March 20, 2008
‘I’m not motivated with my work’
I have been a fund manager for 10 years and currently work for a large UK institution. The job is great: flexible and well-paid. My problem is that I genuinely don’t believe it is possible to do this job – outperforming other fund managers and equity indices - with any consistency. I believe the industry is based on the lie that fund managers add value through skill, rather than luck. This makes it hard for me to keep motivated. Should I move – even though I can’t think of anything else I want to do – or should I accept the idea that work is not meant to be meaningful? I am married, but have no children.
Fund manager, male, 34
I should have thought eveyone in the fund management industry would know this by now. My advice would be to write a book about the worse practices of your utterly pointless profession… there don’t seem to be any written by insiders… Taleb, Malkiel, etc approach this from an outside perspective.
Posted by: David, Liffe local, male, youngish | March 20th, 2008 at 8:53 am | Report this commentWell, I perfectly understand your point. I think it was even proven that a 5 year old could chose stocks randomly with as many chances of making a a profit as any “standard” fund manager.
Writing a book might make a nice change but it is just as pointless and would probably require you to lie (if you just say that performance is random, it might not sell well
I think the same thing about my job, a lot of the time. I think somehow I sacrificed meaningful job for a better living.
What does your wife think about that ?
Also, what are the views of your co-workers…surely they do not all think that fund manager performance is based on skills ALL THE TIME ?
Agnes, 30, Female, Senior Consultant
Posted by: Agnes | March 20th, 2008 at 9:38 am | Report this commentI suggest taking time off and spending a couple of days shadowing someone on the sell-side. That would put your current predicament into perspective. At least you do your best to make rational investment decisions based on analysis and experience. Analysis is a dirty word for us harlots on the other end of the phone.
Posted by: Jerry | March 20th, 2008 at 9:42 am | Report this commentThe need for work to be meaningful gets stronger with age. If it’s already troubling you at the age of 34, you’re going to find it more and more of a strain as the years go by.
It’s time to start planning your exit. How long that will take depends, more than anything else, on how much you need the money.
Posted by: Alastair, male, 46, consultant | March 20th, 2008 at 9:57 am | Report this commentWork on making other people happy. If your job is pointless the money you earn is not; it can be used to better others’ lives.
The purpose of life is to have a life of purpose
Best luck
Posted by: Grant | March 20th, 2008 at 9:58 am | Report this commentEnjoy the money and try not to think too hard about it.
Posted by: Erin, analyst | March 20th, 2008 at 10:02 am | Report this commentThere are perhaps two answers to your question. Firstly, if you think that you are part of a cynical lie then leave, take a cut in pay, and do something which contributes more obviously to the social good - or swallow your principles. Secondly (which I think is more likely to be the case) if you think that it is very difficult for fund managers genuinely to add value beyond chance then try your best to do so - apply yourself and earn the hefty fees that your clients pay you and the bonus you get from your employer. I’m not sure that the big star individual fund managers got there through playing darts with the FTSE, or whatever index they’re benchmarking against. Your clients - certainly if they are large institutions - are wise to the risks that come from appointing an active manager on a multiple of the fees it would pay to a passive manager or from depositing the money in the bank, but have decided to appoint you nonetheless. It’s their money. Do you best to make it grow.
Simon, 38, male, solicitor
Posted by: Simon | March 20th, 2008 at 10:06 am | Report this commentIf you feel this way, step aside. I’m 29, CFA qualified, and don’t have a fund to run yet. It’s a bit annoying to see guys who clearly don’t give a stuff hogging a job that other people are raring to go for.
Posted by: Rick | March 20th, 2008 at 10:24 am | Report this commentYou are losing motivation and eventually will lose concentration unless your overcome your lack of motivation.
Nevertheless your challenge here is not about losing your motivation but knowing what else you want to do.
I suggest you start thinking about something that you are passionate about? Once you get that, discuss it with your wife as she would be your best critic. You do not have children and that could work well in your favour.
Good luck.
Kumar Krish, 34, Male, Accountant
Posted by: Kumar Krish | March 20th, 2008 at 10:55 am | Report this commentI’m not sure what your expectations were when you accepted the job but apparently they’ve fallen short of reality. So what to do?
You’ve got a cushy job, keep it. Enven you admitted the question of talent of luck is a big one…go with luck.
Continue to collect huge paychecks you don’t deserve. Hey too bad for the other guy.
Spice up your personal life. Get into coke or heroin, cheat on your wife, and leave everyday right after lunch. Shoot skeet and go horseback riding. In other words diversify. Tak up acrobatic flying. If worse comes to worse you can alway auger in and then have a great funeral,as a dashing sportsman.
But please, no whining. Just do it….the fun stuff, forget doing the job that’s what the hired helps for dummy.
Posted by: Habu | March 20th, 2008 at 11:49 am | Report this commentI was once in your shoes. I worked on buy-side and sell-side and left because what have you acheived even if you do outperform consistently? Active management is a zero sum game (you make money, another investor loses) and does not add much to the world, so it’s not surprising you aren’t fulfilled. I am now doing (and loving) an MSc in Environmental Technology and am about to join a startup renewable energy company, which I feel very passionate and excited about. You have nothing tying you down. You can get much more from life if you just get the imagination to think of something you do want to do.
Posted by: Noel, 24, male, student | March 20th, 2008 at 11:50 am | Report this comment1) Don’t switch over to retail fund management!
2) Switch to a career where you can use your knowledge to help people manage their own money effectively. Become a Financial Planner (www.financialplanning.org.uk). And I’m not talking about flogging insurance bonds for shed loads of upfront commission and then disappearing into the distance like most salesmen mascarading as IFAs. I’m talking about the small but growing profession of financial planning that accepts accountants, solicitors and fund managers as well as IFAs. People who take on clients for the long-term and use life-time cash flow modelling to help clients make the best decisions.
Also, after the last few months you’ll have enough grey hairs, so clients will listen to you!
All the best,
Tim 36, married, 1 kid
Posted by: Tim | March 20th, 2008 at 11:57 am | Report this commentChartered and Certified Financial Planner
I suggest you breed immediately. The increased financial pressure, the shortage of sleep and the loss of your DINKY lifestyle will quickly assuage any regrets you have about the lack of skill required in your job. Children are meaningful. You can then start agonising over your life path when you become empty nesters.
