Investment Management

Business Trends and

Career Tips

Jason M. Reilly, CFA

Vice President & Senior Portfolio Manager

Personal Asset Management

“In this game, the market has to keep pitching, but you don’t have to swing. You can stand there with the bat on your shoulder for six months until you get a fat pitch.” - Warren Buffett

BIO

EDUCATIONAL Bachelor of Science in Business Admin. - UCF 1995 Master of Business Administration - UCF 1998 CFA Charterholder 2001

CAREER AmSouth Bancorp - Birmingham, AL

– Trust Investments Officer & Equity Analyst – AVP & Portfolio Manager

SunTrust Personal Asset Management - Orlando, FL– Vice President & Portfolio Manager

MEMBERSHIP– The CFA Institute– The CFA Society of Orlando– Adjunct Finance Instructor - UCF

Investment Management Overview

Commercial Bank Asset Management may include any or all of the

following investment related products and services:

– Traditional Trust Services

– Bank Managed Mutual Funds

– Single stock concentration strategies.

– Customized Portfolio Management & Administration

High Net Worth Individuals & Families

Pension & Profit Sharing Plans

Endowments & Foundations

– Natural Resources and Real Estate Management

– Private Banking

– Brokerage & Insurance

Importance of Providing Sophisticated Asset & Wealth Management Services

RECURRING FEE INCOME!

Traditional banking products (loans and deposits) are becoming

increasingly more commodity like and cyclical.

Loan growth and quality is falling. Recurring fee income helps

smooth earnings volatility and the risks of shortfall.

Adding asset management and trust services increases bank’s

“menu” of products and services thus improving customer retention.

These types of services: wealth management, trust, brokerage, etc.

pose very little risk to capital (unlike lending). Thus, margins are high

(50%-70%) and profits flow directly to the bottom line.

Changing Demographics!

Demographics Forces Dictate Significant Growth For Asset Managers

Current Trends

Life Expectancy:Increasing.

Fertility Rates:Decreasing

Population: Aging

Life Expectancy has gone from

age 70 in 1960 to a projected

80 in 2020.

Banks With Higher Levels of Non-Interest (Fee) Income Typically Command Higher Valuations in the Marketplace.

Fee Income / Bank Current P/E Current P/Book Net Interest Income

State Street 21.64 2.98 4.74x

Northern Trust 22.82 3.50 3.05x

Bank of New York 16.76 2.61 2.82x

Mellon 17.74 3.26 8.67x

AmSouth 13.84 2.51 0.59x

Wachovia 12.61 1.68 0.90x

BankAmerica 11.22 1.76 0.77x

SunTrust 13.67 1.62 0.71x

Source: Bloomberg

Largest Global Asset Managers

RANK FIRM ASSETS UNDER MGMT (bill.)1 Fidelity Investments $853 2 State Street Global Advisors $7853 Barclays Global Advisors $7684 JP Morgan Flemming Asset Mgmt. $604 5 Capital Group Cos. $5896 Mellon Financial $5377 Merrill Lynch Inv. Managers $5298 Citigroup $5039 AXA Financial (Alliance Capital) $48110 Morgan Stanley Investment Mgmt. $41511 Vanguard $41212 UBS Investment Management $40513 Allianz $38314 Amvescap (AIM / Invesco) $33415 Putnam Investments $31549 SunTrust $86

Source: Institutional Investor

Careers in Investment Management: Portfolio Manager

Duties and Activities Charged with carrying out the day to day investment decisions of

assigned accounts. (I.E. purchase or sale of specific stocks, bonds, derivatives, mutual funds, etc. for a specific portfolio).

Portfolio managers typically manage 150 - 250 accounts, any of which may be the following:

- Private Client Investment Portfolios

- Profit Sharing Plans

- Pension Plans, Endowment & Foundation Portfolios

- Mutual Fund Portfolios Utilizes both in-house and “Street” research for the investment

decision making process. PM decisions must be within specified guidelines with respect to

investment style, approved securities, and pre-determined asset allocation objectives.

Careers in Investment Management: Portfolio Management

Changing scope of portfolio manager responsibilities.

Job functions moving from opaque “back room” investment only

duties to significantly increased client servicing and new business

related responsibilities.

Traditional portfolio management now encompasses 50-60% of

managers time. Other 40-50% involves servicing existing clients and

helping bring new ones into the firm.

Increasing importance on interpersonal skills in addition to technical

and analytical acumen.

Careers in Investment Management: Portfolio Management

Keeping Score

Investment performance is generally compared to some pre-

specified benchmark consistent with the manager’s style (growth,

value, large cap, small cap, etc). Always compare relative, not

absolute performance on an “apples to apples” basis.

Account Retention: Portfolio Manager becoming increasingly

responsible for keeping clients with the firm. Poor retention can have

a negative impact on PM’s total comp. Hence the importance of

effectively servicing existing clients.

Careers in Investment Management: Equity Security Analyst

Duties and Activities

Typically covers the companies within one or more economic sectors

(technology, capital goods, health care, utilities, etc.) making buy or

sell recommendations accordingly.

