Is it possible to earn six figures a year in financial services and maintain a healthy head of hair and handle on life outside work? In most cases, the answer is no. As Alex Edmans, a former Morgan Stanley IBD analyst turned professor at the London Business School said after he left banking last year, most top careers now require you to be truly passionate. Hard work, commitment and time sacrifice are the prerequisites for success.
Even so, some jobs in finance – or related to finance – are more conducive to tranquility than others. As things stand in late 2016, we would suggest that these are the jobs below.
1. ETF portfolio manager
Exchange traded funds (ETFs) are the growth story of the past two decades. From almost nothing in 1995, assets under management in ETFs globally are now worth $2.4 trillion and are growing at double digit percentage rates each year.
ETFs are funds that issue shares and trade on stock exchanges. Their market value fluctuates to match that of the underlying securities they hold in their portfolio. Usually they track a major index.
What do ETF professionals actually do? That depends which area of the EFT world you would work in, but the most relaxed niche in the ETF nest appears to be: portfolio manager.
Unlike passive fund managers (also perceived as having an easy life) and who also manage funds that track indexes, ETF portfolio managers don’t spend their days buying and selling the securities underlying their fund. Instead, they effectively outsource this to brokers who are known as ‘authorised participants’ (APs) in the ETF. These APs create and redeem ETF shares for their clients (in return for placing the clients’ securities into the ETF’s basket), and it’s the creation and redemption of these ETF shares that helps the ETF accurately track its index as money flows in and out of the fund.
So, what do ETF portfolio managers do then? One managing director in ETF research says it’s more about dealing with dividends and other corporate actions, keeping up to date with tax and regulatory rules and managing the so-called ‘portfolio composition file’ which tells the APs what’s in the ETF basket. The more exciting elements include deciding whether the fund is going to fully replicate (track an underlying index by buying the same assets) or synthetically replicate (use derivatives to track the index), or looking at whether the sample of securities in the ETF is allowing it to follow an index accurately, but these decisions are usually left to the product development team and fund lawyers. “It does rather raise the question of what the portfolio managers are actually up to,” says one ETF marketer.
Simple? Or not. While the job of an ETF portfolio manager sounds like some kind of glorified administrator, there are complications. Firstly, the simplicity of the job means ETF portfolio managers have a lot of portfolios to manage. Four managers can easily manage 40 funds. Secondly, it can be complex: managing additions to the ETF requires knowledge of different clients and different market rules.
It’s not just ETFs, most kinds of passive index tracking fund management jobs are seen as easy by outsiders. “Passive management has got to be the least stressful job in finance,” says a senior fund manager at one (active UK) fund. “Taking information from one source and plugging it into a machine according to rules cannot be high stress.”
Amin Rajan of Create Research, an asset management research firm, insists it’s not that basic though. “Passive and ETF managers’ jobs are less demanding than their active peers’, but they are neither easy nor stress-free,” says Rajan. “The funds they manage are cheap but not cheerful. They suffer from various risks like momentum and concentration, which can ravage a portfolio. They also involve judgments on what to put in the indices. These funds are not as formulaic as they sound.”
2. Credit sales
If ETF portfolio management and passive fund management aren’t devoid of stress, how about credit sales? “These guys do nothing,” complains a trader at one bank in London. “All they do is have lunch and dinner with clients and take orders for new issues. Life is a dream.”
It’s easy to see why he might think that. As investors look for yield, high grade credit products are the new hot cakes. With plenty of investors wanting to go long US and European investment grade bonds, selling them is like handing out Skittles in a playground.
This might change though when/if interest rates rise. In the meantime, salespeople have a few problems of their own as they’re replaced by automated systems and refocused on leading clients. Aren’t they disappearing? “Not fast enough,” says the trader.
3. Investment grade debt origination in Europe
As with grade sales, so with debt capital markets (DCM) origination. DCM bankers are having a special year, especially in EMEA, where corporate investment graduate bonds are being lapped up by investors and the European Central Bank and the Bank of England. Thanks to this happy confluence of factors, EMEA investment grade debt issuance reached its second highest total ever (after 2009) in the first nine months of 2016. What could be easier?
4. In-house executive search at banks
If persuading companies to issue debt that everyone wants to buy sounds too strenuous, how about working for a bank’s recruitment team and approaching people to fill its most desirable and strategically sensitive roles.
Most banks now have teams of such “in-house” executive search consultants. Most external headhunters are extremely sniffy about what these internal teams get up to, typically claiming that they’re inept and put the best candidates off.
Internal headhunters earn less than headhunters working for an external firms, but they also have a much easier life. There are tens of thousands more people looking for London banking jobs than there are jobs to go around. What can be easier than approaching someone and offering them a role at a major firm?
5. Various roles in the under-utilized nearshore unit that’s the next big thing
Lastly, a recently former director in technology for a European bank, says there are plenty of people leading comparatively stress-free lives in near-shored offices (think Birmingham, or Warsaw) because managers in London are clinging to the old ways and won’t reallocate work. “High cost locations are trying to retain control,” he says. “When you speak to people in the near-shored offices they’ll usually say that they’re keen to take on more, but they’re not being given the responsibility or accountability they were promised.”
This is likely to change as expensive staff in London have control forcibly wrested from them. For the moment, though, low cost locations are just about following orders – which can be stressful or strangely zen.
6. Anything to do with infrastructure investing
Lastly, you might want to get into infrastructure investing. As the political tide turns it is, almost certainly making a comeback. As Deutsche Bank notes in the latest edition of its ‘Konzept Magazine’, Hilary Clinton wants to start a $275bn infrastructure spending plan in her first 100 days in office. Trump wants to double that. Not to be outdone, in the UK Jeremy Corbyn wants to spend £500bn on infrastructure. Corbyn and Trump might not get elected, but infrastructure spending is coming back. Infrastructure investments are also long term, and large – thereby eliminating the risk of stressy intra-day trade complications. Perfect.