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  • 1. Roadmap to the Buy Side A Student’s Guide to Entering the Investment Management Profession Prepared for the Students of By Sean M. Gelston, CFA MBA ‘98 26 September 2004 In collaboration with other investment professional alumni of the Stephen M. Ross School of Business at The University of Michigan.
  • 2. Roadmap to the Buy Side Stephen M. Ross School of Business Acknowledgments The following individuals are thanked for their contributions to the content of this document: • Andrew Adebonojo, CFA, Howard Hughes Medical Institute, MBA 1992 • Anthony DiGiovanni, CFA, Sigma Investment Advisors, MBA 1994 • Mark Marcon, CFA, Wachovia Securities, MBA 1989 • Robert Maton, Schneider Capital Management, MBA 2001 Disclaimer In this disclaimer, the phrases “this document”, “the University”, “the author” and “the acknowledged contributors” refer, respectively, to “Roadmap to the Buy side”, the University of Michigan, Sean M. Gelston, and the individuals named in the section of this document titled “Acknowledgments”, which appears on this very page. The term “reader” refers to any individual, whether a student of the University of Michigan or otherwise, who receives a copy of this document. This document has been and will be provided to the students of the University without, in exchange, compensation of any shape or form. The recommendations explained in this document are based on the judgment of experienced professionals within the investment management industry, as opposed to measured studies. Consequently, while it is the belief of the author that the recommendations contained herein are both sound and effective, and while the University deems these materials to be of sufficient potential benefit to students so as to maintain and distribute this document as a resource, there can be no assurance that in following the recommendations herein the reader will successfully secure a position in the investment management industry. Results will vary and will depend on many factors not addressed in this document, and over which neither the University nor the author nor the acknowledged contributors have control or influence. Such factors include, but are not limited to, the prevailing labor market conditions at the time of the career search, the matching of an individual’s qualifications to the requirements of a position(s), and the interaction, verbal and written, between a candidate and a potential employer(s). It is even possible that under certain circumstances a particular recommendation (or recommendations) may actually reduce, rather than enhance, the reader’s likelihood of securing an offer of employment. By accepting a copy of this document, the reader 1) acknowledges that, in exchange for the document, there was not, in any shape or form, compensation received by the University, by the author, or by the acknowledged contributors; 2) admits knowledge of this disclaimer and the uncertainties and limitations it describes and implies; 3) agrees that in having disclosed the aforementioned uncertainties and limitations, neither the University, nor the author, nor the acknowledged contributors can be held responsible of the outcomes that relate to the employment-seeking activities of the reader; and 4) agrees that in choosing to utilize the strategies and recommendation described herein, the reader assumes and bears all associated risks, and agrees that the outcomes of the reader’s endeavors bear no recourse to the University, the author, or the acknowledged contributors. 26 September 2004 2
  • 3. Roadmap to the Buy Side Stephen M. Ross School of Business Forward Roadmap to the Buy Side (Roadmap, for short) aims to provide perspectives from Michigan Business School alumni within the investment management profession, and to do so with an emphasis on the means of joining the business. It is intended to serve as an industry- specific supplement to the materials and services already provided by the Office of Career Development. You will notice that Roadmap is written in the context of a risky assumption: that the incoming student already knows that her or his destination is the investment management profession. It is understood that such an assumption is decidedly idealistic, since many - if not most - MBA students utilize business school not only as a bridge to a different career, but also as a tool of discovery. The process of discovery takes time, of course, and may put undecided students on a different schedule than decided students. As a reference guide, however, Roadmap must lay out what is ideal, and so it does. But because it is a collection of strategies, it can be used piecemeal, if not in full, and so it can be of benefit to any student who ultimately looks for an investment career. You may also notice that Roadmap seems oriented toward the equity side of Wall Street. This is a reflection of the domain of the contributors. However, the content of this document is also quite relevant to those who are interested in landing themselves in the realm of other asset classes, such as fixed income. Writing now on my own behalf, I will share with you the reasons why I undertook the project of preparing Roadmap. First, I wanted to prevent others from making the mistakes I made when I had been pursuing a Wall Street position. Second, I wanted to collect best practices into a single reference which could be used in coming years not only by students but also by alumni. With Roadmap in hand, students would not need to rediscover do’s and don’ts through trial and error, and alumni would not have to reiterate basic tips and strategies. The interaction between students and alumni could instead begin at a more advanced level, whereby the focus would be on the forming of relationships, the polishing of style and presentation, and the identifying of current opportunities. Third and finally, my deep esteem for our alma mater compelled me to give back to it in some shape or form. I believe that Roadmap will give back to the school by giving an edge to the students. Hopefully, Roadmap will do its part to further the perception of MBS as a premier source of talent for the investment management profession. Go Blue! Sean Gelston, CFA MBA Class of 1998 26 September 2004 3
