Investment Management Industry Overview

Investment Management Industry OverviewInvestment Management Industry OverviewThe industry controls around $64 trillion globally (having grown by roughly 10 per cent annually over the past decade) and charges clients 1.5 per cent to 2 per cent for the privilege. Hedge feststellungs charge 2 per cent management fees and typically 20 per cent performance fees.No surprise then that operating margins in the investment management industry are more than 40 per cent, according to the Boston Consulting Group. The beauty of the industry, for its incumbents, is that as markets tend to rise over the long run their fees increase even though the cost of managing money doesnt. Overtime, according to some estimates, fund managers raise their fees by double digits, up to around 15 percent a year.The investment management industry is one of the few that broadly impact households all over the world, particularly now. As the population gets older in the core European Union countries, the old-age depen dency tarif is set to rise from 21 percent now to 50 percent in 2050 and pension deficits have increased, more people than ever are planning for their future financial needs. As a result, the industry is increasingly visible. Investment management has become an increasingly important part of the financial services industry in Europe. London, for example, is now one of the leading international centres for investment management.Still growingIn Europe assets under management grew by almost 400 1000 milliarden in 2007 the UK alone now accounts for around 7 percent of global assets under management, the third biggest home for managed assets behind the US and Japan. Retail fund demand has continued to increase nearly 50 1000000 households had $24 trillion invested in retail funds as of June 2007, up from $1 trillion in 1990. Despite the leistungspunkt crunch investment in alternative asset classes has also shot up. A survey by HedgeFund Intelligence said global hedge fund assets under m anagement reached $2.65 trillion at the beginning of 2008, a massive increase of 27 percent from the same period in 2007.But the credit crunch will biteHowever, the adverse economic conditions of recent times have caused problems for the industry. The credit crunch will lower returns in the short-term because there will be less leverage available to fund managers, not to mention the effect of the crunch on global stock markets. Many big investment banks, such as Citigroup and Merrill Lynch, were already selling off their wealth management departments before the economic downturn. As the credit crunch continues to bite and push returns lower, more big players could downsize their investment management offerings.The crunch may also bring about regulatory changes. In the US, for example, the Federal Reserve bailed out Bear Stearns because, if it failed, its entangled assets would have also brought down the edifice of modern finance. As a result harsher regulatory regimes will be introd uced to ensure fund managers cannot topple a financial system that it has taken centuries to create.The heat has also been turned up on fund managers who are making exorbitant sums amid a seriously tightening economy. While more people than ever are using food stamps in the US some asset managers, particularly hedge fund owners, are making massive profits.Even multi-multi millionaires such as Bill Gates and John McCain have criticised the super-rich for cashing in on other peoples hard-times. John Paulson, a hedge fund manager, made $3.7 billion in 2007 primarily through shorting the risky CDOs that have brought misery to so many. Paulson beat the best-known fund manager, George Soros, into second place with an annual income of $2.9 billion. In the UK alternative assets managers, particularly short-selling hedge funds, have been seriously admonished by the FSA for spreading liquidity scare-stories about UK banks.Pension reform and emergence of propertyThroughout Western Europe, pens ion reform has become a politically explosive topic - and one being watched closely by the biggest banks in London, Frankfurt and across the Atlantic on Wall Street. Several European Union countries are facing pension crises, mainly due to an ageing population. Europes state pension schemes are based on a pay-as-you-go premise, which means that money paid into the retirement plan by todays workers are passed through immediately to todays retirees. That means much more responsibility is placed on the current crop of workers to pay for a disproportionate amount of pensioners Older workers (aged 55 to 64) in the European Union are set to increase by 24 million between 2005 and 2030.And heres how investment managers might benefit in the years to come the governments plan is to strike a new model that shifts more responsibility to workers and away from state-run pension plans. Nations like France, Germany and Italy are trying to increase the retirement age as a way to encourage workers to look after their own pensions through defined contributions. Meanwhile, requirements for defined benefit contributions are being increased. As pension reforms are passed throughout Europe, those that enter the investment management industry will benefit. It is one of the reasons why investment managers, from Deutsche Bank in Germany to UBS in Switzerland, are touting a variety of investments tailored to younger investors.The show will go onInvestors will always desire yields, whether from short-term risky ventures or more secure longer-term investments. As a result, the industry can survive anything. After all, assets are always there to be managed. However, the next couple of years will be a tougher time for the industry as the risks surrounding financial markets and global economic growth remain on the downside. As a result investors, alongside other consumers, are tightening their belts to offset a drastically slowing global economy and a reduction in cheap credit while this c ontinues investors appetite for equity exposure and interest rate risk is likely to remain subdued. This