Tag Archive for: CFA

Investment management career advice from industry veterans

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Investment industry veterans’ somewhat gloomy outlook for Boston’s asset management firms prompted me to ask, what should the people in this room do to promote their careers? I asked this question during the Q&A session following “Where Are We Heading? The Future of Investment Management in Boston,” a June 24 panel presentation to the Boston Security Analysts Society’s annual meeting. You’ll find the panelists’ suggestions below.

Keep learning, said Donald H. Putnam, managing partner, Grail Partners LLC. As the role of technology accelerates, you can’t achieve the same outcomes as in the past using old skills. The great investors spend more time on their own skills as they get older, he added.

Take new challenges and learn new things, said Norton Reamer, vice-chairman and founder, Asset Management Finance LLC.

Be passionate about what you do, said Larry Hughes, CEO of BNY Mellon Wealth Management. If you don’t feel passionate, then find something else to do.

Focus on your trade, said Robert Manning, CEO. MFS Investment Management. If you’re good at what you do, you’ll find a job despite the industry trends.

R Koo, "Lessons from Japan: Fighting a Balance Sheet Recession" at #CFA2010

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Lessons from Japan? What lessons can we learn from Japan? They did everything wrong, didn’t they?

The questions above are the reactions that Richard Koo, chief economist of the Nomura Research Institute and author of The Holy Grail of Macroeconomics: Lessons from Japan’s Great Recession often gets when he presents on  “Lessons from Japan: Fighting a Balance Sheet Recession,” as he did on May 18 at the CFA Institute’s annual conference.

Koo made the case that the U.S. should continue fiscal stimulus until deleveraging by the private sector is complete. If we fail to do so, we risk a double-dip recession once people become complacent about economic recovery, he said. Meanwhile, the deleveraging is necessary because of “the bursting of a debt-financed asset price bubble that leaves many private-sector balance sheet liabilities than assets.”

The U.S. recession is a lot more like Japan’s than most people realize. Koo’s first graph showed a striking similarity between the path of U.S. housing prices, 1992-2010, and Japanese housing prices, 1977-1995.

Japan’s recession management has been more successful than you might think. This is especially true in the sense that Japan’s gross domestic product (GDP) grew during the recession despite massive loss of wealth and private sector deleveraging, Koo said. 

Japan could have done even better if the government had consistently supplied fiscal stimulus until private sector deleveraging ended, Koo said. He estimated that Japan might have suffered only seven to eight years, instead of 15 years, if it hadn’t tried to “pull the plug” on fiscal stimulus.

The U.S. has a tough task in front of it. Maintaining fiscal stimulus for an entire period is almost impossible during a peacetime democracy, said Koo. 

Here’s a startling pronouncement: The U.S. has overtaken Japan in savings. This is the result of the recession, said Koo. This jump in the savings rate means that the U.S. could internally finance its fiscal stimulus. 

Interest rates will stay low, said Koo, because nobody is borrowing or lending. We have to get corporations to borrow money before we can even contemplate reducing the budget deficit, said Koo.

Some people think that the U.S. will be different from Japan because it cut interest rates more aggressively. But Koo countered that monetary policy doesn’t have much impact in this kind of recession because you can’t spur borrowing.

MAY 19 UPDATE: Here’s link to Bloomberg.com interview with Richard Koo on the topic of his #CFA2010 presentation.

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Copyright 2010 by Susan B. Weiner All rights reserved

If you enjoy my #CFA2010 tweets…

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…you may also enjoy my free monthly e-newsletter with practical tips for your client communications. You’ll also find at least one investment or wealth management article. 

I often report on presentations to the Boston Security Analysts Society, so you know you’ll see topics of interest to CFA charterholders.

Topics in the May 2010 issue included

  • Watch out for inflation, says veteran value investor, Jean-Marie Eveillard
    Treasurys vs. Treasuries–Which is the right spelling? 
  • How to guest-blog on personal finance or investing 
  • Poll: How do you sign your business emails? 
  • Last month’s reader poll about ghostbloggers 
  • Morgan Creek Capital’s Yusko on investing

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Copyright 2010 by Susan B. Weiner All rights reserved

GMO’s Jeremy Grantham on "The Ethical Hole In Finance" at #CFA2010

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I think the financial industry has lost its way and become a rogue industry. It’s out of control. 

