A lot of my friends get calls from various job posts asking for Investment Banking or Asset Management experience. Though they work for great banks and are involved in technology and various businesses of the bank, sometimes its a bit confusing as to what division of the bank they are working for. So, here’s my try to clarify the difference:
Most Banks are divided into 2 major categories: Investment bank and Private Wealth Management(Asset Management)
Asset Management: When a bank manages the financial investments of its client, it is called asset management. Most Investment Banks also provide Asset Management services. Banks like Barclays, BNYMellon, JPMC, etc are known for Asset Management services
Investment Banking: When a bank is involved in creating capital for other companies, government or other entities, it is called as investment banking. Initial Public Offerings (IPOs), credit facilities with the bank, selling shares to investors through private placements, or issuing and selling bonds on behalf of the client.
Lets see what people do in these divisions.
The Investment Bank division works on Trading and Raising Capital. There are basically two types of professionals in a Investment Bank: 1. Bankers and 2. Traders. Bankers are the ones who work on raising capital for their clients. Traders buy and sell securities.
In Private Wealth division, there is a group of people investing HNI’s(High Net-worth Individual) money and a group of people inventing new products to attract investments. This second group of people working in inventing new products come under asset management.
In general, Investment Banking division invests in Fixed Income, Equities, Derivatives, etc. Asset Management division invests in ETFs, Mutual Funds, etc.
However, most banks these days have overlapping functions and don’t be surprised to see some functions being carried out under a different division.