Sunday, August 31, 2014

What skills does an analyst need to become a portfolio manager?

Students in the AIM program manager three portfolios. While they learn the skills of how to become a solid fundamental analyst, they along have an opportunity to try their hands at being portfolio managers. The follow thoughts were taken from Larry Cao, CFA, who wrote in a recent CFA blog posting about the Seven Essential Steps in Portfolio Management.

These are seven steps that an aspiring portfolio manager must learn to master according to Cao:  

1. Originating ideas.
Where does a portfolio manager start in his quest to beat the market? Fresh ideas. There are more than 7,000 listed companies in the world, and a portfolio manager needs to know where to look. You need to look beyond the index and the obvious, especially the ones shopped around by sell-side analysts.  Adding value starts from idea generation, the first step in the investment process. This point is particularly important for value managers, who by default invest in companies that the market shies away from.

2. Conducting research.
Research is not the exclusive realm of research analysts — far from it. You need to be able to shorten the list from a few thousand companies to a few hundred. These companies are then ranked and analyzed. Focus on finding the right business run by the right people that can be bought at the right price. Consistent investment results depend on discipline and not on serendipity. How to rank the short-listed companies clearly reflects a manager’s investment philosophy.
3. Making decisions.
Decision making is tough. Investors are often better at investigating investment opportunities than making investment decisions because they are afraid of making mistakes that they’ll regret. It is critical, however, for a portfolio manager to be able to pull the trigger when presented with a killer opportunity.  Decision-making authority is the single most important distinction between an analyst and a portfolio manager. The talented are particularly good at pulling the trigger although the instinct does not come easy, even to them.

4. Structuring transactions.
There are many ways of investing in a company. Buying shares in the open market is only one of them. Portfolio managers need to invest in ways that benefit investors the most. A manager needs to be familiar with the intricacies of these transactions, including accounting, legal, and tax implications.  Portfolio managers need to have a total return perspective to investing. This is particularly important if they are managing an outsized portfolio or invest in alternatives.

5. Executing transactions.
A portfolio manager also needs to work with traders and ensure that ideas become investments. Traders are ultimately responsible for trading. Portfolio managers, however, need to have an appreciation for how their investment decision may affect the market. Trading remains an area that affects portfolio performance and cannot be ignored.

6. Maintaining investments.
Adding an investment to the portfolio is not the end of the story. Portfolio managers need to continue paying attention to portfolio companies once initial investments are made. This is a continuation of the research process. Maintain, not monitor, your investments.

7. Exiting investments.

Conventional wisdom seems to hold that exiting an investment is almost more important than entering one. And it could be right. If portfolio managers hesitate when they exit positions, they often run the risk of letting small losses balloon into major headaches. Similarly, if portfolio managers do not lock in profits when they should, it could be equally damaging to their performance. Don’t be afraid of selling too high or too low. Exit quickly once you’ve made the decision, especially when cutting losses.

Friday, August 29, 2014

Five Important Career Tips

These are from the New York Society of Security Analysts career web site. They have many useful articles and tips for individuals seeking to work in the investments field. Graduates of the AIM program has been successful because of good training, hard work, and avoiding silly mistakes.
Here are five career tips for you to follow at different stages of your career. They may be fairly obvious, but it’s surprising how often people overlook them.Im
  1. Understand the industry. Different aptitudes and personalities are best suited to different specialties. What are you best at? What are you most interested in? Where are your weaknesses? Managers don’t expect everyone to be talented at everything. 
  2. The best employees are the ones who come in every day and think about how they can add the most value to the rest of the team beyond their basic tasks.
  3. Try to work with leaders who you respect for their skills and integrity, and don’t hesitate to let them know when you succeed and when you make a mistake. This makes their job easier. You will gain respect by acknowledging and working on fixing mistakes. Covering up loses trust. 
  4. Don't be afraid to terminate or reassign an underperformer. Give clear feedback and a short opportunity to improve, but then move them on. Otherwise you're hurting yourself, your team, and ultimately the person themself.  
  5. Finally, have “executive presence” every day. Your bearing, confidence, tone, and choice of conversation have a major impact on people's perception of you.

