What’s the difference between asset management and investment banking?

What’s the difference between asset management and investment banking?

For a long time, investment banking has been regarded as a prosperous career. Recent job cut downs across world’s leading investment banks make asset management a popular career choice among finance professionals. This post explores the difference between asset management and investment banking.

So far investment banking has been a coveted profession among finance graduates. The lucrativeness of the profession and the perks which come with it pulls in graduates from engineering, economics and other related backgrounds.

Steadily, however, asset management has emerged as a lucrative career option alongside investment banking. For those who are enamored by the glamourous investment banking industry, now have two options – asset management and investment banking. Though both

The two roles are closely connected. However, don’t get perturbed by the close connection between the two, both have a strong job outlook. Investment banking certifications and other finance-related professional certifications are equally in demand among those looking to build a career in these two areas.

What’s the difference between the two professions?

Investment banking and asset management both are at play at various investment banks. Both are portfolio management, but with significant differences.

One of the major differences is – investment bankers reside on the ‘sell side’ of the financial market, while asset managers reside on the buy side of the financial market. This means an investment banker sells investment vehicles for their clients, while asset managers buy investment vehicles like bonds, stocks, derivatives etc. from investment bankers or through them.

Investment bankers, on the other hand, can be involved in a number of investment activities. Here are some responsibilities of an investment banker —

1. Mergers & acquisitions
Investment bankers help corporate navigate through merger& acquisitions, while addressing legal, financial, and restructuring required at times during merger and acquisition.

2. Raise capital by equity or debt offering
Investment bankers help companies and conglomerates raise capital by offering debt and equity. Capital is often required for team expansion, product development, organizational re-structuring etc.

3. Offer brokerage services
Investment bankers also act as a middlemen between buyers and sellers of stocks, bonds, and other investment instruments.

What do asset managers do?

Asset managers primary job is to make their clients more money, while keeping their risk tolerance, short-and long term goals, and their unique financial needs in mind. They do so by investing in various investment vehicles.

Typically, asset managers do so via the management of so-called pooled assets in investment funds designed to meet specific investment needs like asset accumulation ( stock funds) or capital preservation (bond funds), etc.

Asset managers also chose to invest client’s money in a spread-out way which includes stocks, bonds, real estate, commodities, and complex derivative instruments.

Job outlook

As described earlier, both professions have a strong outlook. Salaries for both asset management and investment banking are at part. Investment bankers, however, in some cases, tend to have an upper hand when it comes to compensation.

Investment banking industry offer both profession handsome compensation. As per U.S Department of Labor, jobs in both areas are expected to grow at 24% until 2024.

According to Glassdoor, an average investment banker earns $84,091 annually, while an investment banker analyst can earn up to $95,000. The average salary of a traditional investment banker is $83,000.

Generally, a fresh asset manager hired right out of college can earn up to $55,000. Additionally, they can earn a percentage of the fund they manage.

According to Glassdoor, the average salary of an asset manager is $85,139. Portfolio managers can earn up to $106,000 annually.

Investment banking and asset management both offer a steep growth curve for finance professionals. Both are promising. The decision to pursue one should be based on skills and level of interest. So which one are you going to pick?


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