PhD MBA CFA for the career in finance (BLOG)

My second year in Banking

2011-11-20T22:46:00.006Z

Gosh... I haven't been writing on my blog for almost a year now! This tells you how busy I am! I am still working in Investment Bank in Fixed Income Division and I enjoy it :). I was thinking that in this post I will tell you how my typical day looks like.

I wake up at 5.50 on every weekday. I live relatively close to the office - I commute on Docklands Light Railway. During my trip on DLR I review emails on my Blackberry - I check also the most recent analysts' reports. I am in the office at 6:45. First, I start with the review of the overnight risks of my trading book. Every night all the exotics and vanilla positions in my book are repriced, so I can see what are the risks first thing in the morning. I see current deltas, gammas, vegas etc. of each of my position in the trading book. If there are significant unhedged positions I put orders to neutralize them.
At around 7.30 we have a floor meeting on which all analysts provide their insight about the current situation in the market. They provide advice where we can expect to see flows in the markets and what are the key drivers of the market in a given day.
At 7:50 I am back into my desk and I review all incoming client orders (first I deal with Asian clients as their day is coming to an end, so I want to provide the with the indicative pricings). If I have any firm orders from the client I execute these orders and hedge resulting risk in the market. In the mean-time I am checking if my book prices correctly (if there are any problems with the book - I ask our excellent MO team to review the instruments that did not price). During the day I am also pricing complex trades that require additional analysis - I check if the models that we have are suitable for these complex trades.
At 12:30 I grab a lunch in a nearby restaurant and I am back on the desk after 5-10 minutes. At 13:30 - I have a risk meeting where I discuss with the head of the desk and the risk officer the risk exposure of my trading book. I need to explain why I hedge particular things in a particular way - for example why I hedged vega with short term options rather than with long term ones etc.
At 17.30 I have to "save the book" (I need to sign-off the end of day risk and end of day P&L). This usually involves some heavy interactions with MO - they are recalculating values of all positions for the end of day. After 19:00 till around 22:00 - when the trading floor becomes quiter I have a chance about RV strategies that we could try implement ourselves or we can recommend to our best clients. I am back at home at around 22.30.

Let me know if you have any questions.

Results of 14th Survey

2011-03-05T18:11:00.003Z

It seems you are not very optimistic about the prospects of the industry. Big portion of you expects that banks will be not hiring this year. I wouldn't be so pessimistic - when I look around I see that there is big number of interviews happening - people are getting and changing jobs. The biggest number of opportunities are now on the corporate side.

My year in Banking... (Part 1)

2010-11-11T00:15:00.004Z

Time really flies...

It's been almost a year since I started working in Investment Banking (BarCap Fixed-Income) - I didn't really have time to update my blog, but I will be now trying to write more frequently.

Probably you are wondering how is the life in Investment Banking in Fixed-Income. First - it's very, very chaotic. You have hundreds concurrent things to do and the most difficult part is to control and manage all these tasks so that everyone is happy.

People are really at the very high level. Everyone is from top school and present very good intellectual level. There are many guys from France from all Grand Ecoles and they are always working very closely together. On my desk (10 people) three people have PhD, two people have CFA, one person has FRM.

The pay is very good 60k pounds per year plus some possibility of the bonus (apparently this year will not be too good in this respect though), but there is some really though work to back this salary.

I next couple of days I will continue with my banking story.

Pick-up in hiring!

2010-01-16T16:02:00.007Z

It seems that we are very close to good times of getting hired by financial industry. Many of my friends (and I - as you remember I started in BarCap) found good jobs in recent months (in CS, Sig, MS etc). Many companies are still very cautious (JPMorgan in particular), but the the situation is definitely getting better (especially in NYC)...
I definitely think that 2010 will be a good year to be hired in good job in Financial Services. For me really good hiring atmosphere will come if S&P500 goes up by10 more percent - people will then get confidence that the recovery is sustainable.
It seems that particularly good demand will be there for junior and mid-level hires. The season for MD hiring is already there - hiring at the junior end needs to catch up.
I also think that this is a very good time to start with MBA or CFA. If you do this at this stage of the economy you maybe almost sure that by the end of the program you will enter the hot job market and you would be able to get a decent return on your educational investment .

My (subjective) timeline of hiring:

2Q-3Q 2010 - Hiring in M&A divisions of investment banks.
3Q-4Q 2010 - Hiring in Equities in Banks that didn't rebuild their Equity Groups yet
4Q 2010 - Hiring in Wealth Management Divisions
2H 2010- Hiring for Emerging Markets roles
1H 2011 - Restaffing of Hedge Funds and Private Equity Companies
2011 - Poorer year for Fixed Income Markets

If you agree with this expectations or your don't please discuss in comments.

The V-type recovery of Investment Banking

2009-09-30T10:25:00.003+01:00

It really seems that the Investment Banking is picking up. Number of companies (like Morgan Stanley, Barclays Capitals, Nomura, Goldman Sachs and some small investment boutiques) are hiring actively. At the moment hiring is mostly in the space of seniors and middle-ranks. The reason for this is a huge number of experienced people, who stay our of employment - firms are willing to take advantage of the state of the market to hire experience people at low cost. I expect that this hiring fever will soon spill to the junior job market as well - I believe that this year will give excellent opportunities to find a job in lucrative sector at the junior level. I don't believe that the financial industry could be hit again anytime soon.

