Asset Management

Asset (or investment) management is the study of managing portfolios of assets, typically including stocks, bonds and/or cash, for individuals and/or firms. Management of those assets takes place by professional investment firms. These are mutual funds, pension funds, and hedge funds. Mutual funds pool household savings and invest in stocks and bonds with the purpose of generating good returns. Pension funds pool retirement contributions and invest long term to generate funds for paying future pensions. Hedge funds raise funds with the purpose of generating high returns by taking advantage of arbitrage opportunities in the capital markets.

The funds comprise of senior managers with extensive experiences in the area of investments assisted by a group of associates and analysts. Senior managers, such as mutual or pension fund managers, are responsible for defining the investment strategy of the fund. Associates and analysts provide support by analyzing and valuing specific assets (stocks, bonds, etc) and providing recommendations for investments in these assets based on the overall investment strategy of the fund.

Students interested in this area can pursue the following career paths:

  1. Mutual or Pension Fund Career: A typical entry point in a mutual or pension fund is that of a securities analyst. This requires strong skills in investments, as well as good skills in stock valuation and accounting. Long term, the goal is to become a fund manager. A strong prerequisite for a successful career in asset management is the completion of the CFA exams. Very strong writing and communication skills are desirable for these positions.

  2. Hedge Fund Career: Hedge funds tend to be considerably smaller in employee size compared to mutual and pension funds. It is not uncommon for a hedge fund to have a team of less than 10 employees. Employment in hedge funds requires very strong quantitative and computer programming skills, and knowledge of financial engineering. Students interested in this career path must take courses in financial engineering and strengthen their quantitative and computer programming skills. Communication skills are not that important.

  3. Asset Management or Investment Banking Career: Same skills as those described for mutual and pension funds, but may also require good knowledge of financial engineering depending on the team’s focus. Investment banks also expect employees to have very strong writing and communication skills.

Suggested Courses

  • Finance 419: Real Client Managed Portfolios

    Applies academic topics on financial markets, security analysis/valuation and portfolio management to hands-on investment management. Students form and review objectives, constraints, and investment policy as it relates to the client's money under management. They purchase securities, monitor performance of the portfolio, and make recommendations for any adjustments to the holdings. Students learn to take responsibility for the fiduciary and ethical standards of professional money management as guided by the CFA (Chartered Financial Analyst)Institute.

  • Finance 515: Fixed Income Portfolios

    Conceptual foundations and implementation of strategies for the selection, evaluation, and revision of portfolios of fixed-income financial assets (bonds), examination of related research.

  • Finance 580 AM: Asset Management

    Course develops quantitative and qualitative skills in solving problems related to asset management; addresses issues related to how finance theory help us be better investors, how asset managers make investment decisions, major classes of institutions in asset management, and how investment managers make money.

  • Finance 580 BF: Behavioral Finance

    Presents the increasing evidence that the financial decisions of at least some investors are affected by various behavioral biases that do not follow from traditional portfolio choice models; this course will highlight and analyze key findings from this research and consider implications of this observed behavior for managers of corporations, mutual funds, and human resource departments.

  • Finance 580 EMI: Empirical Methods in Investments

    Reviews academic papers that characterize the movements of security prices and attempts to test whether financial markets are “efficient.”; special attention is directed to the basic quantitative techniques necessary to analyze the statistical behavior of securities prices relative to the benchmark asset pricing models; topics include models of risk and return (including the CAPM and multifactor models), investment strategies designed to exploit apparent violations of market efficiency, modern techniques for optimal portfolio selection, and evaluating the performance of money managers.

  • Finance 580 HF: Hedge Funds

    Provides an in-depth study on the equity trading strategies and institutional features of hedge funds; focuses on the strategies on four types of hedge funds: equity market-neutral, long/short equity, merger/risk arbitrage, and convertible arbitrage; for equity market-neutral and long/short equity funds, course discusses stock selection using both quantitative models and fundamental analyses; for merger/risk arbitrage funds, covers portfolio construction and risk assessment around publicly announced corporate mergers; for convertible arbitrage funds, course examines how to evaluate convertible bonds using option pricing techniques and how to construct arbitrage portfolio based on the evaluation.


© Copyright 2007 Department of Finance, University of Illinois