Asset Management Interview Questions

How to Answer the Top Asset Management Interview Questions?

Author: Fahad Ghansar
Fahad  Ghansar
Fahad Ghansar
I am a business graduate currently looking to break into Asset Management with around 7 months of Internship experience in Banking, Trading and Financial Content Writing.
Reviewed By: Christopher Haynes
Christopher Haynes
Christopher Haynes
Asset Management | Investment Banking

Chris currently works as an investment associate with Ascension Ventures, a strategic healthcare venture fund that invests on behalf of thirteen of the nation's leading health systems with $88 billion in combined operating revenue. Previously, Chris served as an investment analyst with New Holland Capital, a hedge fund-of-funds asset management firm with $20 billion under management, and as an investment banking analyst in SunTrust Robinson Humphrey's Financial Sponsor Group.

Chris graduated Magna Cum Laude from the University of Florida with a Bachelor of Arts in Economics and earned a Master of Finance (MSF) from the Olin School of Business at Washington University in St. Louis.

Last Updated:March 30, 2023

Asset management is a highly competitive field with a wide variety of roles that you could apply for. In essence, it deals with the management of assets by using the funds of the clients.

The interview process is lengthy, usually consisting of more than one round. Therefore, you can expect roughly 3-5 rounds of interviews. Naturally, it is time-consuming and can take up to a month for the company to assess your suitability. 

It's typical for companies to interview on the phone and then in person. The interview begins with a short introduction, then a run-through with your resume. You will be asked about the experiences and roles, including extra-curricular activities mentioned in your resume.

This article was written in my mind to help upcoming candidates break into the field and consists of the possible types of questions you could be asked in the interview process.

Common First Asset Management Interview Questions

The roles in asset management are of significant importance, and so are the responsibilities. Thus, the questions asked in the interview will be a mix of basic, technical, and philosophical ones to assess your personality, knowledge, and skills.

Some basic questions will be asked regardless of the industry you work in. These questions are designed to get to know the candidate on a personal level, such as:

1. Can you tell us about your education and experience?

If you are asked this question, it is essential to highlight your key responsibilities and accomplishments. Doing so will help the interviewer better understand your skills and how they may be applicable to the role you’re applying for.

2. Why do you want to work in asset management?

The interviewer, while asking this question, wants to learn and understand your motivations for working in asset management. You can highlight your interest and passion for the financial markets and perhaps your desire to help clients achieve their goals.

3. What is your definition of asset management?

You can talk about the goal of asset management, which is to maximize return, minimize risk, and satisfy the client’s objective while participating in the markets. You could also talk about the strategies you would implement in order to achieve this goal.

In essence, asset management is a critical component of the financial service industry as it helps individuals and institutions manage their financial assets to achieve their long-term investment goals.

4. How would you define a balanced portfolio?

A balanced portfolio aims to provide diversification across markets and industries to help reduce over-concentration and minimize risk. A balanced portfolio consists of a mix of different asset classes like stocks, bonds, commodities, and real estate. 

However, the portfolio’s allocation, diversification, and weighting strategies would depend on the investment objective and the individual's risk tolerance

5. Tell me about an obstacle you overcame

The following questions aim to assess how you work in an environment of stress and difficulties. Questions such as these provide an excellent opportunity for the candidate to express his mental fortitude.  

Asset management as an industry is not oblivious to long working hours and unexpected events, both of which require a strong mindset, willingness, and the possession of certain interpersonal as well as technical skills to pull yourself along with your team out of a difficult situation.

General Technical Questions with Sample Answers

The following questions are some technical questions you might want to know. They are pretty standard questions that aim to assess your technical skill and knowledge about the industry.

Having an idea and being confident about it in your interview is crucial. The lack of knowledge about these topics could make the interviewer feel you're unsuitable for the role.

To help you prepare for your next financial interview, we have compiled a list of some of the most common technical questions.

These questions cover various topics, from financial statements and investment metrics to the nuances of different asset classes and the impact of various factors on the market.