My advice at the moment is: Don't be afraid of working in companies that performed badly during the crisis (like RBS, UBS, Citibank etc.). It's very likely that especially these companies will provide extremely interesting opportunities for all juniors. This organizations cut big part of their businesses and hence now they need to rebuild rapidly to remain competitive and profitable.

Yet another proof of the improvement of the business conditions in the investment banking is the fact that I got a job recently! I am soon finishing my PhD and I will be starting in Barclays Capital in their Investment Banking Division.

Usefulness of CFA in Managment Consulting

2009-06-04T21:02:00.008+01:00

As you may see in the 13th Survey I just started on the blog, people are thinking that Management Consulting would be a next "place to be" after the crisis. I thought that it would be interesting to analyze how different financial credentials are applicable to management consulting job.

CFA - This credential is very well rounded. When you study for CFA you need to learn not only about the basics of financial mathematics, but you learn in depth about companies balance sheets and accounting in general. You learn about ethics, about rules of proper conduct etc. This knowledge and especially the breath of this knowledge may be a good preparation for the career in Managment Consultancy. In fact I know number of people, who got their charter and joined top consultancies (McKinsey, Bain, BCG). From what I hear, it seems that the knowledge they got from CFA is much more valuable than what they learned in their Masters degree for example.

FRM - Some of my friends with FRM work in Consultancies (like KPMG, Ernst) in risk departments. In fact these departments grew significantly in recent years and there is really quite a lot of hiring in these space.

CAIA - This certificate is very focused on alternative asset managment, and I haven't heard of anyone, who had it and worked in consultancy space.

PhD - There is some demand for PhD from Consulting Firms (mostly McKinsey), but from my observation PhD in Finance or Economics are not really prefared. It seems they like more PhD in "soft" sciences like PhD in Public Policy, PhD in Medicine etc. Companies like McKinsey attract PhDs to inject some non-standard thinking into the firm. However, PhD in Finance or Economics think very alike MBA students and CFAs, so they don't add much.

MBA - MBA has been the most standard way of getting into Managment Consulting. Companies like Bain or Booz Allen Hamilton recruit most of their employees from MBA students at the best universities. Some companies (like McKinsey) put so much emphasis on MBA business education that they tend to send majority of their non-MBA employees to MBA courses at Top Business School around the world.

Summing up, considering the costs of the degree CFA can be an interesting alternative to MBA for everyone interested in managment consultancy jobs.

Good luck to CFA delegates!

2009-06-03T16:47:00.004+01:00

The date of CFA exam is approaching very fast. Although I am not taking my level III this year (because of my commitments at the university) I feel the excitement of the moment. At my university half of the library is filled with just people, who are reading CFA textbooks. Some of them use Schwesers, others are studying directly from CFA Textbooks (which is good thing, but maybe not really just before the exam as the CFA Textbooks are really heavy-weight).
This CFA exam is administrated at important time for the financial industry. It is soon to be decided if the finance industry recovers from ashes and would provide attractive employment opportunities not only for CFA Charterholders. Even if you expect the financial world to look bleaker now than some years ago, do not lose the fighting spirit before your CFA exam. Yes, there are less jobs, yes, salaries are lower, but still with CFA designation you will be able to find a job which would be better than average.
As you could see from the survey which was published yesterday CFA is expected to be the most desirable credential in the new finance world. I expect this is because of two important characteristics of CFA. First it provides really rigorous knowledge. The crisis was caused in fact by PhDs, who knew stochastic calculus, market microstructure theory, but they had real problem with taking the holistic view of the world. CFA with its broad curriculum, provides you with everything what is important to have a global overview of the situation. Second, I belive there is no other designation that puts so much emphasis on ethics and good standards and in fact lack of regulations and ethics is a root of the recent crisis.

All candidates, good luck!

Results of 13th Survey

2009-06-02T23:52:00.004+01:00

The light for financial industry is even brighter...

2009-05-17T13:56:00.004+01:00

After the word of Soros, who claims that the lowest point of the downturn is behind us, and number of other market practitioners there is now even more optimism in the financial industry.

The most notable signal I observe is the revival of the job market for graduates. In last two weeks I observed number of companies approaching students in London. Just to mention few, I have seen a private equity company (Blackstone) willing to find 4-5 interns for the summer, a management consultancy (Bain) willing to find 2-3 graduates for full time job from summer 2009.
It seems that companies are now expecting the worst to be over and they are preparing themselves for the possible recovery.
It seems that financial degrees and CFAs or CAIAs are not dead yet. It seems that people with these qualifications will probably be able to find a job really quickly, when the markets improve. This means that starting CFA or a Masters degree in a respected institution might be a good choice right now. When markets recover (and they surely recover sooner or later) graduates will be able to profit.

Results of twelveth survey

2009-05-17T13:54:00.003+01:00

Light in the tunnel

2009-04-18T22:53:00.010+01:00

After very strong Q1 results from JPMorgan, Goldman Sachs, Citibank and Wells Fargo some people claim that the situation of the financial industry starts to improve. The banks, which suffered extremely large losses during 2008 are now coming back to profitability. Citibank recorded the first positive (and solid) quarterly result for the first time since the middle of 2007. It is worth to mention that vast majority of these results was generated by sales&trading divisions.

