If you are applying to a large multi-strategy asset manager at the junior levels and are asked which you would like to work in portfolio management for, Equity or FI funds, which would you choose and why?
Very subjective. Different for everyone.
I’d go with FI. Its more logical, cleaner, intuitive. Equity investment is basically fraud glorified.
I would do equity.
philip.platt Wrote: ------------------------------------------------------- > I would do equity. and why?
FI. Like needhelp said, it is more logical. FI will give you more chance to show your analytic ability.
fixed income…more math based. If you like “puzzles” with multiple solutions, FI is the way to go
FI is more mathematical and complex (bonds mature, now you have to go find replacements, portfolio duration changes on its own, so you have to compensate). The same company issues different bonds. I think equity gives you a little more leeway for incorporating intuitive senses of how the company and/or economy is likely to evolve. Because equity is essentially the residual value of a company over and above its debt, lots of little things that are hard to quantify will affect the equity value. If you are good at figuring out what the little things are, then you’ll do well in equity. If you prefer the comfort of having more mathematical justifications to back up your decisions, you’d prefer FI. A middle ground is High Yield FI - it’s basically fixed income, but you have to pay close attention to how the equity performs. If you’re not sure which way you want to go, that might offer exit opportunities in either direction.
Equity is definitely the sexier of the two. I dont know anyone who can talk about some subordinated issue they bought at a killer discount and how that is going to make your YTW .014% better…not a cocktail conversation. Every equity has a story however. With that said I don’t think either is “better”.
great answers … thank you all
You won’t play a lot of golf as a fixed income manager.
Equity for sure…you don’t want to end up looking and sounding like Bill Gross
if you had to choose and are looking for some hot stuff, this won’t be a valid question as the distinction is blurred. it’s gonna be high yield bons, convertibles, etc.
One thing I’ve noticed is that there do seem to be a lot more fixed income PM jobs than equity PM jobs out there, at least judging by ads on places like efinancial, CFAI, Bloomberg, etc… I think that’s because lots of banks, insurance companies, and pension funds tend to do asset liability matching and fixed income plays a bigger role in that. Also, a lot of the toxic stuff that’s been traded fit under the fixed income category, and most securitization is done under a fixed income umbrella. To some extent a lot of those jobs are likely to disappear in the medium term. Short term, they still need to figure out what to do with the cr*p, especially since the government might not be buying the stuff. Sum total: if you’re relatively indifferent, you may discover that there are more FI jobs than Equity jobs out there.
^I believe it’s also because the bond market is much, much larger than the equity market. The equity market is like a pimple on the bond market’s arse.
Being in sellside equity research, we’ve recently become FI analysts given it’s been all about credit the last few months. I’ve had a little taste of FI research, and did not enjoy going through covenant agreements, credit agreements, etc., To each their own.
Dont work in this space but doesn’t the Fixed Income market dwarf the equity market in size? That would probably be a consideration for me. Bigger pond mean bigger deals.
> ^I believe it’s also because the bond market is much, much larger than the equity market. The equity market is like a pimple on the bond market’s arse. …common misconception. Dollar amounts are bigger, that’s about it.