Henry
Posted by: Henry | March 20th, 2008 at 12:28 pm | Report this commentMale
31
Finance Associate
Married with one child and another pending
Can you say Harry Markowitz? As I’m sure you know, the guys at U Chicago had this one figured out in the 1950s. I am personally astounded at the expense ratios still common on British unit trusts and pension funds. It all seems a bit of a ruse, to be honest. Enjoy it while it lasts. Fund managers have not had it this good in the States since the ’70’s or possibly ’80s. Why do you think American money management firms have come to London in droves? It certainly hasn’t been for the volume. When the investing public here figures out they’re being fleeced, many City fund managers could quickly become a dying breed. Why not use your knowledge of the industry to start a British version of Vanguard funds (low expense ratio, high volume, efficient portfolio)? It would probably be more rewarding in the short term and, possibly, more profitable in the long term.
Anyway, your admission was a breath of fresh air. There are so many ananlysts and fund managers in this city who, utterly cocksure of their own superior investment acumen, have a collective alpha of zero.
Posted by: Dave the American | March 20th, 2008 at 12:48 pm | Report this commentIf you really think your job is meaningless, try this thought experiment: imagine that all the fund managers in the world, and all the buy-side analysts and hedge fund types, all quit their jobs tomorrow. They are not replaced. If that happened, capital would start to be distributed incredibly inefficiently, and the ensuing chaos would make the Depression of the 1930s look like a golden age.
The capitalist system needs skilful investors to work. The reason it is so hard to beat investment indices through skill is that investors are doing such a good job at making markets efficient, and efficient markets are a huge benefit to mankind. Fund managers might not see tangible effects of their work in the way that plumbers and doctors do, but their work is still essential.
Posted by: M | March 20th, 2008 at 1:36 pm | Report this commentThere are numerous roles in finance (and beyond) that no one is truly qualified for - just remember the three B’s of finance - bluff, blunder and bl**dy good luck. Enjoy yourself and for your own sake see your work as part and only part of a meaningful life.
Posted by: John | March 20th, 2008 at 1:37 pm | Report this commentQuit your job, become a tree surgeon.
Posted by: Donald | March 20th, 2008 at 1:41 pm | Report this commentI?m amazed it?s taken ten years to reach this conclusion on a manager?s ability to add value consistently! Essentially active fund management relies on the ascendency of hope over experience by those ultimately responsible for the money! Be like your colleagues, enjoy the rewards (while you can) and do your best to add value ? you never know when your lucky streak will come or indeed you discover the holy grail of investing.
Posted by: Graham | March 20th, 2008 at 1:43 pm | Report this commentGraham, Investment Consultant >50
Have you thought about getting into passive management? It probably doesn’t pay as well but I imagine that a professional life dedicated to minimizing tracking error might be therapeutic for your conflicted conscience.
Percussionist, male, age 47
Posted by: Mutulu | March 20th, 2008 at 3:21 pm | Report this commentAssuming you have the normal restrictions of a fund manager (max: 5% of assets in any security; certain sector and market cap limits) it’s going to be very hard to beat the market. If you’ve been doing this for 10 years, you obviously have some credibility and could easily convince some of your clients to let you manage their money outside of a large firm. Once you’ve established a client base that would follow you out of the company, quit your job and set up your own shop. You could probably work from home and make comparable money. Your returns should improve when you have the ability to pick any securities you choose instead of being tied down to the rules above. Diversification will always breed mediocrity. Besides the loss of a company match in your 401(k), there aren’t many downsides.
Posted by: Matt | March 20th, 2008 at 3:39 pm | Report this commentWhy don’t you put some savings away and take a sabbatical for a year or two? A breath of fresh air and thinking space/time might help you clarify what you want out of life (meaningful job or security/money), and you can always get back into your industry if you decide that’s what you want to do (or if you have kids and need the cash).
What definitely not to do is to stick with your job when you’re not 100% happy. As soon as you have a kernel of doubt, it will just grow and not go away. And you’ll start to lose concentration, as one astute poster has pointed out above. And that could lead to you leaving in disgrace rather than for a legit sabbatical.
Posted by: RR | March 20th, 2008 at 4:46 pm | Report this commentThe property of efficient markets, that it is not “possible to do this job – outperforming other fund managers and equity indices - with any consistency”, is the result of people trying to achieve that outperformance. As soon as they stop trying, the markets will cease to have this quality.
Far from being something to complain about, what you are fretting over is the evidence that you are doing something worthwhile and doing it well.
Posted by: David C | March 20th, 2008 at 5:07 pm | Report this commentCheer up. You are quite right that outperforming other fund managers is next to impossible. But this does not mean your efforts are worthless. The reason it is difficult to outperform markets consistently is that so many clever people are trying to do so. The result of these efforts at exploiting opportunities is already in the prices at which you buy and sell. Since you can outperform the others only by exploiting opportunities they have failed to identify, the scale of the collective effort to do this ensures that you are likely to fail. But you are being rewarded handsomely for contributing to a socially useful result: a moderately efficient capital market. If this thought does not console you, you might note that those who do jobs most people view as socially useful (doctors, teachers, nurses, for example) are not at all well paid. And, as your parents surely told you, one can’t have everything in life. At least you are not being badly paid for doing a job you consider worthless. That would be really depressing. Martin Wolf
Posted by: martin wolf | March 20th, 2008 at 5:24 pm | Report this commentIf you dont find motivation in your work, you should may be start thinking what else would inspire and motivate you , either another type of work or an extra-curriculum activity. Become engaged in something , a friend fund manager has recently taken up bird watching and finds it very exciting .
I dont think it is a good time to quit, things are going to get tough ..
If you are well paid , it should mean you are reasonably good at what you are doing , even without outperforming the star managers ..
And if you feel you should be doing something with a socially good angle in this industry, switch to SRI funds or Green/ Clean Funds,
Posted by: Marie-Athena ,lawyer | March 20th, 2008 at 7:33 pm | Report this commentthey dont usually perform well but you may feel better..