By studying the technical aspects of finance and being able to answer these types of questions, you will be in a much better position to succeed in your interview and show that you are the right candidate for the job.

1. What are credit spreads, and why do they matter?

Credit spreads are the difference in the yield between two fixed-income securities with similar maturities. This difference lies in the credit ratings of these fixed-income securities. The securities usually derive their credit rating from the issuers. 

For example, if you have a 10-year US treasury note with a yield of 3.5% and a 10-year corporate bond with a yield of 6%, then the credit spread would be 2.5% (6% - 3.5%). 

The yield reflects the risk on the security. Since the US government issues the treasury note, many consider the security to be 'risk-free.' This is because the likelihood of the US government defaulting on that borrowing is extremely low. 

The corporate bond has a higher yield than the treasury note because there is more risk associated with it.

NOTE

The market demands high yields from riskier securities.

Credit spreads are essential and should be paid close attention to. The layman usually focuses on what the current interest rates are. Although that is important, we must also look at the rates in the bond market and the credit spreads between government-issued securities and corporate bonds.

The credit spread provides additional context when combined with the prime rate (the technical word for interest rates that the bank charges you for a loan). 

When the citizens of a nation are optimistic about the economy, like during the years preceding the financial crisis in 2007, the credit spreads become very low. Such was the case in the US, with around 1%. 

However, as soon as everyone realized they were in a recession, credit spreads rose massively to 4.65%. In the bond market, those are considerable increases in yield. 

The reason it rose, as discussed earlier, was that investors now wanted more returns because they were taking a massive risk investing money in corporate bonds that could’ve gone bankrupt or would’ve defaulted during the recession.

2. If interest rates rise, what effect will the yield curve have?

Interest rates' effect on the yield curve is known as yield curve risk. The yield curve is a graph that plots the interest rates on fixed-income securities for a range of maturities. 

Usually, the longer the maturity, the higher the interest rate. So, in most cases, it’s an ascending curve. 

The yield curve can change shapes caused by changes in economic conditions. For example, an inverted yield curve is a curve where the shortest maturity has a higher interest rate than longer maturity securities.

This indicates that the market considers shorter-term securities to be riskier than longer-term securities.

NOTE

An inverted yield curve is one of the most vital recession indicators.

There is an inverse relationship between interest rates and bond prices. If the central bank raises interest rates, the bond prices decline. Also, when there is a decline in the interest rates, the bond prices rise. 

As interest rates rise and bond prices fall, the yields on that bond start to increase. The opposite is true when interest rates fall, where bond prices rise and make the yield on those bonds fall too.

3. What’s your way of valuing a company?

We can evaluate companies in various ways. You could take multiple approaches to arrive at a company's intrinsic value and determine if the current market price is overvalued, fairly valued, or undervalued.

Some models are better suited for certain stages of a company’s growth, certain types of sectors, and even certain asset classes. For example, the Dividend Discount Model (DDM) is a model that is used to value a company that pays out consistent dividends and is in its mature life cycle. 

Likewise, the Leveraged Buyout (LBO) model assesses whether raising money to acquire a company would be worth the return you would get after managing, propping up, and finally selling the company. 

Similarly, a Discounted Cash Flow (DCF) model can be used to arrive at the intrinsic value of a company in its growth stage that prefers to retain its earnings instead of paying dividends to grow the company further. 

In summary, this question assesses your field of expertise, interested types of companies, preferred financial models, and knowledge of evaluative skills and technicality.

4. If the market went up by 1.5%, is that a big or a small change?

The answer to this question can be both. It would depend on the volatility of the market index. Volatility is a statistical measure; it is the degree of variation in a script's price or an index over time. Its standard deviation usually measures it.

Volatility can refer to the uncertainty in price. An index with higher volatility would mean the price could be very unpredictable. The price could fall drastically in the short term. The opposite is true when the volatility is low. Whether the market increases or decreases, the change would be relatively minimal. 

