My Tip for CFA Candidates

This may be old but my quote was publised in the November 06 issue of CFA Advantage.
Hope you find it helpful and inspiring.

Tags: CFA

CFA Institute Defends the CFA Brand

CFA charterholders will be delighted to know that their organization is pretty busy upholding the integrity of the CFA brand.

Just this month, the Delhi High Court told the Institute of Chartered Financial Analysts of India (ICFAI) to stop (temporarily?) the use of the CFA marks. ICFAI runs a post-graduate program that eventually leads to a CFA Charter from the Council of Chartered Financial Analysts. The court stated that "Chartered Financial Analyst" and "CFA" is not a generic term to be used by any organization and is a recognized trademark owned by CFA Institute.

CFA Institute press release
ICFAI program details

Tags: CFA

Are fund managers really overcompensated?

CFA Magazine recently published an interview with Barton Biggs in its July-August 2006 Issue. Mr. Biggs has been with Morgan Stanley for 30 years acting as chief global strategist and is well respected by Wall Street. In 2003, He retired from Morgan Stanley to form Traxis Partners (hedge fund) with colleagues. In the interview, the following quote struck me the most...

"The hedge fund is another way for people to run money. It happens to be a way in which there are high fees charged. Eventually, the sheer size of the money going into hedge funds and the number of hedge funds that exist are going to inevitably result in a decline in hedge fund fees. In fact, my guess is that compensation across the investment management business is beginning a secular decline. It's the most overcompensated business in the world. Never have so many been paid so much for adding so little. It's an evolutionary process."

I am aware that competition forces fees in a downward trend and compensation will surely follow. But I still don't see the evidence of this happening at the moment based on the postings I see in jobs boards and the number of fresh grads wanting to go into the business (because it pays well).

I think it's all a matter of supply and demand. As more and more fund managers are needed, it becomes more difficult to get really good managers. The lack of supply raises the price for talents. The lack of supply also forces some funds to employ sub-standard managers (whether intentional or not) which results into Mr. Biggs observation of so little value added.

Some articles about Barton Biggs:
Morgan Stanley
Turtle Trader
Weeden & Co.

Tags: finance investing hedge funds CFA

Brushing up on my math skills...

I'm somewhat amazed on how I got myself into the world of Financial Derivatives. I do not have a quantitative degree (I majored in Management Economics) and didn't pay much attention to my math and statistics classes in college. Yet I find financial markets (derivatives in particular) fascinating. And becoming knowledgeable in them actually gave me an edge in the industry.

Looking back, it seems that I chose the wrong college course. But my interest in the subject matter and the willingness to learn did not stop me from attaining my goal. Although not for quants, the CFA program gave me a good background on the financial markets in general; as well as valuation methods for plain vanilla derivatives.

I searched the net for papers. Marketing and research papers published by the big banks are of great help. Sites like DefaultRisk has loads of papers on Risk Management and Derivatives. But reading them is no simple feat as most of them are written by PhDs or PhD students. My lack of academic foundation in mathematics do get in the way, especially when I encounter a lot of greek symbols.

Finding like-minded individuals to discuss topics of interests and ask for advice also did a lot of good. I am an active member of Wilmott -- an online community of quants (Username: Jomni). At first, I was the one asking questions, and now I give answers and advice myself (on topics that are not mathematically deep).

I never stop reading. Part II of the PRMIA Professional Risk Managers' Handbook is a good refresher on quantitative finance topics. It covers Matrix Algebra, Differential and Integral Calculus, Probability, and Statistics. Other good books would be Hull's Options, Futures and Other Derivatives and Paul Wilmott on Quantitative Finance.

Tags: derivatives finance math quant books cfa