These are the comments with which Jeremy Grantham, co-founder and chief strategist of GMO opened “The Ethical Hole in Finance” part of his presentation to the CFA Institute’s annual conference on May 17.

Grantham criticized the decline of ethics in investment banking since the golden years of the 1960s. Back then head of investment banks would never have permitted today’s unethical practices. “They would have shot you,” said Grantham.

“The ethical standard today is ‘Don’t go to jail if you can possibly help it,’ ” said Grantham.

Grantham said the shift from partnerships to public companies has accelerated the decline in investment banks’ ethics. It would help to return to partnerships, but that isn’t going to happen, he said. A more practical step is to require investment banks to spin off their hedge funds.

Grantham suggested that investment management firms should shift their business to more ethical companies. However, he admitted, GMO has not made this change. Grantham said that if you take business away from the firm that does business one-quarter point cheaper, that’s not in the short-term interests of your clients, even though it’s in their long-term interests. There’s a “creative tension” between these two forces,” he said.

Follow the CFA Institute’s annual conference
You can learn about presentations at the CFA Institute’s annual conference as they occur. Read the CFA Institute’s conference blog or follow the conference using the #CFA 2010 hashtag on Twitter.

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Copyright 2010 by Susan B. Weiner All rights reserved

Hear Roger Ibbotson on asset allocation for free on May 27, thanks to CFA Institute

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Roger Ibbotson will speak about “The Importance of Asset Allocation” in a live audio webcast on May 27 at 1:00 p.m. EDT. You can register on the CFA Institute’s website.

This event is free, even to non-members of the CFA Institute.

If you read “Roger Ibbotson attacks asset allocation ‘folklore,’ ” you know I think Ibbotson is worth hearing.
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Copyright 2010 by Susan B. Weiner All rights reserved

Roger Ibbotson attacks asset allocation "folklore"

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“The time has come for folklore to be replaced with reality” says Roger Ibbotson in “The Importance of Asset Allocation” in CFA Institute’s Financial Analysts Journal (March/April).

Folklore means “the idea that asset allocation policy explains more than 90 percent of performance,” which is a misinterpretation of the classic 1986 article, “Determinants of Portfolio Performance” by Gary Brinson, Randolph Hood, and Gilbert Beebower, says Ibbotson. 

“Asset allocation is very important, but nowhere near the 90 percent of the variation in return is caused by the specific asset allocation mix,” writes Ibbotson. Rather, active management plays a role equal to that of asset allocation, as shown by “The Equal Importance of Asset Allocation and Active Management,” an article co-authored by Ibbotson with James Xiong, Thomas Idzorek, and Peng Chen in the same issue of the Financial Analysts Journal.

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Copyright 2010 by Susan B. Weiner All rights reserved

Harry Markopolos on "next Ponzi scheme"

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“Where do you think the next big Ponzi scheme will occur?” That’s what I asked Harry Markopolos, author of No One Would Listen, during the Q&A following his March 30 talk to Boston Security Analysts Society (BSAS).

Markopolos isn’t too worried about seeing another big Ponzi scheme soon. He gave two reasons.

  1. Markets are down. That’s what triggered the redemptions that brought down Madoff and others.
  2. The SEC is now making Ponzi schemes a high priority.

However, most Ponzi schemers don’t register with the SEC, said Markopolos. That helps them to stay hidden from the SEC. Markopolos said the SEC typically finds out about Ponzi schemes through tips. The many poor-quality tips submitted to the SEC make it hard to sort out the good from the bad. 

If you’d like to learn more about Markopolos’ perspective, check out his book. Many BSAS members lined up after the talk to have him sign their books. He’s a hometown favorite and past president of the BSAS.

Related post
* Tweets on talk by Harry Markopolos, Madoff whistleblower


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Copyright 2010 by Susan B. Weiner All rights reserved

Tweets on talk by Harry Markopolos, Madoff whistleblower

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Here are my tweets on today’s talk to the Boston Security Analysts Society by Harry Markopolos, the Madoff whistleblower and author of No One Would Listen.