Although it's far to early to claim that the banks are coming back to health, I firmly believe that this is definite sign of the recover of the financial industry.
Of course the banks will not restart hiring immediately. It's even possible that they will continue with firing, as the crisis in real economy is still unabated. However, recent increase in profitability gives a very good prediction about the future of the financial industry. It seems that the news about the death of financial sector are overstated - banking will still be here and will be strong - there is no other way. Any economy needs a healthy and profitable financial sector to sustain an economic growth.
I think it soon will be the best time for the newcomer to enter the industry. Now, it is really hard to find a job in the industry, but soon the demand for quality workers (with CFA for example) will pick-up. And at some point it will outweight the supply what would lead to wage inflation.

(If you want to discuss this article please visit: http://forum.examhub.org)

Declining interest in Finance

2009-03-28T16:24:00.004Z

One of my recent and important observations is that the interest in finance is declining. As I am teaching n London Undergraduate courses in Economics and Finance I see that people are less and less convinced to pursue a career in finance. My students claim, that "they found that Investment Banking is not for them...". They now prefer to go for management consultancy or government organization. The same is with my fellow PhD Students. Many of them decided that they want to abandon their Investment Banking dream, as the industry will probably not offer opportunities for many years to come.
The falling interest in finance is a big concern for many Banks in London. They now that if they lose the reputation among graduates it will be very difficult for them to fuel expansion when markets recover (if they do). The situation similar to that from 2001-2002 may be repeated... Then banks just couldn't find qualified graduates to fill their graduate programs.
Situation may be repeated, as nowadays the banks not only lost their earnings potential, but also a big part of a reputation. This is not likely that banking will be treated as prestigious profession anytime soon.

Results of Eleventh Survey

2009-03-28T14:03:00.003Z

What to do when you were fired?

2009-02-13T23:51:00.002Z

This is always a problem. In any industry, at any time being fired is not a pleasant thing. However, circumstances in Financial Industry are very extreme. All companies are firing people, so the market is extremely competitive and in fact it is almost impossible to find a replacement job. In addition to this some of you work (worked) in such areas like trading and your skills are almost non-transferable to any other industry. So what can you do?

First, think about your future. Don't assume (of course) that you will not come to finance again, but anyway think about what else you can do. Think about alternatives - where your skills would be applicable and where would you be able to use your potential. I privately expect that there will be a lot more money to be made outside the financial industry in like 5 years to come. I think that really good bets for now would be consulting and law. Some skills especially from the IBD (Investment Banking Division) are really very easily transferable to consultancy (ability to work long hours included :) ), so redundant Investment Bankers should have no problem with finding a new job in consultancy. I also think that talented assets managers would be able to find a job in mainline companies in treasury departments, which now have difficult time managing the liquidity and require talented asset managers/traders. Another tendency I expect to see in following years is the rise of the job market for professionals in emerging markets. I think there would be soon no large discrepancy between opportunities in let’s say China and UK for the professionals. In fact it may be wise to come back to you country of origin, as it may positively affect your career.
Second, consider entrepreneurship. Don't assume that the only possibility is a job in someone else’s company. In fact you may be able to create a business on your own – just look around on what is good in place you live and try to copy this to the region or country you are originally coming from. Think about creating a restaurant, internet shop or anything else you understand.
Third, keep on looking for a job. Even in this market people are hired. It is best to have a good head hunter (for all readers of my blog – if you have good CV I can forward it to my friendly and solid headhunter for consideration – use the email: phdstudent2007@gmail.com) and to be in touch with him regularly. Maybe at some point he will have an offer that would be interesting for you.
Fourth, enjoy your free time. Study languages, exercise, meet friends etc.
Fifth, boost your profile. You should spend a big part of your free time on improving your profile – remember that the world is not standing in one place just because of the financial crisis. People are gaining new prestigious qualifications everyday and you should not lag.
For the list of most relevant business qualifications please visit http://examhub.org.

Good luck in your endeavors!
PS: If you want to ask me specific question please post message on http://forum.examhub.org.

Results of tenth survey

2009-01-27T02:11:00.002Z

Why qualifications will be crucial for new financial world?

2008-12-14T15:54:00.001Z

I know that all of you know what is happening in the financial markets. There is almost no financial company that is unaffected by the current turmoil. People are fired in almost every institution on every level in corporate hierarchy.
Many people wonder how the financial world will look like after the situation stabilizes in the longer term. What kind of people will earn good money and what type of services will be provided by financial institutions?
I think that financial industry will still be an important sector in the economy in the future. Stock markets and bond markets will still be there. There will be people managing the risk and allocation of other peoples money. However, the wild-wild west of last decade is over. It will no more be possible that people will earn millions just because they were lucky and some risky bets turned out to be profitable. I think that financial industry will resemble more and more the law industry. What would count most would be reputation, knowledge and hard-work. Those who count on quick-profit in a short term will be forced to look for different profession.
I think that the changes that are about to reshape the financial industry will favour people with solid skills and strong educational background. I suppose that CFA or other technical certificate like (PRM or FRM or CAIA) will be prerequisite for any front office position in any financial organization.
Certificates and good education will be a proof of you knowledge and will improve vastly your reputation. The will be no place in financial industry, where 0-education and no technical knowledge will be enough to get millions!
My prediction is that the financial industry will start hiring around summer 2009... But only those well educated and reliable will be employed.