Wednesday, August 27, 2014

First AIM Equity Presentations of the new school year will be on Friday, August 29, 2014

The first AIM equity presentations of the fall semester are this Friday. Join us in person or online. A pdf file of the recommendations can be found on the AIM web site at: AIM presentations

Applied Investment Management (AIM) Program
AIM Class of 2015 Equity Fund Reports
Fall 2014
Date: August 29th | Time: 3:00 -4:30 p.m. (CST) | Location: AIM Research Room (488)
Join us in person, or considering joining us live at:

During August and September the AIM students will be presenting current equity holdings that reside in the AIM Small Cap Equity and AIM International Equity Funds. The recommendations will be to sell, hold, or buy more shares. The presenters and their target companies are listed below.

How to Brand Yourself During an Interview and Networking

The following two articles about personal branding during the interview and network process come from the New York Security Analyst Society. These are useful to AIM students as they prepare for internships and entry level interviews.

Personal Branding: Interviewing

The interview process will ultimately determine if your efforts at personal branding have been successful.
There are two kinds of interviews: the informational/courtesy and the real interview (where there is a real job!).
Here are some interview rules of thumb:
  • NEVER ask a question you should know the answer to
  • Know everything you possibly can about the company; nothing will substitute for appropriate due diligence and research
  • Interviewing is like dating—increasing amounts of information is exchanged in successive stages (DON’T VOLUNTEER TOO MUCH UP FRONT)
Don’t forget about the importance of cultural fit. Sometimes a good cultural fit can trump qualifications if the firm believes you can grow into the job quickly enough but make a contribution from the get go. 
The more senior you are, the more important the corporate culture is because you will be higher up in the food chain and more exposed to what is right or wrong about a company.
There is much more about the interview process we can discuss but if you get the job you can tell yourself you have satisfied the ultimate goal of personal branding—someone wants you for who you are!

Personal Branding: Networking

Once you have taken the first step in developing your personal brand—creating a resume—you need to test your brand in the marketplace.
Network to find out if people perceive you the way you see yourself.
There are two kinds of networking: online and in-person.
To start networking online, you need to create an online presence via social media on websites such as LinkedIn, Twitter, and Facebook. You can even create a blog using platforms such as WordPress or Tumblr.
There is no substitute, however, for face-to-face networking. Face-to-face networking involves participating in industry organizations either as a panelist or attendee.
Even more important when you are in real social settings—as opposed to the pseudo social setting of the internet—is to follow appropriate rules of behavior. You want to create a bond with those with whom you are networking. It takes time to cultivate these relationships.
Networking should be a part of your regular career management—not just when you need a job. You want to create networking relationships before you need to use them.
The last and most important part of developing a personal brand is finding out if it will get you a job through the interview process, which we’ll cover next. 

This article was written by Richard Lipstein, executive search consultant with Gilbert Tweed International, long-time NYSSA member and currently member of its board of directors. This is a very good source of information about career opportunities in the investments field.

Tuesday, August 26, 2014

The 25 Most Difficult Questions You'll Be Asked on a Job Interview (and their answers)

With the start of a new academic year, we know that finance interviews for internships and entry level jobs will be occurring over the next several months. On the AIM blog we will be publishing some of the most frequently asked technical finance interview questions and answers across a variety of topics.

A good starting point is with the CFA Institute. They have provided a variety of career resources for college students studying finance. The following link directs the reader to a PDF file that contains The 25 Most Difficult Questions You'll Be Asked on a Job Interview (and their answers).

Sunday, August 24, 2014

Open House for Prospective AIM Students - Friday, August 29, 2014 2:00 pm in the AIM Room (4th Floor Straz Hall)

This message is directed toward any Marquette student (freshmen, sophomore, or junior) interested in learning more about the AIM program - specifically the new AIM track (Private Equity & Banking). For more information, go to the AIM web site.

Here is the agenda for Friday's open house:

2:00 – 2:20 Presentation and discussion of the new AIM track (Private Equity & Banking) with Dr. Krause and Mark Zellmer

2:20 – 2:40 Discussion of AIM application (due 2nd Friday of September)

2:40 – 2:50 Career Services presentation (resume and interviewing schedule)

2:50 – 3:00 Q & A session

Please note that the first AIM equity presentations of the semester will follow the open house in the AIM Room.  
3:00 – 4:30 AIM Equity presentations

Useful Advice for College Students from the CFA Institute's Career Guide


You don’t have to wait until you have completed your degree and received your diploma to prepare for your career. While still in school, there are several steps you can take to set the stage for a successful entry into the finance and investment industry.