One needs motivation and passion in doing his/her job. I think your biggest challenge right now is to identify something else that can make you excited but for which you also have the skill set and experience. The brainstorming part is most difficult when you still have your regular job.
A desperate measure to obtain some fresh ideas is to be back at school — the academia is where free flow of ideas maintains its pace at all times, and there one may often find sparks, and ultimately, purpose of life.
Best of luck!
Posted by: Zhou, Xizhou | March 20th, 2008 at 7:36 pm | Report this commentThe first step in making a contract with your self to stay motivated is to make an outline. When you make an outline in your contract, you will list long-term goals, short-term goals, payoffs and benefits, rewards and a detailed action plan. By having everything you need to know about achieving your goals, you will stay motivated.
Posted by: Andy Senin, | March 20th, 2008 at 9:01 pm | Report this commentContract your Goals to Stay Motivated
Get a meaningful job where you get direct feedback from the grateful people you truly service. Alternatively, get a job with any kind of investment company that tracks an index to achieve average gains with 75% of funds and puts 25% into growth companies they own 100% of. The extra cashflow you get from the wholly owned businesses them compounds into a nice markwet beating percentage. More Berkshire Hathaway, anyone?
Posted by: Formerforexdealer | March 21st, 2008 at 12:39 am | Report this commentyou feel this way because markets are difficult and returns disappointing. but markets are cyclical. good times will return. the industry is clearly crowded with too many managers. the good thing about crisis is that only the best survive whether the others are loosing too much money or are too bored. natural selection. you should stay until you can’t bear it anymore.
Posted by: natalie | March 21st, 2008 at 7:28 am | Report this commentI think that you need a career change and have the opportunity to do so before you are 40 (and therefore passed over in the job market) and before children. Given your previous training and interests, the following could be considered. Try getting into private equity (similar skill set with a longer time frame for investment and therefore more identification of skill over luck). Try investment consultancy at one of the larger groups (Watsons etc) as you will use your previous experience wisely. Try entering pasive fund management on the sales side (seems like you have already learnt the necessary sales pitch). Each will require a manageable career change but each well paid and fulfilling.
Posted by: Ian, 49 Broker | March 21st, 2008 at 7:52 am | Report this commentIan, 49, Broker
Since you are writing here, you are clearly ready to do something definite. But there are two clear issues here. Firstly facts, and secondly attitude:
1. Yes, there are certainly a lot of mediocre managers out there. In fact, half of them are below average. But it is possible to outperform consistently - the thing is most of them go off to hedge fund land. The academics say they can’t see how to choose good managers from bad. Well if they could they wouldn’t be academics. Think about that. Even average fund managers do good by making the market more efficient. If someone is looking at the equity research and using it for investment purposes, then the companies will care what investors think, and behave better than they would if no one was watching. So passive investors get a free ride on this effect.
2. Whether you agree with me or aren’t sure, you can still pretend to yourself that your job is worthwhile. Positive thought feeds on itself. You may start to notice even more good things about your job than the ones you can see now. You may start to wonder what things these consistently good managers do to be so good. In fact, think about previous times when you have been motivated. What was it about you then? I’ll bet you had clear things (goals) you wanted to achieve or you were just interested in learning more and improving your abilities. Does that tell you something?
You are a recovery play, so imagine what you could do if you were motivated. And invest in yourself. Good luck.
Christopher. 40, Male, Hedge Fund Research CEO
Posted by: Chris | March 21st, 2008 at 9:27 am | Report this commentI totally agree with you, the whole fund management industry is a lie. I work for a Private Client Fund Manager and our performance is total luck or fluke! It is distressing to see our poor clients putting so much faith in our ideas. If only they knew the truth that the majority of the fund managers in the firm are unqualified as they are so old they got grandfathered in and also that the industry is so incestuous that they are only there because daddy gave them their client base.
I recently realised what you are presently questioning, and took the steps of telling senior management that I wasn’t challenged. They offered me a position on another desk with greater pay which I accepted. I found this to be no different than my other position and am now serving my months notice. I don’t know what my future holds but I’m very glad that I’m on my way out. I will finish my CFA and see where life takes me.
Mark, 29, Male, Private Client Fund Manager
Posted by: Mark | March 21st, 2008 at 10:37 am | Report this commentStop grumbling and have some kids. That should give you something really worthwhile to work for.
Jim Russell, 57, Male, Director
Posted by: Jim Russell | March 21st, 2008 at 11:29 am | Report this commentFundamental tracker fund manager
Male 55 today
Come and with work with us at tracking fundamentals and help revolutionise the industry. It is ripe for change and you are the person to help us do it.
Please publish in the FT
Posted by: Robert | March 21st, 2008 at 11:32 am | Report this commentGood to see this honest admission by someone who benefits so handsomely from an implicit but false assumption. But, as others have pointed out, at least you are wealthy from your efforts, however fruitless they may be or appear to be.
Maybe you could become a financial journalist and write about fund management, exposing the imbalance between risk and reward inherent in the system. Expressing truth as one sees it can be very satisfying. Or try and become a Warren Buffet, or, more uncomfortably, a Tony Dye. Much harder to do I think: the rewards of ploughing ones own furrow are high, but the flak you may take is also high.
Posted by: David P >40 M Academic | March 21st, 2008 at 11:34 am | Report this comment1. DON’T be exit orientated i.e. DON’T leave your job for the sake of leaving, instead DO look for other things and move towards them i.e. be entrance orientated…
2. CONSISTENCY may be the issue. Gardeners may get depressed in Winter when the plants can’t grow but that doesn’t mean they don’t have a job to do in the Spring. So what if the markets have unpredictable seasons and mindless panics? Spring will come again and so will your ability to add value and with it your feelings of low self worth and meaninglessness will melt away.
Pavel, 42, Male, Teacher
Posted by: Pavel | March 21st, 2008 at 12:04 pm | Report this commentIf you like your job, then it seems the problem could be the conflict with your beliefs on value added.
There are ways to add value that may not conflict: e.g if you don’t believe in skill then you could get a job running an ETF very very efficiently and offer very low charges.
