by Brian DeChesare Comments (22)

What to Expect in Your Asset Management Internship at a Pension Fund or Endowment

Asset Management Internship

If you want to work in a buy-side role, is investment banking a pre-requisite?

There seems to be an obsession with it online, but for many roles, it’s optional.

The best example is in institutional asset management, where you can win internships and full-time roles without stepping foot into a bank.

If you want to invest in the public markets, why bother?

Our reader today came to the same conclusions, won a series of asset management internships, and wanted to share his experiences doing so:

Starting an Asset Management Internship: Becoming a Team Player

Q: Can you start by explaining how you became interested in asset management?

A: Sure. I grew up in a Midwestern state of the U.S. that was hit hard by the last recession, and I didn’t understand how something in the news that seemed so far away could hit so close to home.

I wanted to learn how all the events fit together, and I realized finance was the industry for me after taking my first class in it in high school.

I attended a well-known university and planned to get into investment banking initially.

But after learning more about it, I realized I wanted to follow companies and invest in the public markets rather than working on deals and long-term projects.

So, I interned at an asset management firm that worked with pensions, endowments, and ultra-high-net-worth (UHNW) individuals.

Then, I used that experience to win another internship in the investments division of a large asset management firm in a major financial center.

Q: OK. Before we dive into the recruiting process, how can you find asset management firms that hire interns?

A: The large asset managers, such as BlackRock, Vanguard, and State Street, and the large banks, such as JP Morgan, Goldman Sachs, and Credit Suisse, all have internship positions.

The banks typically don’t advertise the internships as “institutional asset management,” but simply as “general asset management.”

Google searches (e.g., “asset management Tulsa”) work surprisingly well for finding boutiques and regional firms, but if you can gain access, Capital IQ is the best way to find these companies.

Mid-sized banks rarely hire interns, so you should aim for large banks or large asset managers if you have work experience, or regional firms if you’re just starting out.

Q: Thanks for clarifying that.

What qualities do asset management firms look for in interns?

A: The top three criteria are:

1) Involvement in Team Activities

They want to know that you can work with others since the work is heavily client-based, and you’ll be working with industry-specific teams all the time.

Joining an organized sport, participating in a large organization, doing volunteer work, or serving as a mentor could all help your case.

2) Technical Knowledge of Investments, Derivatives, Economics, and Accounting

Asset management is much broader than investment banking, so you need to know a bit about everything.

A banker wouldn’t care about whether or not you understand trade policy, but it could easily come up in AM interviews.

And accounting and valuation/DCF analysis are essential in both industries.

3) Internships in Wealth Management, Asset Management, Hedge Funds, or Trading

You can demonstrate your enthusiasm for investing via other means, such as your personal account (“PA”), but nothing beats work experience.

Q: Great. How does the recruiting process for internships work?

A: For juniors (penultimate-year students), the recruiting process begins in October and ends in February, which is later than the one in IB.

But the timing varies greatly between firms, more so than in banking.

The first round consists of HireVue questions (you record yourself answering questions in video format online, and then they review the recordings) or a traditional phone interview.

Questions tend to be mostly behavioral – Why this firm, strengths/weaknesses, and leadership skills – but some technical questions will also come up.

Technical questions for AM firms cover accounting; DCF analysis; market knowledge of major stock indices, treasury rates, and yields; and portfolio management.

You are unlikely to receive questions on comparable company analysis, precedent transactions, leveraged buyouts, or mergers & acquisitions.

The “portfolio management” questions are the trickiest because there isn’t one centralized source for studying them.

The topics range from defined contribution vs. defined benefit pension plans to CAPM to risk preferences and asset allocation.

If you pass this first round, you might have to take an online test where you answer questions about how you’d deal with clients in difficult situations.

For example, they might ask you how you would respond to a client whose portfolio just declined by 5% in the past quarter, and what you would do to ease his/her concerns.

The math and logic tests common at assessment centers in the U.K. are unlikely to come up; qualitative questions are more common.

Q: I’m already tired. What happens next?

A: If you pass the first round and the online test(s), you advance to the final rounds, which are similar.

But you will speak with senior team members, and you’ll have to answer more technical questions and “on-the-spot” case studies.

For example, they might ask you, “You have a 70-year-old, risk-averse client. How would you build his or her portfolio?”

And you have to go back and forth with the interviewer, asking clarifying questions and explaining your thought process.

So, in this example, you might ask what his/her existing portfolio looks like, how much money he/she has to invest, and the amount he/she needs to live on each year in retirement, and then go from there.

Finally, if you’re interviewing at a pension fund or endowment, be prepared for questions on asset allocation specific to those institutions.

For example, you need to know the liquidity requirements and risk profiles of the firm, and if there are specific strategies that it cannot pursue.

On the Job as an Asset Management Intern

Q: Thanks for explaining all that.