PS: If you have any questions, or you want to talk, please join discussion at forums.examhub.org...

Merry Christmas!

Nineth Survey

2008-10-14T16:57:00.001+01:00

The winners and the loosers

2008-10-14T15:30:00.001+01:00

Financial Crisis is not equally bad for all financial institutions. There are some banks, who will be better-off after the crisis is finished. Some organizations will end up as new leaders in specific market segments.
The banks that will really benefit in my opinion are: JPMorgan, Credit Suisse, Santander and to some extend Deutsche Bank (although it is very highly leveraged at the moment).

JPMorgan wins a lot of business from Hedge Funds because it considered to be a very well capitalized organization and because it was able to aquire very sucessful Bear Stearns Prime Brokerage Franchise. JPMorgan took a lot of business from beleagured ex-investment banks like Morgan Stanley, Goldman and Merrill Lynch, but also because it is very well capitalized it will be able to attract best talents as other banks are not recruiting at all. If markets recover JPMorgan is the place you should be in.

Credit Suisse finally won its small war with UBS. For many years people have considered Credit Suisse to be a weaker and less clever brother of UBS. However, this lack of sophistication of Credit Suisse resulted in smaller loses in Subprime market. Clever and greedy UBS invested just to much into complex credit derivatives. Today, Credit Suisse is able to steal the business of UBS and it will soon become a leading Banking group in Swiss.

I don't need to say much about Santander. This bank is buying falling financial institutions for bargain. I expect Santander to become one of top 5 banks in the world in terms of financial firepower in a year or two.

Deutsche Bank is similar case to JPMorgan, but it's financial standing is much worse.

It is important that you stick with the winners of course :D

Banking in the dark...

2008-08-13T16:27:00.001+01:00

Banking industry is still under the water and it seems that near future will not be better. While reading the Financial Report of UBS from Q2 2008, I came across an apparently gloomy forecast of the chairman and CEO of the company:

Outlook: In the second half of the year we do not expect any improvement in current adverse economic and financial market trends. We will continue our program to reduce personnel levels, costs and risk concentrations.

12 August 2008
UBS
Chairman Peter Kurer
Chief Executive Officer Marcel Rohner

It seems that new lay-offs are on the way (a number of my friends in this bank was laid off already... :( ).
It is really very bad time to be on the job market. If you are able to embark on any academic programme in order not to have blank period in your CV its very good time to do it.

In coming months, quarters and years many people will have to adjust their aspirations and ambitions to survive on the job market.

Let the power be with you!

Results of 8th Survery

2008-08-05T11:21:00.000+01:00

The world outside investment banking.

2008-06-27T18:02:00.003+01:00

This is a blog about careers in investment banking, but nowadays, when investment banking is in crisis, you need to be aware that there is plethora of lucrative opportunities also outside finance industry. Not surprisingly, some of these opportunities are more life-friendly than any job in investment banking could be.

Investment banking is very special industry. People are lured to it by above average salaries and opportunities for quick career progression. For majority of students Investment Banking is the most desired career - it is prestigious and it seems to be lucrative.

However, for many of these people career in other industries (like in FMCG, Marketing etc.) would be a much better option. First, because of much lower competition you will be able to progress much faster. Surely the salary of a managing director in Lehman Brothers may be twice as large as the salary of managing director working for example in Mediacom. However, for a clever guy the chances of becoming a managing director in Mediacom are at least ten times higher than chances of becoming a managing director in Lehman Brothers, and so the expected income from working in Mediacom (which is here given just as an example) would be higher than expected income in Lehman Brothers... (Intuition: It is easier to make a career and become MD if you are the best among averages then to do it when you are average among the bests) . Second, you will be able to live normal life, not the life of IBank nerd who is sitting in work for 15 hours daily.

My subjective list of industries that may provide lucrative opportunities are:
- IT - (Microsoft, Oracle, IBM, etc)
- Energy - (Shell, BP, Exxon, etc)
- FMG - (P&G, Mars, Unilever, L'Oreal, etc)
- Marketing/Reseach/Media (Mediacom, IPSOS, BBC, etc)

and many, many others.

Although it seems that IBanking is the only interesting career, this must not be true. It's possible there are other careers that you find more interesting, and that would provide you with higher income on average. Your life - your choice.

Is the era of Quant Finance over?

2008-06-20T11:58:00.001+01:00

After recent losses suffered by Quantitative Hedge funds (like: Goldman Sachs Global Alpha and many others) some people wonder, if the era of quantitative finance is over. The quantitative funds are not considered to be money making perpetuum mobile any more. Number of people finally realized that it is impossible to make 20% profit every year without bearing any significant risk. This will now directly translate into the money inflow into quantitative funds in the years to come. This inflow will of course be much lower than what was observed before the credit crunch, so there would be definitely much less career opportunities in the quantitative finance field. I expect that demand for quants will be very low for at least 2 or 3 years. However, at the same time the supply of quants is very strong. In recent years almost every university started its financial maths or financial engineering program. The number of people, who will be graduating from quantitative programs goes now into tens of thousands every year, so you can imagine that it will be very hard to find a decent jobs in QF (and of course salaries will go down as well).

