Work at top AM -- AI will virtually kill of entry-level roles in AM over the next 5yrs
I work at a large-well known AM (think T Rowe, D&C, etc) -- have spoken to multiple PMs and Sr. Analysts at my firm and vast majority believe that the associate role (main entry level role into asset management industry) will be largely killed off within 5yrs. The work of an associate (drafting earnings notes, collecting data, building models, drafting ESG reports, setting up calls, etc) will be mostly automated away within this period. Not to say 0 associates will exist, but expectation internally is that we will cut at least 80% of new associate positions by late 2020s (and these seats were few in number as it is). Our tech team is already working on tools to automate many of these tasks away partnering with LLM players
Arguably this is a benefit to Analysts who can now spend more of their time doing higher value-added work and analysis (vs. collecting data) -- though in 10+yrs and beyond even that role might be at risk, but hard to call this today. What is becoming increasingly clear is the sheer pace of innovation in this space astounding. I see tools today that can build world-class slide decks and even build some fairly complex models, not even a year after ChatGPT debuted. These tools will only get better.
I couldn't have known this before but now I'm regretting entering this industry at all. Nothing to really do here but try to pivot out, unless I can somehow push up to Analyst within the next 1-3yrs. All I can do now is share this information -- I would HIGHLY recommend against going into public equities and investment-grade public debt for new graduates. Private markets are going to be more resilient (though late-stage growth equity will also be pretty screwed for entry level folks so I'd go early stage of possible). I'm in the process of figuring out some backup plans atm
Since you're so young you might as well learn the data science tools. When you graduate college in the late 2020s this technology will be even further along. I was an econ major but would have done more data science and statistics if I did it over again.
To work in data science or do apply data science tools to finance?
To work in data science or do apply data science tools to finance?
To work in data science or do apply data science tools to finance?
To work in data science or do apply data science tools to finance?
To work in data science or do apply data science tools to finance?
To work in data science or do apply data science tools to finance?
It’s not just AI, it’s mediocre returns at best at in some instances elevated fees. Surprised that there are still that many LOs managing that much AuM. Think LPs really can do better than this.
No doubt. I didn’t mention those as that’s already been a big pressure (shift to passive / lowering fees)
There was an article either today or yday in the FT about the “battle to lower AM fees”. It will surely come down over time
That sucks. Given the swath of resources out of AM firms and really the overall sentiment that associates are replacable/commoditized, I'm not too surprised.
On the HF side I expect slightly longer longevity for analysts given lean-ness of teams along with greater responsibilities beyond simple data analysis and models, but I can see the industry going that way as well, especially if those tools are offered by third parties. Most HF won't have scale to hire a tech team to get the tools themselves but a Canalyst/Tegus surely can. I can already see how something like Canalyst can replace a really junior analyst and improvements on that will surely affect # of jobs. Very unfortunate. Best of luck.
Opinions make markets, your opinion is bad.
Can’t stand different opinion and takes it personal. Classic associate who wasn’t cut out for the investment side. Has multiple accounts as well. Loser
Intern has an uninformed opinion that everyone MS's -- cries about how unfair it is and attacks OP because his dreams of becoming the 2nd Warren Buffet are going up in smoke
This blows, not a great look for IB either (at the junior level)
Right on the money, my AM is talking about automating all of this stuff too. We likewise have a big tech team (unfortunately). Nowhere to really hide anymore
Great post. I'm not in the industry but it seems pretty clear that this would happen. The upkeep with technology across corporate America is becoming faster and faster by the day.
I'll say it again so people can call me crazy, in the next 50 - 100 years it will not matter what bank you did your stint at. In my ugly contrarian opinion, I believe our society is unfortunately returning to serfdom. There will be owners and there will be a serf class fighting amongst itself for their hopeful rise to autocracy. We're seeing the early signs of it with the top down ESG agenda from State and Blackrock. At the micro level it lends itself to the badge of morality with pronouns in the LinkedIn bio (public resume), the exuberance to which every action has become because of it's need for public attention via internet, the shrinking individuality and more herd like behavior. It's everywhere. And the fact that you read this and feel it, but choose to deny that inner feeling, is further proof there of.
Call me crazy ~
That's exactly what will happen, or some form of UBI to 'equalize' people. Don't know which one will ultimately win out though, could tip either way
People will not settle to go back to serfdom without a fight (no one wants to give up the ridiculously amazing standard of living we have in America relative to human history) so I'm guessing lots of riots / revolutions / etc without UBI. As long as they don't take wealth we're fine but if that's on the table you really might not want to be in America
Edit: Oh of course, there will be plenty of riots and attempted revolutions before then. That's the crash that gets society to the bottom and allows for the government to strip rights or tear up laws. Absolutely, but this is certainly the natural course the world is on right now. And it's not really one groups fault or the other. Ofcourse we've got the dark knights exerting control (blackrock) because why wouldn't they? They're the dark knights. The way I see it it's a really a multitude of factors contributing to what I believe to be the end of a natural cycle.
Don't completely disagree. However, I feel like 5 years might be a stretch - but could see this down the line.
