54% return -- looking for an internship
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Survey: Fund Industry Outlook Grim
Sunday June 15, 8:07 PM EDT
By Jeremy Gaunt, European Investment Correspondent
LONDON (Reuters) - The world's fund industry, already battered by the bursting of the stock market bubble, is facing the prospects of seeing its profits sliced by nearly half over the next few years, an industry study warned on Monday.
A survey of 40 large asset management groups that together steer $8 trillion in investments across the world suggested in a worse case scenario that industry profitability could tumble to $20 billion by 2006 from $34 billion last year.
The industry is looking at compound annual average growth rates of as little as 0.7 percent to six percent over the period, the study by The Boston Consulting Group, said.
This compares with a 14 percent rate enjoyed between 1995 and 2000 when stock markets were booming.
"It is going to be a fairly dogged battle for market share," Andy Maguire, the study's author, told Reuters.
Under the survey's best case scenario profitability was likely to be flat at about 11 basis points on assets managed.
But the worse case view -- where assets under management barely grow -- would lead in a 45 percent decline in profitability by 2006 from last year's level.
Making the prospect worse is that it follows a string of terrible years for most of the industry, which has seen its assets under management hammered by the equity bear market.
The survey calculated that, globally, professionally managed assets fell eight percent in 2002 to $31 trillion from a year earlier. It was almost entirely due to plunging stock markets.
LOSSES
Particularly worrying for the industry will be the finding that some 40 percent of global asset management firms are currently losing money or just keeping their heads above water.
The survey suggested that roughly 20 percent of fund managers were unprofitable while a further 20 percent were "marginal."
Of the large players in the survey, most of whom were managing assets of at least $100 billion, seven percent were losing money and 30 percent reported pretax margins of between nothing and 19 percent.
Ten percent of respondents were doing well -- reporting pretax margins of 50 percent or more.
The survey found what it said was a distinct difference in the industry's structure that was having an effect on revenues.
Fund managers in the United States and Britain, for example, work in an open market with large numbers of independent players and a primarily non-restrictive product-distribution system.
Continental European firms, by contrast, tend to be linked to banking and insurance groups which control distribution. This restricts revenue, the survey said.
Nonetheless, in performance terms, Britain topped the survey's list of declining assets under management by major investing country, with a 17 percent slide to $2.3 trillion from 2001 to 2002.
The Netherlands came second with a decline of 12 percent to $500 billion and Germany third, down 10 percent to $1.1 trillion.
Assets under management declined by eight percent in the United States to $19.1 trillion, which was about 60 percent of the global industry's total.
Sunday June 15, 8:07 PM EDT
By Jeremy Gaunt, European Investment Correspondent
LONDON (Reuters) - The world's fund industry, already battered by the bursting of the stock market bubble, is facing the prospects of seeing its profits sliced by nearly half over the next few years, an industry study warned on Monday.
A survey of 40 large asset management groups that together steer $8 trillion in investments across the world suggested in a worse case scenario that industry profitability could tumble to $20 billion by 2006 from $34 billion last year.
The industry is looking at compound annual average growth rates of as little as 0.7 percent to six percent over the period, the study by The Boston Consulting Group, said.
This compares with a 14 percent rate enjoyed between 1995 and 2000 when stock markets were booming.
"It is going to be a fairly dogged battle for market share," Andy Maguire, the study's author, told Reuters.
Under the survey's best case scenario profitability was likely to be flat at about 11 basis points on assets managed.
But the worse case view -- where assets under management barely grow -- would lead in a 45 percent decline in profitability by 2006 from last year's level.
Making the prospect worse is that it follows a string of terrible years for most of the industry, which has seen its assets under management hammered by the equity bear market.
The survey calculated that, globally, professionally managed assets fell eight percent in 2002 to $31 trillion from a year earlier. It was almost entirely due to plunging stock markets.
LOSSES
Particularly worrying for the industry will be the finding that some 40 percent of global asset management firms are currently losing money or just keeping their heads above water.
The survey suggested that roughly 20 percent of fund managers were unprofitable while a further 20 percent were "marginal."
Of the large players in the survey, most of whom were managing assets of at least $100 billion, seven percent were losing money and 30 percent reported pretax margins of between nothing and 19 percent.
Ten percent of respondents were doing well -- reporting pretax margins of 50 percent or more.
The survey found what it said was a distinct difference in the industry's structure that was having an effect on revenues.
Fund managers in the United States and Britain, for example, work in an open market with large numbers of independent players and a primarily non-restrictive product-distribution system.
Continental European firms, by contrast, tend to be linked to banking and insurance groups which control distribution. This restricts revenue, the survey said.
Nonetheless, in performance terms, Britain topped the survey's list of declining assets under management by major investing country, with a 17 percent slide to $2.3 trillion from 2001 to 2002.
The Netherlands came second with a decline of 12 percent to $500 billion and Germany third, down 10 percent to $1.1 trillion.
Assets under management declined by eight percent in the United States to $19.1 trillion, which was about 60 percent of the global industry's total.
If you can turn the same type of profit, why not start trading for yourself with your real money. This will give you some income, while you are looking for internship, and experience. And by the way, I would not waste money on MBA. You could take the money that you pay for this so called education, and trade. I figure it will cost you about 80K over two years. With this kind of money, you may trade enough income, not to work. There are not any jobs now anyway, so why get an MBA?
So sinking 80K into a bulshit education is valuable and not risky? I mean what do they teach you in Buisness School? Save some money, buy the text books, read them on your own and you will know all about finance and economics they will teach you for 80K. Business School is for connections and because corps require it to advance up the ladder. The guy wants to make living trading. Where does MBA figure in that? Buy low - sell high, is all you need to know. If you know what you are doing and have a system that works you will succeed, if you dont, an MBA wont help you. Management is about personality, not how many books about Business Management you read.
MBA is the minimum requirement for most portfolio manager jobs and most jobs on Wall St. And now, even phds are min requirement for certain types of quant trading.
Whether that kind of education actually help you trade or not is QUESTIONABLE at best. But he has to go for what the market(job market) demands.
It's all about credibility.
Fishsauce:
Here is the answer I got from Marketocracy. I guess they use the same formula as Wall Street City use.
" No, that's a variant definition. There are a lot of "variants" to alpha.
The one the industry uses is based on monthly returns (multiplied by
12), and generally, they define rf as zero, because otherwise you
can't compare funds very easily (since rf varies).
As far as the having low-R^2 but moderate beta, R^2 is the
correlation of the line fit and has no relation with the magnitude of
beta. R^2 measures how closely a fund follows the market movements. A
perfect fund might have steady upward growth, which would mean it was
very uncorrelated with the market. So R^2 and Beta would both be low.
Conversely a fund that when up when the market went up, and down when
the market goes down, would have a high beta, and a high R^2.
I hope this helps answer your question,"
Here is the answer I got from Marketocracy. I guess they use the same formula as Wall Street City use.
" No, that's a variant definition. There are a lot of "variants" to alpha.
The one the industry uses is based on monthly returns (multiplied by
12), and generally, they define rf as zero, because otherwise you
can't compare funds very easily (since rf varies).
As far as the having low-R^2 but moderate beta, R^2 is the
correlation of the line fit and has no relation with the magnitude of
beta. R^2 measures how closely a fund follows the market movements. A
perfect fund might have steady upward growth, which would mean it was
very uncorrelated with the market. So R^2 and Beta would both be low.
Conversely a fund that when up when the market went up, and down when
the market goes down, would have a high beta, and a high R^2.
I hope this helps answer your question,"