  • 4. Roadmap to the Buy Side Stephen M. Ross School of Business What is the Buy Side? Simply put, the phrase buy side represents investment management firms, collectively. It derives from the notion that such firms, who are in the business of managing assets, must buy securities in order to put the money to work. But there is a secondary notion: that they are in the role of buying ideas. Ideas generally take the form of published research, which is produced by brokerage firms, collectively known as the sell side. The sell side can either be thought of as selling research, or as selling securities. Buy side firms encompass mutual funds, hedge funds, pension funds, insurance companies (who manage asset portfolios that balance their liabilities), private wealth managers, etc. Within an investment management firm you will normally find the following types of professionals: 1. Portfolio Manager: hired to govern the investment decisions for a portfolio of assets, and generally expected to produce returns that are in excess of either a fixed target or the fluctuating returns of a benchmark. 2. Analyst: conducts research on specific securities and makes investment recommendations (re. said securities) to the portfolio manager. 3. Trader: manages the accumulation and liquidation of securities in the capital markets on behalf of the managed portfolios. Buy side firms are the clients of sell side firms, who provide research and execute trades of securities on behalf of their clients, in exchange for commissions. Within a sell side firm there are customarily the following types of professionals: 1. Institutional Salesperson: responsible for maintaining relationships with buy side clients. Provides services to clients that include research updates, access to special meetings, at the margin information and investment ideas. 2. Research Analyst: prepares and publishes research on covered securities; interfaces with buy side clients on research ideas. 3. Trader: executes orders on securities exchanges on behalf of the brokerage’s clients. 4. Sales Trader: interfaces with buy side traders and services their transactions through the sell side traders; provides value-added services such as execution expertise and market color. On either side of the business (whether buy or sell) there are found various layers of supporting staff. Junior sales people and junior analysts (or associates) are generally apprentice-like roles, but are very much in the game and involve “heavy lifting.” Professionals in senior positions are generally at the forefront of client relationships and also, as in the case of the buy side, the culmination of investment decisions. This document, as already mentioned, is focused on buy side roles, and analysts and in particular. For those who are not intimate with Wall Street, it would be worthwhile to explore the other roles as potential career destinations, in addition that of analyst. Talent is needed across a variety of roles in this business, not solely in research. It is important to determine the role that best matches your strengths and interests. The business is challenging enough in a job that you love; it would be insufferable in a job that you don’t. 26 September 2004 4
  • 5. Roadmap to the Buy Side Stephen M. Ross School of Business The Roadmap As you will learn from the Office of Career Development, there is a schedule of general steps that MBAs should follow in their paths to careers. As you will learn from Roadmap, there are steps specific to the investment profession that overlay the general program. These steps are outlined below, and are detailed in the pages that follow. In addition, some reference material is provided in the appendices. Fall 1. Join the investment club 2. Subscribe to WSJ, Barron's 3. Build contact network 4. Research target firms First Year of MBA 5. Enroll in CFA program (optional) 6. Prepare stock ideas 7. Attend Wall Street Forum Spring 8. Interview for internships 9. Prepare for CFA exam (optional) 18. Concurrent Actions 10. Excel in the internship Summer 11. Expand contact network Internship 12. Take CFA Level 1 (optional) Fall 13. Prepare Stock Ideas 14. On-Campus Interviews 15. Off-Campus Interviews Second Year of MBA Spring 16. Off-Campus Interviews 17. Prepare for CFA Exam 26 September 2004 5
  • 6. Roadmap to the Buy Side Stephen M. Ross School of Business 1. Subscribe to the Essentials To become a Wall Street professional, it pays to develop the habits of one. So, it is recommended to immediately get a subscription to the Wall Street Journal and read it daily. Barron’s is also highly recommended, because it is a weekly overview of latest events and issues in the markets, and features stock ideas and money-managers in every issue. Other periodicals that are germane to the investment profession include, but are not limited to, the Economist, Institutional Investor, Financial Times and Investors Business Daily. Investors Business Daily, while overlapping the Wall Street Journal in terms of news coverage, provides excellent technical information on the market. Even if you don’t subscribe to IBD, picking up a copy and reading section B2 every couple of days is worthwhile. Incorporate CNBC and Bloomberg into your daily routine. Finally, it is helpful to set up a brokerage account with Fidelity. Doing so will grant you unlimited access to Lehman Brothers research and analysis, allowing you to familiarize yourself with a sell side research product. 2. Participate in the Investment Club This step lies in the realm of the obvious. However, it is important, here, to transcend mere membership and actively participate. Membership in the investment club represents more than a checked box on the resume; it represents access to resources and extracurricular learning. Participate to the fullest in this club because it will allow you to learn more about the business than you would otherwise, and it allows you to form relationships with fellow students having common interests. Leverage your membership in the club as a means to connect to alumni, whether related to their speaking visits at the university, or as an excuse to engage them over the phone or in person. Participate in the stock pitch competition and the student-run fund as a means to gain insights into the daily activities of the investment professional 3. Build the Contact Network Any investment professional will tell you that theirs is a business built on relationships. Opportunities are discovered, analysts are hired, and investment recommendations are followed all because of relationships. In prosperous times (and even more so in challenging times), asset management firms often forego advertising and third-party recruiting to fill a position. Since Wall Street is so small and tightly knit, when an opening at a firm appears, the news spreads like wild fire, and candidates come knocking. As such, the student wishing to join the profession must build a network of professional contacts. The network will be essential for finding positions, accumulating references, obtaining advice, and evaluating opportunities. With respect to the last item, who better to ask about a choice of two offers than somebody who is in the business and is familiar with the firms in question? Building the contact network is something that can never be done too early. Here are some recommended steps in doing it: 1. Starting with alumni, make a list of the people you wish to contact. Preferably, they would be portfolio managers or analysts at firms that you may ultimately like to work for. 26 September 2004 6