Perhaps you need to re-think your definition of skill. I’m not sure an amoeba would be able to run that ETF.
Posted by: Maurice, 49, male, investor | March 21st, 2008 at 12:16 pm | Report this commentWake up and see the broader perspective. Your job is fundamentally important to the unbiased allocation of resources in the economy. Without capital markets we would be at the mercy of self serving politicians, and they really can mess it up, often deliberatly. Also you give your investors the possibility of high returns and the opportunity to enjoy this feeling. If this doesn’t make you feel better think how tedious and demanding most other jobs are in comparison to fund management.
Posted by: Paul, 43, male, retired fund manger | March 21st, 2008 at 1:31 pm | Report this commentBe thankful and try to get better at what you do. The assumption that fund managers don’t add value is false. People like Warren Buffet have demonstrated that very smart, patient people with cool heads can beat the indices over long periods of time. So try to re-ignite your passion for your trade and improve your knowledge and skillset. You’re lucky to be in a field that requires one to be knowledgeable in all walks of life (business, economy, finance, health care, etc.). Many people would envy your job and the chance you have to work in a financially rewarding position so be thankful. Other people toil in meaningless jobs and make a small percentage of what you make.
Posted by: Tito Lapuerta | March 21st, 2008 at 1:40 pm | Report this commentThe problem may not be you, but your situation. Institutional fund management makes one focus on “beating a benchmark”, even if just by a little bit - but consistently, quarter by quarter to reatin your mandate. That is counter productive to long term investment success. An absolute return mentality may allow the identification of skill over luck. But investment committees can’t afford to delegate that much decision making away. They are getting paid to be stewards and need to justify their own positions with short results, even if small. I previously manafed institutional money. A broader (ablosute return) investment environment might be more reward to you.
I am a CFA charterholder, and not a hedge fund manager.
Edward, 39, portfolio manager, USA
Posted by: Edward | March 21st, 2008 at 1:52 pm | Report this commentI’m a fund manager myself and I implore you to stay in your current line of work. It is hard enough trying to beat peers who are motivated and genuinely believe that they can add value and can demonstrate having done so. It helps to have some unmotivated mediocrities in the talent pool. Never fear, even in the UK institutional market, where consistent mediocrity is much more acceptable than is the case in the U.S. (we call your sort “benchmark-hugging weenies”), you’ll get weeded out sooner or later, only to be replaced by someone equally pathetic.
Harry Pitts
Posted by: Harry Pitts | March 21st, 2008 at 4:20 pm | Report this commentMale
Managing Director
I agree with many of the comments.
The only economic rationale for active management is efficient market pricing at the margin which would mean significant deviations (allocation, returns) from the index in a less than efficient market and moderate deviations in a fully efficient market place.
In an efficient market place for market price setters the return from such activity would of course need to provide returns over the long term that beat the index. We do not have an efficient market place for a number of reasons; too many participants in the “price setting role” zone with shorter term horizons that conflict with price setting targets; an infrastructure set up to incite and profit from excess active market pricing participation and asymmetric information over the realities of investment and price setting.
There is too much money being made from not making money efficiently to prevent the industry from pursuing a more efficient route and too little end consumer awareness to force a more competitive market place. But hell, why not stop at the stock market, excess returns to suppliers are not restricted to the financial services industry.
I do however disagree that everyone should hold the broad market index.
The major market index represents the sum of economic consumption, saving and investment needs and decisions and each individual investor has a different time frame, risk preference and liability profile. This means that component driven strategies (higher yield, lower short term risk, higher long term return greater short term risk etc) are viable differential investment strategies. Also, given that liability/consumption profiles should impact asset allocation and risk management, timing decisions related to the management of liability risks and asset allocation are also important. Therefore many of the characteristics which we use to define active management actually have a place in a structured passive investment structure.
Institutional money however has a broad mix of time frames and profiles within its mandate (note pension funds) making an index composition and hence an index strategy more appropriate.
There is of course money to be made for the providers of risk capital (and not just the managers) in efficient market pricing but this can only ever be a marginal activity and the market for this activity is not transparent or efficient.
Posted by: Andrew Teasdale | March 21st, 2008 at 5:20 pm | Report this commentPersonally I’d recomend the aforementioned “getting into coke or heroin” idea.
That, and taking an evening class in Salsa dancing.
It’s worked out well for me.
Posted by: Bob Henderson | March 21st, 2008 at 5:27 pm | Report this commentThe fund management industry chews people up and spits them out. You appear to be well gnawed on. Just try not to leave any ugly drool on your way out.
Posted by: George, 34, fund manager | March 21st, 2008 at 6:03 pm | Report this commentDue to occasional random fluctuations in share prices it is impossible to beat the market indices consistently, difficult and very rare to do continuously, but quite possible to do so continually if you are good enough and work hard at it.
Posted by: John | March 21st, 2008 at 6:32 pm | Report this commentI live in the real world in which, unlike the University of Chicago’s make-believe one, we have both death and taxes - also investors with differing needs/preferences for income, capital growth, protection of capital and differing time horizons. We do not have an “efficient market” in the format postulated as a hypothesis from which MPT was derived. The EMH has been repeatedly disproved but, presumably because MPT was developed by US academics, we keep having it trotted out by those who choose not to examine the evidence.
I have never met Buffet, Lynch or Bolton but I have known and worked with, or competed against, a couple of dozen of fund managers who persistently (even if not quite consistently) outperformed the indices and their rivals. It was fairly obvious (to us) who was good and who wasn’t and when there was data on medium- or long-term performance that confirmed our subjective judgements. You know whether you are good but demotivated or simple mediocre.
If you are mediocre to fairly good you can still add value by selecting for your fund/clients the best portfolio for its/their needs, looking at the risk/reward pattern on the relevant tax basis, time-scale, risk appetite, ethical choices (if any) etc. An index fund suits nobody at all because not all shares have the same attractions to tax-exempt funds and tax-paying funds or individuals and each share price is set by the marginal buyer and seller. That is why Gordon Pepper some forty years ago showed that gilt-edged yields formed a three-dimensional surface instead of a two dimensional curve (for equities it would need to be a hypersurface in a five-dimensional space).