Seize every opportunity to meet people who have experience in the finance and investment industry and learn from them. These opportunities may come in the form of career events, seminars, conferences, and lectures at your university. Networking is more than just exchanging name cards. It’s about striking a connection with the people you meet, and nurturing and leveraging those connections. Introducing yourself and asking questions to a school alumnus who’s now a senior banking executive may be intimidating. But think of it as practice for the real world.

Your ability to conduct yourself with ease in social and business settings shows your confidence and you can only build up that confidence through practice. Outside of school, don’t hesitate to reach out to relatives, family friends, or friends of friends who work in the industry. Even if you live well outside a financial center, you can hone your networking skills with your local business community.

So you have decided on a career in finance. But which area? There are many fields in the industry and myriad roles. Research these fields, find out as much as you can what professionals in those fields do, and the skills and qualifications required. If a CFA designation is typically required for the job you’re angling for, prepare for the CFA Program as early as possible.

Keep yourself up to date on industry developments so you know how to position yourself in the job market. Read the financial news — it’s always a good conversation starter in networking events.

Employers not only judge you based on your grades or relative experience, they want to see a well-rounded person. Your extra-curricular activities can demonstrate your leadership abilities, time management skills, collaborative skills, resourcefulness, and other soft skills.

One way of showing employers your serious interest in the industry is to join the CFA Institute Research Challenge — an annual global competition that provides university students with hands-on mentoring and intensive training in financial analysis. Considered as the “investment Olympics,” the competition is held in three progressive levels — local, regional, and global. CFA charterholders mentor students as they assume the role of research analysts and are tested on their ability to value a stock, write an initiation-of-coverage report, and present their recommendations.

Fresh graduates are understandably short on work experience when they join the job market. But it doesn’t necessarily mean that you have zero work experience. One credible way of demonstrating your potential is by getting yourself an internship at a financial institution or company. Many of today’s leading global business leaders spent time learning the ropes as interns: Microsoft founder Bill Gates was a U.S. congressional page, Xerox CEO Ursula Burns was once a mechanical engineering summer intern at Xerox, and JP Morgan Chase Chairman and CEO Jamie Dimon interned at Goldman Sachs in the 1970s.

An internship in a prestigious bank would look good in your resume, but more important is what you learn in the process. What were your responsibilities and what business functions were you exposed to as an intern? Don’t just spend your internship photocopying or fetching coffee for the team; be proactive in finding meaningful assignments.

Large international banks have highly competitive internship programs, but you don’t have to limit yourself within this circle. There are many other banks and companies that can offer you a place. Oftentimes, you just have to take the initiative to look for these opportunities by contacting organizations directly, even if they are not advertising for interns. It’s a chance to hone your ability to market yourself to potential employers. Internships may lead to a full-time job offer.

“Mentors and sponsors are hugely important in careers. We know that people who have them do better,” says Sheryl Sandberg, chief operating officer of Facebook. Some people are lucky enough to stumble upon good mentors early in their careers, while others have to seek them out. Sheryl Sandberg’s own mentor was her Harvard University professor Larry Summers, who later became U.S. Treasury Secretary and her boss. If you did your networking homework well, you would have a good group of potential mentors to start with.

Mentors and sponsors are people who can offer you practical insights and advice, and can help open doors for you in the industry. They don’t have to be influential figures in the industry. A university professor, a family friend who has years of experience in the finance industry or your supervisor at your internship or summer job may be a potential mentor. It all depends on the kind of relationship that you are able to establish with them and the value that they can add to your career development.

Saturday, August 23, 2014

10 Frequently Asked Finance Interview Questions

With the start of the new school year, finance interviews for AIM students (and others) interested in internships and entry level jobs will soon be taking place. On this blog we will be publishing some of the most frequently asked technical finance interview questions and answers across a variety of topics. Here are some of the most likely questions you’ll be asked. (Note: some of the questions relate to prior work experiences).

1. Tell me about yourself.
This sounds like an easy question to answer. After all, what is so difficult about talking about yourself? But not preparing for a question like this could cause you to bring up points that might be irrelevant for your job candidacy.

Review the job requirements and see how your strengths and qualities can support the position. Write down your responses and rehearse your delivery so that it sounds natural. You will have done much of the groundwork in your self-review.

Be concise but informative in your response. Depending on your career stage, this answer should take two to four minutes and include the highlights, and sometimes lowlights (remembering to provide examples of how you overcame challenges), of your career background. Focus on your professional work but include significant personal events and experiences if they have affected your career.

