Investment- what? Investment Management vs. Investment Banking
This blog post was written by Peer Career Ambassador, Catherine Ferri ’21.
If you are concentrating in Finance, or even by virtue of being a Babson student, you are likely to hear the word “investment” thrown around pretty frequently. But not all investment-related positions are the same. Ever wonder about the difference between Investment Management and Investment Banking? This blog is here to ease the confusion surrounding these fields and provide you with some insights into what these positions entail. If you have an interest in finance, it is important to be aware of the various career options available to you!
While both investment management and investment banking have proven to be highly sought-after jobs post-graduation because of their attractive starting salaries and potential for growth, there are some key differences in the objectives of employees in each respective position. The goal of investment managers is to aid clients in making important investment decisions by devising investment strategies and asset allocation models. In contrast, the goal of investment bankers is to strategize with large corporations to raise capital. Now that we have a general overview of the objectives of each position, let’s dive a little deeper!
The purpose of Investment Management, or Asset Management, is to help clients meet their targeted investment goals by managing their money. Investment managers attempt to meet the objectives of their clients by developing short- or long-term strategies to manage the holdings within their respective portfolios. Some of the services investment managers offer include asset allocation, financial statement analysis, stock selection, managing existing investments, and portfolio strategy. Portfolio managers mainly handle securities, like bonds and equities. Additionally, portfolio managers may also deal with alternative investments, such as commodities, real estate, private equity, and artwork.
Investment banks help to facilitate large financial transactions. In doing so, investment bankers work to create capital for companies, governments, and other entities. They work with clients to assess the risks involved with moving forward with a transaction and advise them accordingly. In addition, if a company is looking to issue stock or bonds, investment banks aid in both the pricing of financial instruments and compliance with regulatory requirements. Specifically, as an investment banker, you might perform tasks such as underwriting new debt and equity securities; helping with the sale of securities; and facilitating mergers and acquisitions, reorganizations, and broker trades.
As you can see from the descriptions above, these fields, despite having similar names, involve very different tasks. Both, however, appear to be growing industries. If you are interested in either, consider joining the Babson Finance Association or scheduling an appointment with Career Advisor, Caroline Hayes.