To use these tools there needs to be a baseline of technological competence - think of how you have to learn to structure the prompts in ChatGPT to get a useful result. There are still some dinosaurs in PM/Analyst seats that haven't bothered to learn how to save an Excel file as a PDF...
In my experience, Analysts/PMs in AM are creatures of habit that are extremely engrained in their ways. Associates will likely be the ones that are able to learn how to use these new tools and integrate them into the Analyst's/PM's investment process in the medium term.
Agree on PMs, but disagree on Analysts. Associates typically report to Analysts (younger) than PMs (older) for the most part
Almost all of our analysts are 30-45, where they are still able and willing to learn these new skillsets (we have multiple that learned how to code in the past 2yrs for example). I would actually take the under and say this stuff happens before 5yrs than after
Does anyone else think that the entry level associate role in AM or ER doesn't really prepare you well for an analyst role? I also doubt the system has this in mind (creating the associate role to make for a smooth transition into analyst) - more like they hire a couple of associates and pick the best ones, like VC
That’s why I tell the interns at my AM to start off in banking lol and many of them scoff at me because they don’t want to do the hours. Oh well…
Isn’t banking at just as much risk?
Isn’t banking at just as much risk?
Isn’t banking at just as much risk?
Quite worried about this. Currently interning at a boutique AM and they too are working on an AI project. I am interested in Equity research but worried about it not being a role in 5 years time. Anything you’d recommend I go down as an alternative. My original goal was to try the HF route. Not quite sure what to do.
I would go into banking for the optionality, the training, the fundamentals, and the analyst network and make your way back into the public markets if that's something you want to do long term.
Can you eloborate on the AI tooling they are working on?
I understand where you come from on this but I'm not sure if I agree. I myself work as an associate at one of the firms you listed and I'm not sure that this will happen, and certainly not in such a quick time frame (I think you're at least over-estimating the operational quality of some of these large AM firms lol; I assure you that all by itself will keep the associate role around for over 5 years, even if all of the work for the role could be done by AI in 5 years).
Furthermore, I think the associate role will move in one of two directions:
1. Other low-value / low-impact work that analysts will be able to delegate.
What kind of work could this be? I'm not totally sure, but I assure you that there is generally lots of mundane work to do at the senior level that has not yet frequently been delegated. Even basic things like writing and posting trip reports, alternative data "asks", among many other things (ESG reports certainly being one good example) will change, be amended, or be added to. This type of lower-value work in my opinion seems to just grow like a weed and I can't imagine ChatGPT or AI will kill all of it.
Again, for this point, do not over-estimate operational quality here. That all by itself alone will assure that the above isn't automated too quickly.
2. Higher-value work on securities / ideas / macro-level work / alternative data projects that analysts don't have the time and effort for
As we have seen with the introduction of AI and operational technological changes in the past, other lower-value work gets displaced with higher value work among a similar set of persons. Analysts mostly have a specific area of work and there is a lot that they cannot cover. Although some associates might argue that they have trouble finding what this "higher-impact" work is because they are not delegated it by their directors (while at least initially, analysts might be delegated companies or an area to look at), there is certainly at least more companies, if not more macro-level or more channel checking that these associates can do that analysts simply do not have the time for.
I'm curious what your thoughts are on these two topics. Do you think that these two areas will just be eliminated and more will be placed on analysts? Or maybe they eliminate the associate role and hire a few more analysts? Or maybe these companies decide to move away from growth and toward cash generation and focus heavily on operational savings? I'm not sure if any of those will happen, but curious if you think they will.
Agree with this. I also think many people are underestimating how lean AM team already are. At my AM (work at one of the largest), we have less research associates than analysts already. Research associates are such a relatively low cost to the company and there is little reason to remove our primary pipeline/internal filter into the analyst role just to save a couple million a year or so?
Those are actually really good points too. The associate program where I work has far, far fewer associates than analysts and they are relatively cheap compared to the average (investment or non-investment) employee at the firm. It's not a "no-cost" program, but you're at more getting a handful more analysts vs. a really good set of young potential future analysts at low costs.
Pivoting out of IB/PE towards software engineering/quant. Math undergraduate. Realized the same thing could happen (for some sophiticated banks this is already happening) for both IB and ER (I worked in both fields). I'm lucky since I studied math so at least am qualified for some master's of computer science programs' prerequisites.
I know some pure finance people might say something like: computer programmers will eventually get replaced! True, that could happen, but relatively speaking, junior/mid-level corporate finance professionals are much more replaceable compared to those programmers. A lot of LLMs are not sophisticated enough to affect jobs of programmers, not yet, coming out of friends in SV.
LLMs won't replace bankers. If banks really wanted to replace their analyst/associates with automation they could have already done so 10 years ago.
Hey, I’ve the same plan as you to pivot into doing a masters of computer science, what avenues do you think this might open up into finance, also I’m in India we’re really backwards here like in my office clients still call to place trades, but we have all the large mnc am firms too don’t really know what’s happening there
This is definitely an interesting perspective. For IB/HF/other industries, I see AI making analysts jobs more efficient as opposed to being completely automated.