will impact liquidity, meaning managers will have less cash in their funds than they have been used to over the last few years. ConsolidatingThere have already been well over 150 mergers in the investment management industry in the last 20 years. Recent consolidation activity includes the merger of BlackRock and Merrill Lynch Investment Management, buyouts of Jupiter from Commerzbank and of Gartmore from Nationwide Mutual. A further spate of consolidation is in the offing amid tough economic conditions. Experts believe institutions with low price-to-earnings ratios, or struggling with poor asset quality, will sell-off their investment management businesses to find more capital. The credit market turmoil has already sidelined some private equity deals and could lead to fire sales of distressed assets. Indeed, M&A activity within the investment management industry was at an all ti me high from January to March 2008 in terms of deal volume. In the first quarter of 2008 53 deals were announced at a cost of around $9.6 billion. The acquired assets under management totalled over $704 billion. By contrast in the same period of 2007 45 deals were announced representing $544.9 billion in acquired assets under management.Convergence The European investment management sector is currently experiencing massive convergence between traditional and alternative investment styles. Hedge funds, private equity funds and traditional asset managers are competing increasingly closely as the lines between the asset classes become blurred. Investors increasingly understand how to invest and which investments could generate higher returns in a regulated environment. Regulators have realised this and are now offering traditional asset managers new flexibility as long as investors remain protected.The search for the alpha has aided the process. Traditional asset managers have been bu ying hedge fund boutiques for some time. But now the difference between these businesses and their core investment strategies are disappearing. Long-only managers are also using regulatory devices such as UCITS III to offer hedge fund products for retail investors and other products to widen the choice for their institutional investors.Meanwhile, alternative asset managers are reaching a wider audience among investors through regulated fund vehicles and eschewing offshore domiciles of the Caribbean and the British Isles for EU member states such as Luxembourg. The Alternative Investment Management Association (AIMA), the international hedge fund industry body, recently suggested Hedge funds are now considered part of the mainstream of the investment management industry. There is even convergence among alternative assets. Private equity houses and hedge funds are frequently adopting similar investment strategies. Cheap credit, low volatility and rising equity markets encouraged hedg e funds to enter the private equity market until the middle of last year.mora strategically, hedge funds are increasingly ring-fencing capital for illiquid investments, similar to those made by private equity. Recently they have deployed these investments up and down the capital structure, including second lien and mezzanine debt products. Private equity houses have acquired undervalued assets and businesses through public market deals. Many experts suggest this could lead to further growth in hybrid alternative investment firms.The shift from equities to bonds to equitiesAfter the dotcom bubble burst at the turn of the millennium, equity markets became erratic as stocks were challenged by a mixture of corporate scandals and weak economic growth. As a result funds moved from equities to bonds. According to some estimates, pension funds moved 40 billion from equities to bonds in 2004. However, strong economic growth and weakening bond yields since then has instigated a shift back to equities. But, experts suggest, investors in stocks lulled by periods of low volatility can be hit hard. As the recent economic crisis has shown, things can change quickly and even the strongest of stocks can plummet. In the UK during the 1970s the last time stagflation hit and editor of The Sun Larry Lamb immortalised 1979 as the Winter of Discontent equities on the whole performed very poorly. Then, as now, investors flocked to more secure bond funds, primarily investing in government debt as opposed to risky junk bonds.Still, bonds arent always a stahlkammer-haven in times of strife. The trick for investors, says one fund manager, is to Keep a diversified portfolio comprised of stocks and bonds. Even 100 percent safe products arent always safe, as most managers will tell you. The trick is to spread the risk.The challenge of exchange traded fundsDescribed as the Wal-mart of the business, exchange traded funds (ETF) are increasingly undermining the traditional business model of investment management funds. According to Morgan Stanley, ETFs had $74 billion in assets under management in 2000, but by 2007 this was up to $700 billion. The growth will not stop there, with Morgan Stanley estimating that $2 trillion will be invested in ETFs by 2011. And it is no surprise. Nearly anything investors believe will perform well in the future can be bought in the form of an ETF, which is a portfolio that can be bought on the stock exchange and costs much less than a traditional investment management firm. The more investors pay in charges, the less money they are likely to make according to experts. As a result, ETFs will remain extremely attractive to investors. More than just investmentMore than ever investment management companies are focusing on more than just investing. Business decisions such as marketing and distribution, global growth, and technology integration are becoming increasingly important factors in the success of investment management firms. While th is Guide will focus mainly on developing a career on the investment side of the investment management industry, we will also spend some time discussing the growing alternative career opportunities relating to these non-investment business issues.