You presumably are not in desperate need of your salary so you can either seek another job (at which you may be less good) that motivates you better or you can use your surplus income to do something that you think is really worthwhile and let that provide you with a motive to continue your enjoyable job.
John, 61, male, consultant
I agree with Martin Wolf. Cheer up. Though my reason is different.
Obviously “outperforming other fund managers is next to impossible”. That is a given that cannot even be debated without a healthy dose of hypocrisy, artfulness and/or self-delusion.
That fact, however, changes nothing about the critical role fund managers play in today’s economy. A role that has absolutely nothing to do with “outperforming” the market (which is as efficient as it is precisely because people like you constantly try to outperform it).
As someone whose job it is to instruct individual investors on stock selection and portfolio composition, I can (first hand) attest to the fact that most average, working people are terrified silly by the market. And not just those pulling down a working wage. The average dentist would rather pull his own molar with vice-grips than buy a share or two for his own portfolio.
The reality of today’s market is that, without professionals to hold their hands, these people would dump their life’s savings into a bank vault, bullion, real estate or some similar hole that does nothing to put capital in the hands of entrepreneurs or business managers. Without professionals, such as yourself, it would not be the market making capital allocation decisions. It would be, God save us, bankers.
The next time you’re feeling blue because you cannot outperform a peer (who has, BTW, spared no expense in getting an education and crafting his or her skill for the express purpose of outperforming you), cheer up. Even with an eye out, you vastly outperform the six-figure banker, whose latest greatest investment idea was dumping billions down the sub-prime sewer.
So, cheer up (and put that gun down before you hurt yourself). Rather than being the blood-sucking scum you evidently think yourself to be, you’re really one of the people making sure that the next Bill Gates or Larry Page has an alternative to hat-in-hand to the bank office. Also, while I personally do not need your services (I can manage just fine on my own, thank you), without you, your clients (who cannot), would be worse off. Much worse off.
Posted by: Robert Mladek, 44, investment advisor | March 22nd, 2008 at 10:14 am | Report this commentIt’s simple : stay if i) your clients are happy and would be worse off without you than with you in the job, and ii) if you enjoy the profession of studying companies and their ability to create value for their shareholders. No-one can consistently outperform the so-called market, but some of us can comply with our mandate and bring comfort to our clients. The latter does not mean outperforming everyone else all the time, but rather allowing clients to be comfortable with their money manager in terms of the risk-reward eqaution. If your employer does not understand that, you’re with the wrong type of firm with the wrong type of mandate.
Posted by: Chris. Fund Manager | March 22nd, 2008 at 12:40 pm | Report this commentFund managers may not eb able to deliver abnormal risk adjusted performance, but they nonetheless serve a useful function in keeping share prices in line, and thus ensuring an efficient allocation of capital, a benefit to the whole of society
Posted by: Tony | March 22nd, 2008 at 4:12 pm | Report this commentThree points:
(1) Very few fund managers–if any–have ever consitently beaten the market.
(2) Point (1) has never stopped fund managers from trying, and it has never stopped investors from financing their attempts.
(3) Fund management is about making money–not meaning. If you want meaning, you should find another profession.
Posted by: Andy, Analyst, 29 | March 23rd, 2008 at 1:44 am | Report this commentTry to find an interesting hobby. Look around for something very fun and see about getting work in it. Feel good in the knowledge that at least you don’t LOSE other people’s money. Think of those hedge funds, Barings Bank, and Joe Lewis who lost billions. Maybe you can work with John Bogle somehow? He is the “father of index funds” who started Vanguard.
Posted by: J.G. Wentworth | March 23rd, 2008 at 1:45 am | Report this commentYou may find making your mark in Western markets tricky, but if so, then move to a minority market. In seven years of emerging markets, I have outperformed by more than 10% a year. There’s plenty of irrational investors to relieve of their trading strategies.
Posted by: Peter Higgins | March 23rd, 2008 at 3:30 am | Report this commentTake a nice gamble every once in a while. If you win they’ll think you really know your stuff and you can demand more money and/or another job. If you lose they kick you out of a job you don’t like anyway. Arbitrage!!! Go get them, tiger!
Edgar
Posted by: Edgar | March 23rd, 2008 at 9:39 am | Report this comment44
Male
Retired head of marketing, large US investment bank
Funny thing work. The more you need the money the the less you care about meaning of the work.
Ask yourself if I was rich would I do this ? If the answer is no then ask yourself . How much do I need this money, and will I hate being poorer?
Most of us do rather unsatisfactory things for money.
Someone once advised me - get enough F off money . Whats that ? Its enough to be able to tell your boss to F off when you want to.
Yours about to retire early with some F off money.
Posted by: M Reid | March 23rd, 2008 at 1:02 pm | Report this commentI was once an investment analyst who switched to corporate finance (at the same rather generous investment bank – this was 35 years ago) because I too reached a similar conclusion. I was persuaded by the Chicago school efficient market theorists and didn’t think I was that much smarter than everyone else put together. The thought that my effort helped make the market fair for widows and orphans was the only consolation (the latter should of course invest through low cost index funds, letting others pay for generating the efficiency).
However, over the period since then I’ve modified my view. There certainly do seem to be people who can consistently beat other fund managers or indices, although obviously not all the time. Think of Warren Buffett, Peter Lynch, Anthony Bolton or the late Nils Taube (read his recent FT obituary and the FT article “Lessons from a cheerful copycat” published 4 September 2006). And in case you try to argue that they were just lucky, or can only be identified in retrospect, let me say that I have personally (through my SIPP and its predecessors) enjoyed excellent results over the last 20 years from backing Buffett and Bolton. There is a respectable statistical argument that by the time you can be sure that someone really does display consistent skill, they will be dead, but I think the foregoing are counterexamples.
How do you invest your own money? The answer will indicate whether you really believe in what you are saying!
You may be able to modify your own approach to fund management in light of the above. If not, follow the advice of some of the other respondents and switch to a fund management area or firm where you think you really can add value. Or you could do as I did, and use your experience in the foundation and endowment world, which is crying out for greater professionalism and expertise. Why not sign up for Elroy Dimson’s Foundation and Endowment Asset Management Programme at London Business School next summer ( an initiative that my foundation helped set up) and you may be surprised by what you learn and engaged by who you meet. That could give you renewed motivation.