On that note, can you explain the differences between endowments and pension funds, and how asset management differs as a result?

A: The main difference is the centrality: Endowments represent incomes and monies given to a university for operational items or other relative actions.

But pensions represent employees’ benefits from working at a certain corporation.

As a result, endowments tend to use longer-term strategies and have a higher risk tolerance; there’s no pressing need to pay retired employees, so they can be more aggressive.

The exact allocation depends on the Portfolio Manager (PM), but many large endowments invest in a combination of equities and hedge funds.

Endowments used to focus on bonds and other fixed-income-like assets such as REITs, but they have shifted to equities because stocks have outperformed bonds in the long run.

The strategy at a pension fund depends on whether it’s a defined benefit (DB) or defined contribution (DC) plan.

DB plans promise to pay employees a certain amount each month in retirement based on their position at the company and years of work experience; with DC plans, employees “contribute” a certain amount from their paychecks and choose how to invest it.

DC plans have become more popular over time because there are no guaranteed payments in retirement, which greatly reduces the risk for the company.

Individual employees have more say in DC plans, so these plans also tend to invest more in equities and mutual funds.

With DB plans, there’s usually an External Manager or Treasurer who allocates the pension funds into a wider variety of assets.

For example, the Treasurer might build a portfolio consisting of bonds, REITs, non-REIT equities, hedge funds, and commodities.

There is less variety in most DC plans.

Q: OK. And what does all of that mean for an average day on the job?

A: As an intern, I spent 70% of my time on portfolio construction and 30% on client-facing meetings.

“Portfolio construction” meant finding different stocks, bonds, ETFs, closed-end funds, and open-end funds to fit into whatever portfolio was assigned to me.

I had to create make-shift portfolios of 100-500 assets each and give the drafts to my manager, who said “Yes” or “No” to each asset.

When he finished, each portfolio had 50-80 assets.

This exercise is called a “term project” because it takes 2-4 days to complete and consumes all your hours in that time span.

For the client-facing meetings, I went with my manager and team to visit current and prospective clients, with performance updates for current ones and pitch books for prospectives.

As in sales & trading internships, interns cannot make trades or directly speak with clients because they don’t have the Series 7, 63, or any other certification such as the CFA.

So, you usually spend your time as an “idea person” if you’re completing an internship.

Overall, I liked the experience quite a bit because there was more real work than in many S&T internships, and I didn’t have to focus on networking with all the desks.

The downside is that I didn’t get as much direct exposure as IB interns do.

Q: Great. And what are you planning to do in the future?

A: My long-term goal is to become a Portfolio Manager in institutional asset management, so I’m currently preparing for the CFA Level 1, Series 7, Series 63, and the CAIA and CFP; I might also consider an MBA in the future.

I hope to win a full-time return offer from my next internship, but if that doesn’t work out, I’ll recruit for AM roles elsewhere.

Q: Of all those degrees and certifications, the MBA probably makes the least sense for you…

Anyway, thanks for your time. Do you have any final thoughts for students considering asset management?

A: Don’t be scared off by the less structured recruiting process, or by the fact that you’re not going into investment banking first.

In some ways, it’s a bit easier because there’s less competition: All the students in the “I don’t know what I want to do” category tend to default to banking.

Also, don’t be lazy: It is worth spending the time and effort to obtain certifications like the CFA here.

Q: Well said. Thank you!

A: My pleasure.

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys lifting weights, running, traveling, obsessively watching TV shows, and defeating Sauron.

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Read below or Add a comment

  1. Will a msf help get into asset management?

    1. Depends heavily on your previous background. Maybe? The issue for AM, as always, is that there just aren’t that many entry-level roles compared to the number of openings for IB, corporate finance at normal companies, etc. So an MSF can help, but it’s just a smaller field in terms of junior roles, so it’s always challenging to break in.

      1. What are the best ways to break into AM firm like Goldman Sachs? Is MSF or bachelor degree from a target school necessary?

        1. For Goldman specifically? Yes, a target school will help a lot. Otherwise, see all the coverage of asset management or “mutual funds” on this site.

  2. Hello Brian,

    This summer I am going to be interning with an institutional investor (large insurance company). I will be working with the fixed income group. I was wondering how often places like these hire their interns into a full-time role. The investment group of this company seemed pretty small and I am unsure if there will be spots open. Also what is the compensation of a full-time investment analyst for an institutional investor? I can not find any info on this online. I looked through the linkedins of all the full-time analysts and they had their CFAs and MBAs so it seems like the company wants their employees to be pretty certified so I am guessing they are compensated well?


    1. I’m not sure about that one, but I believe there’s probably a bit less intern to full-time hiring in asset management because there isn’t massive turnover each year the same way there is in IB. There are compensation figures here:

  3. Hi Brian, I really enjoy reading your articles and most them talk about recruiting for juniors. Can you shed some light on full-time recruiting for IB and AM.