So, what can you do to improve your chances for employment if you are studying at a one of numerous MFE programs? First, work on your soft skills. In the current job market, not only you need to be able to solve Black-Scholes model, but you need to know what is happening in the macroeconomics for example. Second, work on your programming skills. In current market, IT skills is the asset that can find you a job. There are much more places in the banks for Quantitative Developers than just for Quants. Third, be open to other opportunities. Your quantitative skills will be useful not only in the investment banking. You can find that the work for the startups or other smaller companies may be very interesting (and even more rewarding that the work for investment banks).

As usual if you have comments or you would like to express your opinion, I invite you to the "Careers in Business Forum at forum.examhub.org".

Which parts of the market are still alive?

2008-06-19T18:56:00.000+01:00

If you are brave you may still fight for the job even in this very bad environment. What you need to know at this stage is which parts of the markets are not dead. Surprisingly there are some areas which are still hiring and these are:

- Risk management (FRM type of jobs)
- Distressed debt (MBA) *
- Equity underwriting (MBA)
- Emerging markets IBD (MBA)

Unfortunately the competition for these few spots is very intense. There is a number of people, who were fired recently, and they want to find their way back to investment banking.

* - If you know French or German or Polish and you would like to work for a small and presigous Distressed Debt fund - please let me know (with CV): phdstudent2007@gmail.com

Results of seventh survey

2008-06-17T16:26:00.000+01:00

When the situation improves?

2008-06-17T15:19:00.001+01:00

I think that's the question a number of people is asking right now. The mood in Investment Banking is very poor, and that translates directly into lack of employment opportunities... The sad truth is: the banks are not hiring.

In the worst situations are people, who quite recently invested in their education, and now are not able to find a job (example from Investment Banking Forum - please gives your thoughts on the forum). In many cases with debts and some other obligations, these people may be forced to look for employment in sectors other than finance. (An interesting article from Journal of Finance about the impact of the crisis on the lifes of MBA students - really worth reading at least the introduction)

The most important question right now is how long will the bad mood last. I asked this question to a head-hunter who is a friend of mine (cheers Craig!) and who forecasted the downturn at a time, when everyone else was certain that the markets would always grow. Now, he thinks that by the end of the summer the banks will finish writing-off the credit mess. He thinks that by the end of the year (Dec 2008) there will be some capacity in the banks to create new teams. He claims that the general revival will come in the first half of 2009.
I think that he may be right - he is really a great mind and knows the industry inside-out.

Now the question is "what to do during the slowdown"? I wrote about it before in my previous post: "slowdown a good time for education". I still think that each of us should spend the time most productively to polish and improve his or her CV. Doing a financial certificate seems to be a perfect idea. However, if you are forced to get a source of income changing an industry may be inevitable.

Results of sixth survey

2008-04-04T13:34:00.000+01:00

CFA or MBA (or both)?

2008-04-04T12:25:00.000+01:00

Number of readers of my blog ask me whether it is a good time now to start CFA or MBA degree. In this post I will discuss pros and cons of starting any degree program at the moment.
As you know markets are stagnant now, there is informal hiring freeze and in fact short-term prospects are really bad. No one knows when markets will be back to previous state again. It maybe a year or even three. This timing is the biggest risk for your decision whether to move into further education or not.
If the markets rebound quickly, its pretty save to start let say 1-year MBA. When you finish your degree you will be in a good position to get on board in major investment bank. On the other hand if you decide to quit your current job and start your MBA now and if the markets are stagnant when you graduate you may be really unhappy that you did it.
So the solution is as follows: If you really believe that the downturn will be short go for good MBA program (you even still have time to apply). If your expectations render to be correct you will be in perfect position to accelerate you career when the markets rebound (this time with MBA). If you think that downturn will be longer, or you really don’t know think rather about CFA that will allow you to improve your qualifications while still on the job. In comparison to MBA CFA is much more flexible and much more cost-efficient, but you must remember that finishing CFA is minimum 2,5 year now.

Results of fifth survey

2008-02-06T17:47:00.000Z

Slowdown - a good time for education

2008-01-02T02:17:00.000Z

It seems it will take a while for the financial markets to get back to a healthy state. Currently, the banks have decreased their recruitment efforts significantly. It appears that getting IBank job may be a very difficult task at the moment. Probably this is good time now to go back to school. Doing additional certificate or degree, when the market is stagnant, may be an extremely good investment. Not only will you get a powerful credential when the market is back to healthy state again, but also you will NOT lose too many opportunities. The alternative cost of studying is now smaller than usual.
The big question is, however, how long will the current crisis last. If it is short, you’d rather not start PhD program for example. You don’t want to be stuck preparing your dissertation when the market is booming and all your friends are making big bucks.
If I were to guess I would say that it will take about 2 years for the financial job market to be hot again. This indicates that CFA or MBA may be good options. If you can’t afford halting your current job than go for CFA (or CAIA or CQF), otherwise think about the MBA. With additional credentials, when the market is booming again, you will be in much better position to advance your career.