Michael 63 male retired foundation CIO
Posted by: Michael | March 23rd, 2008 at 6:18 pm | Report this comment[…] column where readers solicit advice for their problems. The current one – link here — focuses on a British mutual fund manager who seems to have been plunged into an existential […]
Posted by: Fund manager faces existential crisis - The Wealthy Boomer | March 24th, 2008 at 3:21 pm | Report this commentSee blog entry on this: Fund manager faces existential crisis at www.wealthyboomer.ca
Jon, 54, male, columnist & blogger
Posted by: Jonathan Chevreau | March 24th, 2008 at 3:28 pm | Report this commentIf your work is pointless and meaningless why don’t you quit and go work on the assembly line at a manufacturing plant you spoiled punk? In comparison with how most people in your country earn a living you are not working at all; it’s like a permanent vacation. Go try hard labour for a few years and then come back and try and complain about your previous career as a fund manager.
Posted by: Ban Jelacic | March 24th, 2008 at 4:19 pm | Report this commentBetween quitting and living a lie, you may find another way: Stay in your job, accept that your industry shortcomings and find yourself a niche of clients who are happy with your choices and opinions. You may find that selling yourself on different values than outperforming other analysts just as gifted as you has its merits - you will feel good about yourself. But it will require strength to build the loyal customer base you aspire to. And that’s a challenge…
Posted by: Remi, male, 37, CR consultant | March 25th, 2008 at 11:24 am | Report this commentThis is a hoax perpetrated by an index fund manager, right ?
Posted by: John, Male,60-something, broadcaster | March 25th, 2008 at 12:47 pm | Report this comment“This is a hoax perpetrated by an index fund manager, right ?”
I’m not allowed to say that but fortunately you are.
Posted by: John (not the broadcaster) | March 25th, 2008 at 8:39 pm | Report this commentMy response is “Not necessarily”, it could just be a below-average FM who has become demotivated by his inability to outperform those better than himself except on a few occasions when he’s lucky. The average FM does not outperform, just the good ones. The really good ones outperform most of the time (again luck means that they do not necessarily do so all the time). A few get noticed by the media, a lot more by their peer group and the analysts who work with (or compete against) them. Some of the bad ones get noticed by their peers.
It is incontrovertible that clients of an index fund manager will, after charges, receive performance worse than the index. What needs to be shouted from the rooftops is that they will be noticeably worse off than if they had an average FM who selected an appropriate portfolio based on their tax position, risk preference and timescale which, after charges, underperformed the index by the same amount. The last data I saw had the average active FM, after charges, underperforming the index but by less than the average index fund after charges. There is no data on the position after tax but it is obvious that will make the index fund client relatively worse off.
I do not dispute that Markowitz identified the concept of an efficient portfolio, and that there is, in theory, a unique efficient portfolio for each individual investor. However the geniuses who developed MPT and Index Funds tend to overlook the key fact that it is a different portfolio for each individual and it will change as share prices move up and down and as things change in the real world. A good FM will switch when the value of switching outweighs the cost (tax is often the largest part of the cost).
The concept of an efficient portfolio is not the same as the “Efficient Market Hypothesis” (which has been repeatedly refuted as not corresponding to the real world).
Many honest and wise fund managers have lived with the Big Lie and still finished their career—perhaps spurred on by fund shareholders’ faith in the value of active management. Other managers, often past their peak, have taken up second careers in the helping professions (they’re sometimes replaced by a candidate from the helping professions seeking to earn a decent living). Matters of the heart depend on more than meets the eye–in any case, talk to your wife before you take action on a career change.
Posted by: Investor, male, 51 | March 26th, 2008 at 2:57 am | Report this comment1. You could either breed or adopt kids, that’s quite meaningful.
2. Start your own (fund management) business, get filthy rich or fail miserably and end up in a call center.
3. You say your job is flexible, but how flexible? What are the extreme boundaries you can bend your job to? Do so, but stay of the Kerviel/Leeson track.
Posted by: Derek, 29, male, Online Marketeer | March 27th, 2008 at 12:05 pm | Report this commentABOVE-AVERAGE DRIVERS - True, two-thirds to three-quarters of people honestly believe themselves to be above-average [drivers]. True, too, that the past decade or two has seen hundreds hired as bankers/fund managers each year, with many, including yourself, surviving.
THE BELL CURVE - Hiring vast numbers for hitherto-choice positions does not alter the fact that the overwhelming majority of the population are closer to mediocre than excellent. By definition, very few qualify for the latter adjective–mass-hirings and survival rates notwithstanding.
Which explains the prevalence of–nay, necessity of increased reliance on–
1 index funds, and
2 algorithmic tools and numerical/quantitative techniques.
Ergo, your predicament does not in any way disprove
1 the existence of the very few truly talented bankers, the difficulty of their tasks, and their success;
nor
2 the existence of index fund managers and quants analysts, the distinctiveness of their methods, and their success.
It–together with “I can’t think of anything else I want to do.”–only proves that your talents are better suited elsewhere, where the sense of fulfilment which has eluded you hitherto should make up for much-reduced income.
Those who truly have the talents demanded by their profession are happy doing it. And money itself, while an indispensable tool of the trade, comes only third in importance–following
1 one’s suitability for the job, and
2 sense of fulfilment obtained from performing it.
PS: Those who are confident that they themselves can do it better–or that a monkey can do it just as well–are welcome to bet their own house and life savings to prove it. After which I would like to be first in line to hire them and their monkeys.
Posted by: J Michael, private banker, 39 | March 29th, 2008 at 1:31 am | Report this commentWelcome to the human race; you are not a genius and your job is not particularly meaningful in the great scheme of things. However, it is flexible and well paid and you are still only 34, which is more than most of us can say.
Maybe it is time to take a step back and reflect on some of your conclusions. Performing well over a ten year period is not just a matter of luck, some skill must have been involved. By the sound of it you did not lose a wad of your clients’ money by speculating in internet stocks, U.S sub-prime loans, or even European “blue-chips” like Ericsson and Ahold. I assume your customers are grateful to you for this.