    1. We don’t have much information on that, but hope to feature the full-time recruiting process in a future article.

  4. Josh Fre

    Hi Brian,

    I am a second year university student currently doing a financial analyst internship at a non-profit organization. How can I make this internship sound relevant to investment banking given that it is a non-profit organization. Can you let me know how I can make this internship sound relevant to IB.


    1. Talk about how your work led to better outcomes for the non-profit and spin a story about how it was thinking about making acquisitions of other non-profits or something like that, and say that your work supported some of that effort… you will need to plan it out in more detail if that didn’t really happen.

  5. Brian, is it possible to get straight into PE (skipping IB at BB stage)? I am pre-penultimate non target uni student with a small PE internship for the upcoming summer lined up. Do you reckon I can secure PE internship at one of the top PE firms when I am penultimate student and go straight into PE after graduation? Thanks

    1. Yes, it is possible, but not advisable because it’s harder to move to a larger firm if you don’t work at a large bank first, you’re taking a big risk because you won’t have a brand name (no one knows the top PE firms outside the finance industry) if you decide you want to do something else, etc. etc.

  6. Hey Brian,
    Great article. I have a quick question. I’m currently a freshman at UT and have a 3.8 GPA. I currently do not have any work/internship experience related to Finance. When should I start looking for internships in order to have the most chances for IB? How many am I supposed to do? And what type of internship are you supposed to get first? Should I find something to do for this summer ASAP or do most people start doing something in their sophomore/junior year?

  7. Hi Brian, thanks for yet another insightful article.
    I’m a first year student and I managed to secure a summer internship(equities desk) in a mid-high sized AM firm (think aberdeen/schroder).
    I was wondering if the skills I would learn in an AM firm is transferable to IB. If not, how can I spin an AM internship to fit an IB interview?
    Moreover, are AM internships valued by bankers at all?
    Thank you for your time.

    1. Yes, the skills are transferable because you still value companies, need to understand financial statement analysis, and so on. Spin the experience by talking about how certain companies you followed did M&A deals, raised capital, and so on, and how you had to learn about deal analysis from that as well.

      Bankers do value AM internships, though they obviously see IB/PE internships as being more relevant.

  8. Philip choi

    I am not a fresh graduate and is a qualified accountant and FRM with experience in banking and investment banking as product controller for many yeaers. I am now doing a dump accountant job in NGO. My job is not interesting and I always admire all those IB practitioners who are doing non-routine work and earning big sum of money. I tried to find IB job when I got an MBA in Warwick but not succeed (at that time I don’t know this web site exists) I always want to transform to do more interesting and challenging work by leveraging my professional qualification and skills and at the same time earn sufficient money to support family and controlling more time to enjoy life, do more travel. Can you leave me more advice?

    1. Your question is really broad, so I’m not sure I can answer it. If you already completed an MBA, going back for another MBA at a top school is probably not an option, and getting into IB at this stage probably isn’t realistic. Maybe think about corporate finance at a large company and use that to move into deal-related work eventually; see:

  9. Hey Brian, nice article. I have a quick question.
    I know that you say it’s worth it to attend a target school undergrad, even if it costs a lot, if you want to break into IB. You said to view it as a personal LBO haha.
    I got into Umich Ross as a preferred admit (I’m a senior), and the University of South Carolina Honors College (Ranked #1 honors college in the US in 2012).
    The thing is, I will graduate debt free from USC, but I will need to take out $120k in loans to go to Umich. (Parents make too much, so we didn’t get aid)
    Obviously this is a huge decision and I know you don’t have enough info to answer it as best you can, but if I am sure that I want to work in IB/PE/HF, is Ross worth the $100k in debt, or should I just go to USC for free, crush it, and then work at a boutique for a few years before hopefully going to a top MBA and then breaking in as an associate?
    Thank you for the advice!

    1. I think it depends on how much you absolutely have to work at a top bank or other finance firm vs. a smaller one or a boutique.

      If you are 100% set on Goldman Sachs, the Ross offer is worth it even if you go into debt. If you don’t care that much which bank you’re at, and you would be fine accepting an offer at a middle-market or boutique firm, then USC is better because the downside risk is much lower in case you don’t win an IB offer.

      1. Thanks for the response. Obviously if I want to work at a mega fund or top HF, I would basically have to be coming from a BB or EB.
        Other than that, can I still make comparable money in a middle market or botique firm in the long run? I really don’t care about prestige, as it has no effect on my life, while money does (up to a certain point). Also, will I be limited in middle size private equity firm recruiting coming from a middle market/botique?
        Thanks in advance.

        1. You earn less at smaller banks, both short term and long term, but you’ll still be in the top 1% by the time you make it to the mid-levels. So if you don’t care about prestige, go for the cheaper schools.

          Yes, your ability to get into private equity will be more limited. But you could always move to larger banks and then get into PE from there.

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