NOTE

VIX is a popular market instrument that measures the volatility of the S&P 500 index. A 20% jump in the VIX would indicate that the S&P 500 is extremely volatile.

 A 1.5% increase in the S&P 500 index with high volatility will be a big move. However, the same 1.5% increase during periods of low volatility will be a small move. 

Another way to look at this 1.5% change is to identify the current economic cycle. This price change would be a small one in a bull market; however, it could mean a large one in the case of a bear market.

At the end of the day, whether it’s a big or small move would still depend on the market’s volatility.

5. Can you walk me through calculating unlevered free cash flow from net income?

Unlevered free cash flow (UFCF) is a company’s cash flow before completing its financial obligations, such as making interest payments. To arrive at UFCF, we first need to find out EBITDA

To arrive at EBITDA, which stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, we would add all the non-cash charges such as depreciation, amortization as well interest payments and taxes to net income

Once we have EBITDA, we can move on to calculating unlevered free cash flow. The formula is as follows: 

UFCF = EBITDA – CAPEXWorking Capital – Taxes

Levered cash flow is a company’s cash flow after making its interest payment. The formula for levered cash is UFCF - Interest payments.

General Philosophical Questions with Sample Answers

The following questions are philosophical. The aim here isn’t to assess your skill but to know who you are and how you think. These questions try to assess your philosophy of investing, and answers to such questions are completely subjective. It depends entirely on the candidate.

Every investor and participant in the financial markets is different. The motivations and the decision-making process for each are unique. Due to our uniqueness, we also have different perceptions about a particular script, an event, or what we think the market will do in the next month or maybe in 5 years.

Risk aversion, investment horizon, and asset class preferences are some factors that are unique to us all. The following sample answers do not provide a clear-cut answer but aim to guide you so you can think for yourself and arrive at your own conclusion.

1. How do you approach risk management in your investments? 

Since risk is an inherent part of the return, effectively managing risk is a must-have skill to be in the asset management industry. However, before managing risk, we must identify what the risks are. 

To identify risk, we must be able to predict what the future economic conditions are going to be by assessing the current climate. There are two ways to determine the economic conditions:

1. Top-down approach 

The top-down approach involves analyzing macroeconomic factors to identify investment opportunities. These factors include global trends, market conditions, industry, sector performance, and economic policies of the central bank and the government. 

2. Bottom-up approach

Bottom-up investing is an investment approach that analyzes individual stocks and de-emphasizes the significance of macroeconomic and market cycles.

Many reputable asset management companies like Fisher Investments prefer the top-down approach because it identifies asset classes, industries, and sectors that are riskier than others instead of focusing on just individual stocks.

Such a decision can grant deeper insights, more clarity, and further flexibility to decide the best course of action to meet company objectives.

Using complex financial instruments such as options, swaps, futures, and forwards can help hedge the exposure of certain investments to tailor the risk-to-return aspect of those investments. These instruments can help mitigate the risk.

2. What is your investment philosophy? Do you have any preference for value or growth?

So, the set of beliefs that an individual holds guides the investor or the asset manager's decision-making process. It is entirely subjective and will depend on the individual giving the interview.

A preference for value investing or growth investing would be characterized as an investment philosophy. In addition, using quantitative analysis to make decisions on whether to buy or sell security instead of fundamental valuations is also an investment philosophy.

It depends on the role you’re applying for. In fact, the use of quantitative analysis has become quite the norm in the 21st century due to the rise of high-frequency trading (HFT). 

Value investing, as popularized by Benjamin Graham and Warren Buffet, is essentially looking for fundamentally underpriced securities by calculating a company’s intrinsic value and assessing whether they’re overpriced or underpriced. 

This can be done by analyzing a company’s cash flow, revenue earnings, net profit, and dividend modeling. Other assessments include the brand, business model, and competitive advantage of the company.

One can also do ratio analysis such as P/E, Debt-to-equity, Receivable turnover, Asset turnover, etc., to arrive at a sound conclusion.