Results of fourth survey

2008-01-01T23:56:00.000Z

Sankaty Advisors vs DEShaw - MBA vs PhD Hedge Fund

2007-11-01T00:11:00.000Z

Recently, I had an nice opportunity to attend company presentations of Sankaty Advisors (which is part of famous Bain Capital) and DE Shaw. These two companies are considered to be best Hedge Funds in their classes. Sankaty Advisors has very fundamental oriented investment strategy, whereas DE Shaw is considered to be purely quantitatively driven. Both companies generated superior returns in recent years.
I am writing about these hedge funds just to show how different opportunities Hedge Fund industry offers. Comparison of the profiles of these two companies shows that there is place in HF industry for both business major students with MBAs or CFAs (Sankaty Advisors) and also for those who have scientific background like PhD (DEShaw).
Sankaty Advisors invests in leveraged loans, high-yield bonds, distressed/stressed debt, mezzanine debt, structured products and selected equities. Sankaty Advisors puts great emphasis on fundamental analysis. They claim they always need to understand the business of any company they are investing in. If you would like to work in this firm, MBA or CFA would be highly beneficial.
DEShaw is mainly statistical arbitrage fund, so great deal of transactions is automated. Computers using sophisticated trading models are speculating on various markets and are exploiting subtle mispricings. Your mathematical background may be very useful in the process of preparing this models.
As the example of these companies show, hedge fund industry is not a solid entity. There is a number of different opportunities you may pursue if you want to work there and each of these opportunities may be prestigious and rewarding.

If I were to decide between these companies I would have a great problem. Both seem to be really nice. The presentations were on comparable level. However, I believe what I would learn in Sankaty Advisors would be more transferable. I could learn a lot about the business and "fundamental oriented investing" and then apply this knowledge somewhere else later. The same with DEShaw would not be that easy. There are not so many places in which you can use cutting edge quantitative skills. Maybe some statistical arbitrage desks of Investment Banks, but still the market is not that big for that. So, I claim that in fact Sankaty Advisors is a safer option for those willing to go for Hedge Fund industry.

If you know something more about various hedge fund please write about this in comments to this post.

Results of third survey

2007-09-09T12:00:00.000+01:00

Best career choice for CFA Charterholder is:

CQF - Certificate in Quanitiative Finance

2007-09-06T20:37:00.000+01:00

CQF is a specialized certificate for all those who are interested in becoming Quants in Investment Bank. This certificate was launched by Paul Wilmott, who is considered by some as a guru in this field. The company that is organizing the exam and classes (which are integral part of the certification process and you cannot be awarded CQF designation without spending many weekends in the classroom) is 7City, which is also preparing students for CFA and other certificates.
CQF designation is not very popular, but due to the fact that it is very focused it is quite prestigious in the quant environment. It has simply no competition. CFA or CAIA are by far more general and do not cover asset pricing (etc. Ito's Lemma, Interest Rate Models) deep enough to prepare a candidate to very technical field of quantitative finance. If you are thinking about becoming a Quant CQF certificate (or more broadly - a CQF Course of Studying) will prepare you to that role. You need to remember, however, that you need very good prior math preparation in order to catch up with the course of studying.
And should you do CQF if you already have PhD in Finance or in Economics? I think that it will not be very wise choice to do that. PhD is already very useful degree for Quantitative Finance. CQF is expensive (~10k pounds) and it takes time to finish it. On the other hand, if you have PhD in other discipline (like Chemistry, Mathematics) and you never did anything with finance, getting a CQF will probably open a lot of doors in IBanks for you.

Which degree/certificate for specific division in Investment Bank?

2007-08-26T21:13:00.000+01:00

If you want to have successful career in the investment bank you have to carefully tailor your education to your goals. Some degrees/certificates may be useful in certain division and completely useless in different ones. Below, I created a list of the certificates/degrees that are most useful in various IBank divisions. [You can find detailed information about various certificates under: examhub.org]. Of course the list is subjective - if you have suggestions please let me know.

Investment Banking Division: MBA should be considered as a top choice for all who target this division. IBD is mainly about general business knowledge, and MBA is great for that. I've heard about some IBD people with CFA, as CFA is quite prestige designation, and you need prestige if you are willing to work in IBD.

Sales: No specific degree or certificate is required. What counts most is your energy and ability to talk with people. MBA may be quite good for this division anyways (as MBA is about networking, and in Sales you may use your network/contact to market the products). In Hedge Fund sales CAIA degree may be desirable.

Flow Trading: Most useful certificates for flow trading are ACI (ACI Association) or FSA certificates. This certificates are focused on very specialized knowledge (how to make deals in the market, how to book the deals etc)

Prop Trading: Prop trading (including Stat Arb.) is nowadays very quantitative discipline. PhD in highly quantitative discipline (physics, economics etc) is preferred, but in this business there are many people, who are self made men - without special degree etc.

Research: In economics research EconPhD is extremely useful. In equity research CFA is a good choice (better than PhD)

Wealth Management: CFA or MBA are very useful

Risk Management: FRM or PRM are good choices. PhD may be useful as well.