Accepting that work, any work, is not the source of meaning in life would seem to be a first step on the road forward. Meaning has more to do with what you mean to other people, whether customers or family, than it does with beating the index. So, before you resign, why not take your wife on holiday and be nice to her? You’ll probably enjoy it.
Chris, 55, male, VP
Posted by: Chris | March 31st, 2008 at 2:17 pm | Report this commentI recommend Anthony Robbins book “The Power Within You”. That will have a very positive effect on you and convince you that you can achieve (almost) anything you really wish for.
Posted by: jj | March 31st, 2008 at 3:21 pm | Report this commentSo set your target and go for your heart’s desire. I receommended that book to a cousin who wanted to work in California. She went there, no green card, but within 3 years she had a job paying over USD100 000 a year and stock options which she later cashed for a seven figure sum. Three other (friends from university years) people were at different times laid off in London, had always wanted to live in a country wiht top skiing resorts and as my best girl-friend here is a Swiss headhunter, she got them fixed up. JFYI, “Fund manager, male, 34: Her website is www.jobsuche.ch
Hi there,
By all means, work is meant to be meaningful. Do you have the ability to think on your feet? If yes, then I strongly suggest sticking to your job, whilst giving serious thought to alternative career paths.It would keep on paying the bills, keep your mind engaged (well, as much as possible…), and you are still able to consider your options.
Posted by: Tola, F, 27, Corporate Affairs Manager | April 1st, 2008 at 12:35 pm | Report this commentYou may however just need a break; you are more than due for a sabbatical. If you consider this and think it the case, take a break; it just might give you some fresh perspective on your job, amongst other things.
If you’re 34, successful, and hate your job, you need to make a change. Do not listen to the posts that imply that losers underperform the market and that you’re obviously a loser. When you take into account taxes, transaction costs, fees, and the crazy loads that burden investors, virtually every fund will underperform long-term. Even the ones that can outperform short-term quickly get their winning strategies parroted.
Some suggestions: (1) move out of US/UK equities into less efficient asset classes; (2) move into private equity or an activist fund where you can proactively influence the outcome of your investment; or (3) take on a financing or asset allocation advisory role where you are helping financial dullards avoid get fleeced by people at institutions like yours.
After 10 years of hedge fund and sell-side work, I am now consulting with entreprenuers and feeling good again.
Posted by: JD, 39, Consultant | April 3rd, 2008 at 4:36 am | Report this commentShhhhh….
(whisper) Don’t tell anyone the truth and just keep minting away.
Posted by: TK, Banker, Male, 35 | April 3rd, 2008 at 7:08 am | Report this commentYou should trying running a Japan equity long fund for 20 years - then you know the meaning of “de-motivated”.
Posted by: Marco | April 3rd, 2008 at 3:12 pm | Report this commentI am third year (Single) investment analyst with a CFA Charter at a value orientated institutional investment firm in New York. I too have questioned the work I do. On the one hand, I enjoy the challenge of attempting to pick stocks that do beat the market and the stimulation I receive from learning about new companies and industries. Equity research is all about understanding the world in which you live. I feel connected to the world in understanding what is driving commodity costs higher, etc… At its heart, it makes you question everything and ask why. There is no question it is very difficult work and consumes a lot of time and energy. At times, I question my own ability. Its critical that you agree with the investment philosophy of your firm and that you enjoy the people you work with.
On the other hand, I see your point that it lacks personal meaning and satisfaction. Who cares if you are helping rich clients become richer? And does it really matter if you end up beating the market by 100bps? How can so many people care whether a company earns two less pennies per share than everyone expected? In the grand scheme of things it does seem quite trivial compared to real issues affecting humanity.
What really bothers me is that it is by nature passive and lacks creativity. All you are doing is reacting to information as opposed to creating it. Secondly, it lacks human interaction. You don’t necessarily need to speak with anyone to run a fund. You can simply read 10-ks and work models all day long. I believe that running a business with more client interaction, leadership responsibilities, and the ability to create something like a product or strategic vision and carrying it out would be much more fulfilling. As to what I would actually do, I haven’t yet figured it out. (But this would probably be a higher capital and lower ROI business.)
At the end of the day, a job is a job. There are good things about it and bad things about it. Take a successful actor playing the same part in a theatrical performance for 100 days in a row. Or take my friend who is a lawyer. He absolutely hates what he does as there is so much procedure, process and red tape.
Posted by: Labatt, 28, Male, Analyst | April 4th, 2008 at 1:45 am | Report this commentThe key to changing beliefs is empirical research.
Posted by: Michael M, Rogue Marketeer, Luxembourg | April 4th, 2008 at 1:01 pm | Report this commentStudies suggest Fund Managers on average do not outperform, yet, in the long haul there is a percentage of 10-20% who do OUTPERFORM. Maybe one could draw a little bit of motivation out of making the way into these 10-20% …
Do you have enough money to retire?
Posted by: jacques | April 5th, 2008 at 2:37 am | Report this commentThen do so.
I did it when I was 36. There hasn’t been a SINGLE day where I regretted this decision. I was not in the financial industry and the job was “ok” but getting very routine and I was definitely in what is called a “golden cage” position: making too much money to quit. But I figured it this way: what is the point to retire at 65 filthy rich but not having done in my life what I would have liked to do the most. Asking the question was answering it. Money is a mean, not an end. The end result so far (I am now 51) is that I am now probably richer, likely much healthier and definitively happier that I would likely have been if I hadn’t retired.
You are 34, and may be working for the next 35 years. How do you feel about staying in your current role for the next 35 years?
Never accept that work is not supposed to be meaningful: you will be so much happier if you find something you enjoy.
Get an exit strategy with a hard-stop date, eg “I will resign by 30 April 2009″. How about a Masters degree? Or type “gap year for adults” into google; or type “career coaching” to find companies who help the many others in your situation get out of their ruts.
Male, manager, 38
Posted by: Ian | April 5th, 2008 at 8:48 am | Report this commentLittle satisfaction from work? This frequently is the case. Trust me…I am in my mid-50’s so I have some experience in these matters. The best advice I can give you is:
You have a good job - make the most of it (keep it for now).