Display your competence and interest in the position but do not start going into your personal history. If the interviewer wants more detail about a specific incident or phase of your life, he or she will probe further.

2. What is your greatest accomplishment in your career or personal life? Tell me why.
The interviewer is interested in the accomplishment you have chosen to share and its context in your personal and professional background. You should choose a significant event that demonstrates such personal qualities as persistence or ability to overcome adversity and, ideally, an event that displays something a little out of the ordinary.

You can broaden your answer to include a selection of accomplishments. For example, “I’ve been pleased with a few accomplishments, such as X, Y, and Z, but I would have to say that my proudest moment was Y because of reasons 1, 2, and 3.”

3. What value have you added to your company in your current role and what value has your company added to you?
This question enables you to demonstrate your expertise, but remember to answer both parts of the question. For the first part of your answer, outline your accomplishments in your current role and include measurable outcomes.

Be able to identify and quantify specific ways you have benefited your organization. Outline the challenges or issues you faced in your position or your desired outcomes for the role when you started.

Ideally, you want to be able to find similarities between the challenges faced in your current role and the challenges that could arise in your prospective role. This strategy can help convince the interviewer that you are the best choice for the position.

In the second part of your answer, identify how you have progressed and what skills and experiences you have gained. Employers like to meet people who are aware of key issues and perceptive of changing situations. Present yourself as having arrived at a situation in which you are now ready — and very able — to take on the new job.

4. Describe how your division/company is organized and how you fit into its structure.
This is a popular question because it gives the interviewer a better understanding of where you fit within the organization. Your answer also demonstrates your verbal skills in explaining your company’s structure and how clearly you understand your role and the chain of command.

Start with your job, its title, and a brief summary of your responsibilities. Then, describe your colleagues’ titles and responsibilities and whom you report to. Finally, identify people who report to you. This is a factual answer and doesn’t need to be a sales pitch; just ensure that you are succinct and confident in your answer.

5. What did your latest performance appraisal highlight about you?
Although you should portray the good points from your performance review, you should also be prepared to discuss some of the issues that were raised, if any, and how you are overcoming or improving on these limitations. Most interviewers will also be asking your references this question, so be careful about coming across as sugarcoating the facts.

6. (a) What are the qualities required for the position for which you are interviewing? Why?
Research is important for this question. Before the interview, study the top three qualities required for this position as per the job description, and be able to discuss why they are important to the job. In doing so, be aware of the next question that will be asked once you have completed your answer.

(b) Do you think you have these qualities? Can you give me examples of recent work situations that would suggest you do?
As long as the qualities you chose in the previous question (6a) correspond with the qualities that you possess, this answer should be easy.

7. If you were to stay with your current organization, what would your career path be?
You should be able to outline a potential career path (if one exists) within your organization and why this does and doesn’t appeal to you. You should have already gone through this thought process before commencing your job search. Your answer should be logical and sensible to the interviewer because any hint of an illogical approach may indicate to them that you are hiding something.

8. Putting this job aside for one moment, describe your ideal next move in terms of your career.
Since you have mapped your career plan and done self-analysis before your job search and this interview, this should be a relatively straightforward question. Nevertheless, it is an important question because the interviewer wants to understand whether you have thought carefully about your next move and whether your analysis and your plan sound logical and achievable. There needs to be some congruence between your career plan and this role.

9. Are there situations in which you have received instructions from your manager you believed to be morally or technically wrong? What did you do?
Answers to these questions can be interpreted in different ways. Do you display initiative, or do you flout authority? Are you loyal, or do you follow instructions blindly? What are your values, and how do they affect your work? With the recent emphasis on corporate governance, many more organizations want to discuss your ethical perspective and whether you would be the whistleblower if you observed impropriety in the organization.

Whether you have had such an experience may depend on your career stage, but the interviewer wants what your approach has been or would be. Ideally, you want to explain that you would want to further discuss the issue with your manager to better understand why he or she made such a decision. The interviewer wants to hear that you know it’s a complex and delicate issue and that you have the ability and experience to read the situation and act accordingly.

10. If you could change one thing about your personality, what would it be?

The interviewer is seeking more information about how self-analytical you are and is trying to see what negative personality traits you may be prepared to reveal. You want to be able to identify one characteristic that you would like to change or develop and this should be significant but not fundamental to the role. Depending on your rapport with the interviewer, an appropriately light-hearted and/or self-effacing comment might be appropriate.