An interesting article for all MBA applicants

2007-08-24T23:44:00.000+01:00

http://www.insidecrm.com/features/mbas-are-overrated-081307/

Results of second survey

2007-08-21T23:45:00.000+01:00

Qualifications of Investment Banks' CEOs

2007-08-18T01:13:00.000+01:00

For sure there is no easy and universal way to the top positions in investment banks or similar institutions. Each success case is entirely different. What is more, most of us will never become a CEO or even a Managing Director (what a pity ;) ). Getting on the top of the financial world is not just a matter of qualifications and hard work. What counts most is the luck. Luck of being in the right place at the right time. I think, however, that it is still worth to study the qualifications of people, who currently rule the financial world. I collected all available data about education of the top managers in financial industry in the table below.

First conclusion of this analysis is that qualifications of top managers differ a lot. We have guys, who completed MBAs at Harvard, but at the same time many of CEOs graduated just with BA degrees. This indicates that a degree is probably not the decisive factor for the success in the Investment Bank. Degree seems to be only entry level requirement...
What is more none of these great CEO's had any of these fancy certificates (like CFA, FRM or CAIA). The reason for that may be the fact that all these certificates were not popular when current generation of CEOs began their careers. Maybe CEOs of future, who begin their careers now, will have these qualifications.

Best excuses...

2007-08-14T19:08:00.001+01:00

After writing all this serious stuff about job hunting and various degrees its time for something much lighter!
On the efinancialcareers website I found quite interesting text. I think you may be interested as well :)

"How can you disappear from your desk without broadcasting the fact that you're looking for a new job?
With analyst bonuses about to be paid, now's the time when investment banks' greener employees are liable to nip out to have a few words with alternative employers. Bearing this in mind, The All Nighter is offering handy excuses for getting out of the office without revealing what precisely what you're up to. Here they are, distilled:
• Dentist, doctor, home delivery (only good for one interview, hard to pull off twice – unless you're having root canal treatment).
• Complain about back pains from sitting in front of your PC – out of paranoia about law suits, banks will first replace your chair, then (if you keep complaining) pay for chiropractic sessions which will give you the excuse to get out a few times a week.
• Go out for regular cigarette breaks. When you're gone for a bit longer people will assume you're drinking coffee as well as having a smoke.
• Wear a suit at all times – that way it will be less conspicuous when you come in wearing a suit for your interview.
The last point may be the most important. We asked a (very) senior banker how he spots people who are going out on something other than company business: "It's obvious because they are wearing a suit with a tie done up," he says. "They also leave at odd times and, more to the point, I have a call report system which lets me know precisely what they're doing at each time of day."
Is this a problem, we wonder? Apparently not: "I don't mind that people are going out interviewing," our senior friend explains. "If I drive it underground then they'll just respond by creating false meetings and doing it at the weekend. I'll then know less about them than I do now – if they're not happy (and want more money) it's better to know about it."

Results of the first survey

2007-08-11T13:21:00.000+01:00

PhD in Economics or PhD in Finance?

2007-08-11T12:53:00.000+01:00

If you are interested in finance and economics and you want to do a PhD you need to decide whether you want to have EconPhD or PhD in Finance. Many universities have both degrees in their offer. In this post I will write why, in my opinion, going for an EconPhD seems to be a wiser route then pursuing FinPhD, even if you want to work in finance after completing your PhD program.
First, while doing a PhD in Economics you can write you thesis on financial topics. Economics Department are usually so large that you can find many finance oriented professors in them. To give an example in Department of Economics at Harvard University you have Andrei Shleifer, Efraim Benmelech, John Y. Campbell, Jeremy C. Stein, who are very much finance oriented. There are many other examples of top finance profs in top economics departments, so even if you are doing your PhD in Economics Department, you can write PhD thesis which are finance oriented. On the other hand, finance departments are usually quite small and don't give that kind of flexibility. It will be hard for example to diverge with your topic from pure finance to microeconomics during your PhD in Finance. Second, EconPhD gives clear signals. In all private and public organizations people know exactly what EconPhD is. They know what they should expect from EconPhDs. Finance PhD programs are less established and usually have shorter histories. Also curricula of different FinPhD programs differ considerably. Its not like EconPhD where you always have Micro, Macro, Econometrics plus some options. Every Finance PhD program is different. The only plus for Finance PhD, in my opinion, is that usually continuous time statistics (stochastic differential equations) is often a part of the basic curriculum. If you want to do research in finance during you EconPhD you have to learn it by your own.
Generally, EconPhD is a safer option. It is considered to be more general (and it is) , so in the future you can use it to find a job even if it is not finance oriented.