Think of manually building models with pen/paper or calling companies to get annual reports etc., things just get faster over time. I'm still expecting to see analysts crank out 80+ hours a week, but now just with even more deal volume similar to what happened when computers came around.
I'm just an intern though, so who knows.
Some hedge funds are already on full-paced research for automated portfolio management using AI. Completely systematic signals, auto enrichment & aggregations of data, algorithm-dominated rebalancing. Portfolio managers become a glorified SRE that monitor the machines.
Honestly PMs might be more replaceable than Analysts, though they have the tenure / power to keep themselves around
Any thoughts on how this will effect the sales and relationship mgmt side of AM?
Next: high fee AM will cease to exist.
I mean, this is entirely asset class dependent. With alpha in my view basically eroded away in the US large cap equity space. But it's very difficult to have visibility into whether or not AI is going to take away the job of a distressed emerging market credit analyst as 1 example. Where inherently the decision trees associated with the investment process are much larger and the true understanding of the assets you are looking at is seen by a much smaller pool or eyes, and information asymmetry is larger.. This should continue to yield inefficiencies. I think it's pretty clear by now if you want to be in AM, the more illiquid/niche/exotic the asset class you are in, the more your long-term career downside is mitigated to these technological changes.
This! For all the fantasy football fans I think a useful metric to apply to investment careers is value over replacement player more than perceived "prestige" of the asset class. Sure large cap US equities move the capital markets, but very difficult to stand out in and while you have gotten the return tailwinds historically LPs are getting smart and realizing you don't need to overpay for beta. While you do take some macro asset class risk by picking something more obscure I would imagine some of the structured products folks or private credit infrastructure ones have much higher VROP (even vs. AI). Of course you could be that talented individual that has a high VROP for large cap US stocks in which case you should do that.
Become the Travis kelce of asset management
Agreed, that's why I specified public equities and investment grade debt will be highly affected as I have visibility into those. Private markets are a different animal (though I don't think Buyout or Late-Stage Growth Equity will be a good place to be in either)
VC is a good bet, as are distressed assets or other special sits
Why is buy-out and late-stage growth equity not a good place to be?
What type of tools do you hear being used for slide decks? Asking for a friend.
Tech based Creative Destruction is agnostic to industry. There will likely be many changes in most industries as future iterations of AI make more possible. That said, this is nothing new. Every generation has had to deal with it in some form. You can go back to fire, the wheel, electricity, autos, the mainframe, yada yada yada. This feels like it will be further and faster (and may be). However, all the more reason to be a value creator. Become that person in your department who is viewed as invaluable. Doesn't matter what the role, take on more responsibility, get mentored, become a mentor, be a team player / solution provider, etc. That's the way to build a personal moat around your career.
Why do you think late stage growth is bad?
I recently spoke to a good friend of mine and we both agreed that we very well may be the last generation that is able to take this career path. The industry is changing quickly. Ironically, I do think as particularly short-term trading is more and more computerized, there is value in differentiated long-term opinions. However, those coming up with ideas may very well not need a support structure anymore (aside from tech).
Agreed -- I would not recommend this career (public equities / investment-grade public debt) to anyone who is in college now
When people are saying AI will kill AM are we including PWM and private banking or are mostly talking about public market / active investing jobs?
Wealth Mgmt is a relationship based business. People want to deal with people and there are so many ways to create value. Money mgmt is just one of several areas within PWM / PB. You really need to become knowledgeable in taxes, asset protection, insurance / liability management, wealth transfer, trusts, etc. A good FA will essentially become his client's personal CFO. That's not going away. I also think active AM, especially in FI and the private markets, will be just fine.
I think before developing fear against AI replacing associates etc, you have to ask: Does your firm or any other AM properly use AI based tooling with high retention? That means that questions that used to be asked to you are now being asked to AI.
For people I know in the industry, this has not been yet the case as the firms are pretty slow in adopting new tooling. I heard of only Man Group developing ManGPT and some other boutiques who directly use ChatGPT. Lmk of your experience
Sadly this is very much true. Fee compression is destroying this industry, State Street just came out with a 2bps S&P500 ETF (the lowest cost one before that was 5bps so it's a -60% cut) for instance.
AI is going to kill us, I've spoken with several AI folks our firm has hired and they are positive on the 3-5yr time horizon for humans but in a 10yr horizon we are screwed
We are precisely one generation too late for this industry.
So best to do IBD, VC, or Special sits and Distressed? why not buyout?
Are there mindless tasks that AI could execute in lieu of a human? Absolutely — let’s put that on the table. However, when I consider prior technological advancements (anything as trivial as the creation of an electronic calculator, or the ease of access to computers/internet/software/telephones, to the formation of algos) it seems that all of these could’ve, in theory, replaced some jobs on the street. In spite of this, it seems as if this created a quicker paced environment, increasing market efficiency, and consequently creating more of a use case for human labor. Even quant focused shops require human judgement, creativity, and relationship curation. Maybe this is a cold take or, wishful thinking; but was curious to hear other thoughts.
Become the person driving the data analytics. It’s an area where having the skill matter more than the degree or institution where it was issued.
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