However, the preference for analyzing and incorporating a strategy in the decision-making process depends on the candidate.

3. Where do you think the market is headed? What major theme are you paying close attention to?

This is a subjective question that assesses if the candidate shares similar options about future market conditions as the hiring firm does.

The candidate needs to do thorough research on the company they’re applying for to make sure that their future outlook somewhat aligns with the hiring firm. 

The candidate must be aware and be up to date with the current economic situation of different economies. Conducting a macroeconomic analysis would help grasp an overview. Metrics and indicators such as GDP, Manufacturing Index, Retail Sales, and other indicators should be looked out for, analyzed, and forecasted. 

Not only does practicing macroeconomic analysis help candidates better understand the economy, but it can also hone their skills, which could translate into improved investment strategies and decisions.

For example, the primary theme in the markets after the 2020 Covid crash was commodities. Asset management firms were heavily bullish on crude oil, Brent oil, and natural gas.

4. Would you rather have good financials with poor management or poor financials with good management? Why? 

It is generally better to have poor financials with good management. This is because the management of a firm plays a huge role in the company's future success. 

Good management can improve the company's financials over time, whereas poor management can worsen the financials and hamper performance. A long-term vision is essential to any business.

On the contrary, poor management can make it incredibly difficult for the company to improve. Having a strong and effective leadership team in place can help navigate challenges and make sound decisions which will ultimately drive the growth and success of the firm.

In the asset management industry, having a long-term investment horizon is generally preferred, and the addition of great management in the company you’re going to invest in will be more profitable. 

Firm-Specific Questions with Sample Answers

The following questions are firm-specific. So, if you’re looking to apply for interviews in some of the biggest asset management firms, you can expect these questions.

The questions have been sourced and pooled from our database, and we guarantee they are accurate. The point is for you to understand the questions certain firms ask to manage your expectations.

Some firms are notorious for asking extremely technical questions because they’re looking for something specific in the interviewee. Other firms ask more general questions to which you probably should know the answer.

The answers are as concise as possible. However, it's important to note that these sample answers are only a form of guidance. 

Blackrock

Blackrock

Goldman Sachs

Goldman Sachs

JP Morgan

JP Morgan

Vanguard

List of Global Asset Management Firms

Below is a list of the top 15 global asset management firms that are ranked by the assets under management (AUM):

  1. BlackRock | BlackRock Overview
  2. Vanguard Group | Vanguard Group Overview
  3. Fidelity Investments | Fidelity Investments Overview
  4. UBS Group | UBS Group Overview
  5. State Street Global Advisors | State Street Global Advisors Overview
  6. Morgan Stanley | Morgan Stanley Overview
  7. JPMorgan Chase | JPMorgan Chase Overview
  8. Crédit Agricole | Crédit Agricole Overview
  9. Allianz Group | Allianz Group Overview
  10. Capital Group | Capital Group Overview
  11. Goldman Sachs | Goldman Sachs Overview
  12. Bank of New York Mellon | Bank of New York Mellon Overview
  13. Amundi | Amundi Overview
  14. PIMCO | PIMCO Overview
  15. Legal & General | Legal & General Overview

WSO Interview Prep Guides & Additional Resources

There is no doubt that the finance industry has become increasingly competitive. The skills and qualifications required to break into the industry have only got more technical and complex.

Being able to confidently interact with interviewers, senior executives, colleagues, and clients is extremely important.

At WSO, we offer premium 1:1 personalized services such as the WSO Resume Review and WSO Corporate Training services that will help any candidate up to level with the elite professionals in your target industry. This will help you increase your chances of landing your desired role.

WSO Resume Review

WSO Mentor Service

WSO also provides interview preparation courses in Investment Banking, Private Equity, Hedge funds, and Consulting which cover questions in the range of 2000-7000 and case studies that will help you qualify for all the stages in the interview process.

Researched and authored by Fahad Ghansar | Linkedin

Free Resources

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