When it is worth to get online MBA

2007-08-08T12:18:00.000+01:00

The number of online MBA programs has exploded recently. Many established schools (but also new ones) offer online or distance MBA education. All programs differ considerably in the quality, length and prestige.
Of course online or part-time MBA courses are considered to be less prestigious than well established full-time MBA courses. Chicago MBA will be by far more prestigious than any part-time MBA course, unless its part-time MBA of... the Chicago GSB. Yes, Chicago GSB has its part-time MBA program! And it's not written on your degree that it was earned part-time. It is absolutely the same degree as standard Chicago GSB degree.
And what about other, less popular part-time or online MBA degrees? Is it really worth to pay bucks for any less popular online program?
The answer is as always: it depends.
If you are not working full-time, or you want to make a break in your work full-time is probably the best investment for you if you think about the managerial position in the future. Full-time MBA is also a good place if you want to build your network (but don't over-estimate networking - networking is not a most important element of the MBA program), have a wonderful time in your life or if you just want to look for the new job (during the full-time MBA program looking for a job is one of the most important activities).
However, if you already have a good job, you have family or you don't need "holidays" from work you should consider on-line MBA from the good school. This is especially true if you already have reputable education on different level (let say good MSc or CFA), but you need an MBA to be eligible for managerial position. If this is not a top-ten MBA program no one will look at the name of the university anyway, neither on wether this was full-time or part-time program. The most important will be that you have an MBA.
Of course you may find different online programs. You should analyze how much you want to learn and how much you want to pay for it.
Also the quality of different programs is various. Just compare some programs like: Instituto de Empresa MBA, Regis University Online MBA, Robert Kennedy College in Swiss, Frederick Taylor University and you will see that quality and level of fees varies hugely.

To conclude, I would say that not always is an online MBA degree useless. Sometimes, especially when you have good prior qualifications, online MBA may be the smartest route that would lead you to the managerial position in the company you are working in. And maybe even if you could combine online MBA program with learning to other qualification (for example CFA) simultaneously that would make your position on the job market similar to that if you finished very good full-time MBA program

MBA vs. PhD on the Job market

2007-08-07T21:16:00.000+01:00

Greg Mankiw's Blog: MBA vs PhD

And what about the CFA?

2007-08-05T11:56:00.001+01:00

[CFA vs. the rest of the world]
The second deadline for the CFA Exam in December 2007 is approaching soon. If you want to enroll to this program you shall be fast. The exam fee will rise to 465 if you pay for it after 15th of August.
The CFA Institute is advertising the CFA designation as the most prestigious designation in finance. Is it true? Yes. That is true. All other (strictly investment oriented - so excluding ACCA for example) certificates like PRMIA, FRM, ACI etc. are definitely less prestigious, and less popular. The CFA designation, however, does not give superior money earning power as some people think. In terms of money earning power some credentials seem to be much more interesting.
In order to see which are most powerful credentials on the financial markets I conducted small research. I analysed the job offers on the efinancialcareers website. I was looking for the offers in which employers explicitly stated that they look for certain designations/certificates and education.
Here is what I found when I searched through all offers:

There were 171 Jobs online in which Employer stated that FSA is an advantage
There were 167 Jobs online in which Employer stated that ACCA is an advantage
There were 153 Jobs online in which Employer stated that PhD is an advantage
There were 144 Jobs online in which Employer stated that MBA is an advantage
There were 139 Jobs online in which Employer stated that CFA is an advantage
There were 80 Jobs online in which Employer stated that MSc is an advantage
There were 3 Jobs online in which Employer stated that PRM is an advantage
There were 3 Jobs online in which Employer stated that FRM is an advantage

From this data you may see that ACCA and FSA designations generally outperform CFA in terms of the number of job offers.

And what if you are interested in trading for example? (I put the word trading into the search) The result of the analysis is on the chart below:

This chart shows that when you are interested in trading CFA designation is worth less than good MSc education for example. Relatively, the CFA charter is even less rewarding in trading environment than in general. This chart shows also that PhD qualifications are dominating trading now.

The CFA designation, although it is not the most "powerful", has many advantages you shall consider. First, you may work while getting it. Second, it is obviously much cheaper than good MBA (although still expensive). Third, you have growing community - CFA may be even more powerful in the future.

My personally, I am going to get my CFA designation (I hope) although I am studying for PhD right now. I think that combining theoretical side of PhD with practical approach of CFA will make me really interesting asset on the Job market.

Why they give more to PhDs?

2007-08-03T12:39:00.000+01:00

Lately, I had an interview in one of the investment banks in London for the position in the Fixed Income Research. The position was not an entry one as I had some experience with the stuff they were doing. I said that I was a Master's student at my university, as if I started working from September I would have only Master's degree (I need at least one more year to finish my PhD).
The guy I was speaking with told me that although he thinks I deserve at least associate position (I had prior experience), he can offer me only a second year analyst. He told me that this is because they don't offer any entry level associate positions to Master's students. Only MBAs and PhDs are eligable. I told him that I am sure that after 1 or 2 more years I need to finish my PhD I will not be more clever then I am today. What is more, I will probably forget a lot from this what I learned in finance (as I am doing PhD in Economics and I had MSc in Finance before). He agreed with this, but told me that these are the rules.

I was thinking why they offer Associate positions to MBAs and PhDs, but only Analyst positions to Master's. Case of MBA's is simple. Usually MBA students have already a lot of experience, because they need it before they boarded on the Top MBA program. Offering them Analyst position would be like wasting their potential. And what about PhD students? I think they get Associate positions not because of their experience (because they don't have it) nor their knowledge (because this knowledge is usually useless), but because of their... age! Usually PhD are simply too old to work just on the Analyst position! Can you imagine a PhD (of age let say 27) who is working at par with 21 old who just finished his BA? I don't!

Although I am pursuing PhD at very strong university, I believe that this rush on financial markets for PhDs is unjustifiable. PhDs usually are not much more effective in day-to-day work than typical Master students, but the this is just trendy to have many PhDs on the trading desk...