who understand the realities are business are going to do best at picking the companies that will outperform in the reality of the market, hands down.
When I was on the buy side and I would interview someone, I would hear all sorts of responses to the question, “So what would you invest in right now if you had $1m?” While this question could have been answered with unlimited creativity, most of the time the responses were very forgettable.
People with strong brands win in a competitive marketplace, and I'm not talking about the font on your business card, resume and cover letter. When most investment analysts are going to say the same thing, have a unique angle that will set you apart. For example, If you want to work at a hedge fund, become a distressed debt expert and know everything about turnarounds that anyone could possibly know. Then start writing a blog about it and blast it out across social-media channels, or present it to your local CFA society. Get obsessed.
Most people underestimate how hard it is to get and keep a job in this field. Remember that the really successful hedge fund managers own yachts. There’s a reason why analyst salaries are what they are, and it is not just because of the sheer amount of hours people work. These jobs are competitive, demanding and hard to get.
Most portfolio-manager wannabes are going to make an attempt for a few years, struggle and eventually fail. They’ll pursue some job in corporate finance or become a financial adviser and call it a day. If you’re not prepared to promote yourself hard, then the market will punish you.
Here are some examples of what I mean by promoting yourself hard. Contact 10-to-15 new contacts by phone each week on your lunch break or other downtime. Make an effort to reconnect with old college friends and request introductions to their contacts who work at asset management firms. Use the CFA program not only as an academic experience but also a way to make inroads with at least five new portfolio management contacts each month. Update your mock portfolio and models each quarter to reflect economic changes.
The other thing to realize is that if you want to become a portfolio manager, you don’t have unlimited time to do this. While it’s not impossible to crack into the industry when you are in your 30s or beyond, keep in mind at that point you are going to make an entry-level salary and compete with the 26-year-old who has a motorcycle and no checking account while you have a wife, a mortgage and two kids that you have to pick up from soccer practice twice a week at 6pm. Employers know that.
There’s no shortcut a buy side job, and the older you get, the lower the chance that you’ll be selected for the lower-level positions that require training and would be your entry point to a career in portfolio management. This is why I recommend that people in their 20s or even early 30s market themselves hard.
Sara Grillo, CFA, is a financial writer with a focus on branding and marketing for investment management firms and professionals. She is a former associate at City National Rochdale and Lehman Brothers, an investment adviser at Grillo Investment Management and a financial adviser at Empire Wealth Strategies.
Photo credit: ismagilov/GettyImages