You have a paycheque - make the most of that (keep it for now)
You have a brain - make the most of it. If the job does not engage it, work on other things. (I am working on my Ph.D. part time)…..that will give you less time to feel that you are not working to your full potential.
Graham, M, 53, Lecturer (former banker), Living Offshore
Posted by: Graham | April 7th, 2008 at 9:23 am | Report this commenthey, join the club!
but, there’s more to life than just work. i’m sure it means a lot to you, but try to focus on your private life. think about having a child. why not? it will change your life completely.
Posted by: Dee, 32, Female, Quant Analyst | April 7th, 2008 at 10:53 am | Report this comment1) The industry is a triumph of hope and greed over reality and therefore survives for the same reason that casinos do. You are providing a service.
Disappear from your desk for and hour or two at a time and go and do something else, like reading a good book in one of the meeting rooms. You will be amazed how nobody will say anything or even notice, in fact they will probably assume that you are doing something important. Always walk back to your desk very calmly with a cup of coffee and a pile of papers.
2) Keep taking risk and diversify. You will have some lucky years and some unlucky years. You will pick up a good bonus in the good years and still earn more than 99% of the population in a bad year.
3) Your bosses also know the truth and probably don’t expect you to outperform so take some of the pressure off yourself. That’s why they’ve promoted themselve into a business management role where they don’t have to go through the trauma of active management any more.
4) Fund management is about gathering fees and having enough products so that at least one or two of them are “lucking out” and sellable at any given point in time. Don’t expect to outperform all the time but do take risk as that way you will occassionally get lucky and appear on the sales radar…. then milk it for all you are worth.
5) Save some money, it’s just like slavery.. you save up to buy your freedom. Most professions don’t pay you enough to do that so count yourself lucky. Pay off your mortgage, build an escape fund, finance your wife in setting up a small business on the side that you can then move into when you are finally found out and kicked out.
6) Drink more in the evenings, it helps.
7) Watch television at your desk on the bbc iplayer, by some flesh coloured in-ear earphones and listen to intersting podcasts. Or just brazenly wear a huge pair of headphones and listen to whatever you like whilst covering for this by playing bloomberg or our company’s webcasts up on your PC screen.
9) Book lots of fridays of, with 30 days holiday you can have a lot of long weekeneds.
10) Look for meaning elsewhere in your life and use the money you are earning to help with that.
11) Say little and ask more questions, it unsettles other people who will assume you know more than them.
12) If it all gets too much then take a big portfolio position in something you really believe in and stick to it Tony D style. You will either be right and make a lot of money or you will be spectacularly wrong and get sent home with a big pay off.
Good luck
oh and by the way… life is meaningless.
Posted by: Spiv | April 15th, 2008 at 9:55 am | Report this commentYour job satisfaction is directly proportional to your level of effort. Pay attention. Find and deliver value to others. It’s not all about you.
I hope you quit. I want your job.
Posted by: S. Marty, 39, M, trader | April 24th, 2008 at 1:41 pm | Report this commentAh grasshopper, this is the first step towards wisdom.
Many young fund mangers have overwhelming faith in their ability which little more than blind arrogance. Like a desert orchard, they may bloom for a short time when their style is in favour but then wilt away under the glare of information ratios.
Truly great fund managers are the ones who constantly question their ability to beat the benchmark. It is because of this very doubt that they are able hone their skills, looking at both triumph and disaster with equal critique.
Perhaps Grasshopper you can grow and, in time, join the ranks of those who through patience, self-doubt and constant questioning develop the ability to become oaks that survive the storms of financial markets- a Graham or a Buffet or a Bickerstaff.
To know that you do not know is the first seed of knowledge.
Posted by: Saker Nusseibeh-fund manager | April 25th, 2008 at 11:20 am | Report this commentWow.. I suffered something similar after 9/11 .. I quit as head trader for one of the Genie funds and moved to Costa Rica and did nothing for two years after realizing all we produce is money…. for our clients…. I eventually launched my own fund ( a small one)..and as some suggested here, I wrote a book too…. Hedge Fund Trading Secrets Revealed…… coming out next month supposedly… Good Luck with whatever decision you make.. Im 46 male chief technical analyst
Posted by: robert dorfman | April 25th, 2008 at 9:23 pm | Report this commentIf this is genuine, it is about two things: the profession and you. In 2007 I conducted master?s research into non technical factors affecting the investment performance of UK-based fund managers. I found that something as apparently trivial as team size correlated negatively with investment performance in a sample of 54 individuals (smaller is better). Similarly, individual or mixed team/individual decision-makers did better than team-onlyl decision-makers although even the latter did better in smaller teams. This suggests more than luck is at play. It suggests that a move towards individual involvement and discretion (not isolation in practice) can increase the chances of performance: doesn?t this say something for talent? You say you work in a large institution; it may have significant constraints to limit risk and probably, therefore, the opportunity to outperform. It seems perhaps inaccurate to knock the whole industry on the basis of your experience and possibly premature to jump ship when, as others counsel, there may be a role with greater autonomy that suits you well enough without retraining as a plumber.
Regarding you and your motivation, this is never easy. Heeding previous comments to just knuckle down, enjoy the money, have kids, get a hobby, etc. may be helpful short term but ducks the issue. I recently presented my research to 50+ chief investment officers at a conference and asked them to vote for their chief motivator out of a list. Highest first, this came out as: sense of achievement, nature of your work, personal development, variety, financial reward, and recognition. I suggested they?d all do it for nothing which of course received dismissive laughs! This is the well-known hygiene-factor: money is not often intrinsically motivating but it is demotivating if you think you are unfairly rewarded. For you personally, you need to work out what is ?enough?. Then think about the other motivators but also why you did this job in the first place. Is it all bad? What is good about the role? What is different/the same about other roles in different companies or even industries? Etc?
Once you?ve had a think about these things, it should help ? if you haven?t already gone off with your backpack! Good luck.
Jim
Posted by: Jim Hunter - Business Psychologist, Male, 36 | April 28th, 2008 at 11:20 am | Report this comment