Generally provide best investment ideas for their respective sectors

which in-turn the PMs may purchase in their portfolios.

Buy Side vs. Sell Side Analyst

– Buy side analysts cover sectors and stocks for mutual fund

companies, bank trust departments, etc.

– Sell side analysts are the talking heads we see on CNBC

that generally work for large investment banks.

Careers in Investment Management: Equity Security Analyst

Keeping Score

Analysts are typically judged against the performance of the stocks

they pick. Again, relative performance here is key.

Analysts who cover electric utilities will have the performance of the

stocks they have chosen compared against a basket of stocks

consisting of solely electric utilities for a similar time period.

Sell Side analysts may also be ranked using both quantitative and

qualitative factors by a major investment publication (I.E. WSJ,

Barron’s, Institutional Investor). Up until recently, investment

banking fee income was a major factor.

Investment Professional Compensation

The median total compensation for investment professionals is $170,000. Total

compensation has increased materially since bottoming out in 2003 due to

positive market conditions. Source: CFAI & Russell Reynolds Associates - 2005 Investment Management Compensation Survey

< 5 5 - 10 10 - 20 20 +Total Years Years Years Years

2005 Median $113,000 $85,000 $105,000 $140,000 $160,000Salary

2004 Median $35,000 $15,000 $34,000 $55,000 $50,000Bonus

2004 Median $5,000 $0 $4,200 $10,000 $12,000Non-Cash Comp.

Median Total $170,000 $111,207 $160,000 $233,750 $260,000Compensation

90th Percentile $530,000 $252,500 $425,000 $670,000 $940,000

Career Progression: First Step

Management Training Programs

Generally, the easiest and most effective way to get into the

investment management business right out of college.

Programs generally focus on other areas of the bank as well (retail,

operations, commercial lending, & trust).

Those with a sincere interest and desire generally get offers in the

respective areas they choose, including asset management.

Internships

Can be completed with “boutique” firms locally to gain applicable

experience.

Career Progression

Example: Management Associate Program to Trust Department Immediately enroll for Level I of the CFA Exam and begin study

program as soon as possible there after. Begin developing analytical skills by following assigned sector(s)

under the supervision of senior officer to recommend stocks for addition or deletion from departmental “Buy List”.

Progress to Junior PM still covering a sector(s) but begin to manage mutual fund only portfolios to get familiar with trust department policies and procedures and get some client contact experience.

Progress to Trust Investments Officer thus handling larger more complex individual equity and fixed income portfolios.

Time Line: 1 - 2 years.

Management Training Program Interview Tips

Different keys can open the same lock! Banking is increasingly becoming more of a commodity business.

What’s sets banks apart is the quality of their people. Banks are looking for people with excellent interpersonal skills, these

are skills that can’t easily be taught. Technical skills (good grades) are important, but, they can teach

most of what you need to know on the job. Banks are just as likely to hire Liberal Arts majors for an MA program as Finance / Business majors!

Management Training Program Interview Tips

SIGN UP FOR EVERYTHING! Future business leaders, customers, and decision makers are the people you meet today in social clubs, intramural sports, business fraternities, etc.

Network, Network, Network! You’ll have to do it through your entire career, so get good at it early!

Accentuate the positives: extra-curricular involvement, related internships, related classes. Just having high grades doesn’t guarantee a great job upon graduation!

ALWAYS SELL YOUR SELF….ALWAYS!

Useful Courses for Careers in Banking and Investment Management

Financial Models

Financial Markets

Security Analysis

International Investments

Commercial Bank Management / Management of Financial Institutions

Real Estate Investment Analysis

Micro and Macro Economics

Quantitative Analysis

All of my classes.

Three More Years of Hell: The CFA Designation

MBA is no longer enough for those wishing to seriously pursue a career in investment management. The Chartered Financial Analyst (CFA) designation is now more important than ever as competition in the job market increases. Three year program, with one exam given per year. Pass or fail. Fail and wait until next year to re-take the exam. Take Level I as soon as possible after graduating, during senior year, or during grad school. A lot of the information on the Level I exam comes from finance, economics, and statistics courses taught at the senior and graduate level. Levels II and III become progressively more challenging. Very difficult and grueling curriculum. Pass rates generally around 50% for each level, but well worth the effort.

Resources For Careers In Investment Management

Local Bank Management Training Programs– www.amsouth.com Follow links to careers @ AmSouth– www.suntrust.com Follow links to careers @ SunTrust

Information on Becoming a CFA Candidate– www.cfainstitute.org

General Job Sites Frequented by HR Professionals– www.monster.com -www.cfainstitute.org/jobs– www.hotjobs.com

Popular Financial Websites Used by Professional Investors

www.cnnfn.com www.pimco.comwww.bloomberg.com www.barrons.comfinance.yahoo.com moneycentral.msn.comwww.iimagazine.com www.thestreet.comwww.economist.com www.morningstar.comwww.firstcall.com www.stockcharts.com