  • “This case was a global tragedy” said Markopolos. “It was beyond evil.”
  • Madoff case is only in its 2nd innings, said Markopolos. There’ll be more arrests due to cooperating witnesses.
  • CFA# Code of Ethics is important to Markopolos. “It’s about investors and doing the right thing,” he said.
  • CPAs, is this true? CPA code of conduct lacks affirmative duty to report fraud.
  • Lesson #1 for Madoff victims: 0-25% is proper allocation to hedge funds, said Markopolos
  • Lesson #2 for Madoff victims: Never put all of your eggs in one basket, said Markopolos
  • Markopolos book is a good road map for conducting due diligence, said Sam Jones of the CFA Institute’s board of governors.

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The next session of “How to Write Blog Posts People Will Read: A Five-Week Teleclass for Financial Advisors” will start in April. For more information, sign up to receive “Information on upcoming classes, workshops, and other events” as well as my free monthly newsletter.
Copyright 2010 by Susan B. Weiner All rights reserved

Some ammo for job-hunting — and client-seeking — CFA charterholders

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Employers–and potential investment management clients–don’t understand why they should hire a CFA charterholder instead of a non-charterholder. That’s the lament of some job-hunting and client-seeking colleagues of mine in the Boston Security Analysts Society.

“Fund managers with CFAs take fewer risks than those with MBAs, study says,” an article by Ian McGugan in Canada’s The National Post, provides one reason for choosing a CFA charterholder. Charterholders are going to take fewer risks in portfolios compared to MBAs.

“This result is surprising and may have something to do with the ethics instruction that is part of the CFA course but not most MBA programs,” writes McGugan.

This newspaper article is based on research by Oguzhan C. Dincer of Illinois State University, Russell B. Gregory of Allen Massey University – Department of Commerce, and Hany A. Shawky of SUNY at Albany – School of Business and Center for Institutional Investment Management.

You can download “Are You Smarter than a CFA’er?”  from the SSRN website, where registration may be required. 

Thank you, Matthew Andrade, member of the Calgary CFA Society, for bringing the National Post article to my attention!
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Susan B. Weiner, CFA
If you’re struggling to pump out a steady flow of good blog posts, check out my five-week teleclass for financial advisors, “How to Write Blog Posts People Will Read,” and sign up for my free monthly
Copyright 2010 by Susan B. Weiner All rights reserved

To GIPS or not to GIPS in your presentations

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Must every presentation you give include the seemingly endless GIPS disclosures if your investment management firm claims GIPS compliance? For answers, I turned to Dave Spaulding,  president of The Spaulding Group and author of the Investment Performance Guy blog.

The short answer is “It depends.” When you hand someone a document containing performance data, you should either include the relevant GIPS disclosures or make sure that you’ve provided the disclosures during the past 12 months. There’s no exception to this rule. 

However, you’ve got more leeway when you make a live, in-person presentation to prospects or clients. You can’t mislead your audience. But you don’t need to include all of your GIPS data and disclosures in your live presentation. The keys are to
•    Provide enough information that your viewers understand what they’re seeing
•    Label as “supplementary” any performance information that is neither required  nor recommended
•    Hand your audience members a hard copy of your GIPS presentation

If you follow these rules, your presentations can focus on what you and your audience care most about. By the way, Dave’s presentation to the Boston Security Analysts Society on fixed income attribution was one of the top-drawing posts on my blog in 2009, so I thank him for helping to grow my audience.

Related posts
 •   What does GIPS verification mean?
•   A quant’s guide to detecting a future Madoff
 •   Top five tips for investment performance advertising
 •  SEC update to CFA Institute’s GIPS conference
 
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Susan B. Weiner, CFA
If you’re struggling to pump out a steady flow of good blog posts, check out my five-week teleclass for financial advisors, “How to Write Blog Posts People Will Read,” and sign up for my free monthly e-newsletter.
Copyright 2010 by Susan B. Weiner All rights reserved