ASME Pressure Vessels Video Thomas Pastor Medal Winner

ASME Pressure Vessels Video Thomas Pastor Medal Winner ASME Pressure Vessels Video Thomas Pastor Medal Winner Video Thomas P. Pastor, Melvin R. Green Codes & Standards Medal WinnerThomas P. Pastor is vice president of code services for HSB Global Standards and leuchtdiode the development of several knowledge-based databases used to provide code technical support to over 3,000 ASME certificate holders and inspectors. He formerly worked at Combustion Engineering where he was a member of the structural analysis group responsible for performing load analyses of nuclear reactor internals subject to seismic and loss-of-coolant events.An ASME fellow, he has served on the societys Boiler and Pressure Vessel Code committees. He currently serves on ASMEs Council on Standards and Certification as well being a member of the Board for Pressure Technology Codes and Standards, among others. He earned his Bachelors and Masters degrees in Civil Engineering at the University of Connecticut, Storrs (UC onn).Learn more about Thomas P. Pastor and the ASME Melvin R. Green Codes Standards Medal. The copyright of this program is owned by ASME.

Every Small Company Needs a Compensation Strategy

Every Small Company Needs a Compensation StrategyEvery Small Company Needs a Compensation StrategyEvery Small Company Needs a Compensation Strategy ChildersWhile many small geschftlicher umganges have a solid business plan in place, they often falter when it comes to implementing a compensation strategy. That is unfortunate.As a result, its easy to offer too much or too little money to compete for the best talent. Even worse, some businesses neglect to have a compensation strategy in place that reflects their overall strategy and values.Katie Busch of HR Communication Consultants in Boynton Beach, Florida, says small businesses need to keep their salary structure current, while also offering a competitive advantage over other small businesses in the same market.Many small businesses mistakenly believe that having a compensation program in place isnt something they need to worry about until their company gets much bigger, Busch says. They often believe having a compensation plan will limit their ability to make good business decisions in regards to employee pay, but often the opposite is true.To create a comprehensive compensation strategy for your small business, consider the following stepsLook at the job and its location. Salaries for small businesses are not necessarily based on the same data used by large companies. When determining a jobs market value, job location is oftenas important as the job title. The Small Business Administration recommends doing an online search using keywords such as Administrative assistant, salary range, your location to determine how to better understand the market for particular jobs in your area.Experts recommend taking it a step further. Look at where youre competing for talent, says Tim Low, Senior Vice Presidentof Marketing at Payscale.com in Seattle, Wash. For many positions, especially in technology, companies may be national, rather than regional.The takeaway if youre seeking candidates who live outside of your immediat e area, be sure to utilize a salary relocation calculator to help determine fair compensation.Be transparent about your compensation strategy. In the past many businesses believed that talking about compensation should only be done behind closed doors, but Low says that successful small businesses today believe in an open pay policy that reveals a compensation strategy that is committed to investing in top talent.Being honest and candid about your compensation practices and how you benchmark salaries can have a positive impact on trust and employee morale, Low says. Consider implementing salary ranges. While not all small businesses feel as though they are ready to implement salary ranges, Low says that creating pay ranges can be good for your business.By establishing a salary range, you can show employees where they are starting on the range, and illustrate how they have room to grow, he says. If an employee is at the top of the salary range, you can talk to them about a growth tra ck, and how they can thrive at your company, perhaps by getting the skills and training needed to be a manager.Anticipate employee expectations about raises and bonuses. Low says many small businesses are moving away from annual reviews, preferring instead to offer more frequent feedback. This strategy is particularly important for retaining Millennial employees.Many large companies including IBM, Microsoft and General Electric are leading the trend by replacing annual performance reviews and offering employees more frequent informal reviews, where they can set and update quarterly goals and offer opportunities for individual growth.At Grady Britton, a creative agency in Portland, Oregon, Paige Campbell, the agencys president and partner, says employees receive quarterly rewards based on performance including a bonus day off or a long leisurely lunch paid for by the company.Employees and work teams are also celebrated throughout the year when they have demonstrated superior performa nce. If someone has done an outstanding job they may receive a mid-year raise, we wont wait a full year to acknowledge their achievements, Campbell says.Get creative with rewards. Busch says one of the first rewards she encourages small businesses to implement is a simple thank-you given to an employee who has exceeded expectations.Its especially important to verbally acknowledge an employees contributions in a group situation that also serves to demonstrate to other employees your companys expectations.