eFinancialCareers

A game of patience, profits and pension funds.

Fund managers invest money on behalf of their clients – which include pension funds, institutional investors, insurance companies, unit trusts and others – with a view to making it grow.

There are two basic kinds of fund:

• Passive funds: also called 'index trackers'. Fund managers select a portfolio of assets whose value will track that of a financial index. A fund that tracks the FTSE 100 index, for example, will aim to follow the value of the UK's 100 biggest companies. The investment decisions of passive funds are typically made using computers, meaning fund managers working on them have a relatively easy life.

• Active funds: active fund managers buy and sell financial products in an attempt to outperform the rest of the market. Active fund managers are what most people's ideas of what fund management is: they invest in products they hope will rise in price, to sell at a profit.

Fund managers invest in everything from shares, bonds or real estate to commodities such as oil, wheat or aluminium. Some funds offer fast growth and high risks; others offer slower growth and smaller risks.

Trends

2006 was a good year for Europe's money managers; strong markets saw assets under management rise for the third year running.Headline figures alone disguise the fact that the market is evolving, however. Scratch the surface, and the asset management market starts to look very different to the way it did only a few years ago.

One of the biggest issues has been a shift out of traditional investment houses into more specialist funds, such as hedge funds, quantitative funds and emerging markets funds. Between 2003 and 2005, research by the European Social Investment Forum (SIF) found that investment in socially responsible funds increased by 36% to £706bn.

Bond funds, however, look set to have a tough time in 2007 as rising interest rates and inflation help depress bond prices, creating a danger that bond investors will lose money. However, uncertainty surrounding the US economy means equities may also be on the way down.

Key players

Europe's top fund managers include Swiss-based UBS, the UK's BGI and Allianz of Germany. Some big US fund managers, such as Fidelity Investments or State Street Global, are also active in Europe.

Roles and career paths

Working as a fund manager used to involve everything from analysing and investing in products to persuading new clients to put money into the fund. Today, however, fund managers focus on managing money, while other people are employed to do the rest.

If you don't fancy being a fund manager, you could work as a marketer, research analyst or operations expert. Fund management marketers wine and dine potential clients; they also manage relationships with existing clients, meet investment consultants and play a role in developing new products.

Analysts working in fund management help steer fund managers in the right direction when it comes to choosing assets to invest in. They scrutinise companies' results and meet with management to discuss strategy. They then write lengthy reports detailing their conclusions.

Operations staff working for fund managers do everything from working in IT to settling and reporting trades, project management and customer services. However, many funds have outsourced the administrative aspects of their operations to global custodians.

Pay

Traditional fund managers don't make quite as much as traders working in investment banks, but they don't do too badly either. Hedge fund managers can make considerably more than anyone else – but they're a special case.

Fund manager pay is rising. Research by recruitment firm Morgan McKinley suggests top performers in the sector can now earn salaries of £140k, plus a bonus which can be several times higher, depending upon their performance over several years.

Skills

The attributes required for a career in fund management vary according to the role. Laura Everingham, graduate recruitment manager at Fidelity International, says: "Researchers will need an enquiring mind, an avid interest in the stock market and a passion for finding out what makes a good or bad investment."

Richard Barry, HR manager at fund management firm Baillie Gifford, agrees: "Fund management is very different to investment banking; it is more about qualitative rather than quantitative research, making it good for graduates with any sort of degree," he says.

"We look for lateral thinkers and people who are naturally inquisitive. We want really bright people who are going to come up with winning ideas that will work, although you do still have to have some numeracy skills and have a good academic record."

Fund managers need to be able to assimilate large quantities of information and then identify the key points to make investment decisions, stresses Shane Kelly, head of international graduate recruitment at fund management firm BlackRock, formerly Merrill Lynch Investment Managers: "In asset management we generally look for potential – passion, ambition and enthusiasm for our business – rather than specific traits. But good quantitative, numeric and communication skills are a must."