  • 7. Roadmap to the Buy Side Stephen M. Ross School of Business 2. Plan the dialogue that will take place with the contact. Identify the specific things you wish to accomplish in the phone call. Know what you aim to communicate to the contact, and vice versa. Through careful planning, you will have a much more purposeful interaction, and you will leave your contact with a much more favorable impression. You’ll come across as more “effective” and “on the ball.” 3. Begin approaching your contacts … by telephone! It cannot be over-emphasized that verbal communication surpasses written communication in terms of its effectiveness. Consider that it may take 100 paper letters, or 10 electronic mails to engender one response, where as a single phone call to a live human being guarantees a response! A few alumni have expressed their preference for an email that is followed up by a phone call. That is fine. But your author would greatly emphasize the phone over email, especially when it comes to investment professionals, who are bombarded with hundreds of emails each day, and all the more likely to ignore another one. 4. Phone calls to investment professionals should generally be made after market hours, i.e. after 4pm EST. During and before the market opens, you should assume that investment professionals are generally coping with breaking news, unless they have indicated to you otherwise. 5. Following up with the resume after a phone call is essential because it allows the contact to market you. You should remind and encourage your contacts to share your resume with their own contacts. 6. Be respectful of the alumni network, and don’t abuse it. Do not send spam emails. When communicating with alumni (or any contacts, for that matter), be mindful of their precious time and be succinct in your communications. 7. After tapping the alumni network, move on to other channels of networking, which include colleagues of alumni (i.e. one contact removed), sell side analysts, institutional equity salespeople, and investor relations professionals. All three latter constituents have a vested interest in building relationships with future buy side analysts. Sell side analysts and institutional equity sales people will have, in you, a potential client; IR professionals will have a potential investor. Sell side analysts and investor relations representatives are more appropriate for the student who is targeting an industry-specific research role. For instance, an individual with a pharmaceutical background who wishes to become a buy side health care analyst may wish to make contact with the sell side analysts covering pharmaceutical companies, and also the investor relations representatives for several pharmaceutical firms. 8. With contacts, it pays to be patient, pleasant and persistent. It also pays to become friendly with their staff. Administrative assistants and associates are gatekeepers that can occasionally influence a contact; but they can always tell you what’s going on at a firm. You shouldn’t discount their importance to your search. 26 September 2004 7
  • 8. Roadmap to the Buy Side Stephen M. Ross School of Business 4. Research Target Firms One of the aims of the first year MBA is to secure a summer internship. In the investment management industry this will likely require an off-campus search because so few firms come to campus to recruit for their opportunities. Said differently, some of the best opportunities may not necessarily be the ones making their way to campus. As such, the student will be required in most cases to seek out firms and the opportunities within them. This process begins with a canvass of the landscape of investment management companies. Nelson’s guide, for which a copy in the library is kept, is a useful source of information on investment management firms. It reports, among other things, contact information, the names and specialties of investment professionals, assets under management, investment style (e.g. momentum, relative value, deep value, GARP, growth), and, in many cases, firm structure. Bigdough.com is another directory of firms and the investment professionals in each. However, it involves a paid subscription. Morningstar is a respected source of information on mutual fund firms. Portfolio managers are regularly reviewed by Morningstar analysts. Barron’s magazine conducts regular reviews of money managers, and features an annual ranking of portfolio managers. It has begun publishing reviews of hedge funds, as well. Institutional Investor magazine is another source of information on money managers. The CFA Institute maintains an online database of members, with a directory that resembles iMpact’s. But one must be an society member to utilize the facility. The directory will not help you in learning about investment management firms, but will allow you to collect contact information. Bloomberg will allow you to do the same. Keep in mind that proper background research will help you find those firms with which you represent a “good fit”. A good fit would be a value investor with a value firm, a sector-specific analyst with a firm that has a centralized research platform of specialized analysts (as opposed to a team of generalists). Your contact list will also come in handy in this regard, but you should go to them only after having done a modicum of background research. Another thing to keep in mind is that the firms that have grown assets and that have outperformed are likely to be in the better financial position to hire candidates. Everything else being equal, you should consider seeking out such firms. 6. Enroll in the CFA Program (Optional) The Chartered Financial Analyst (CFA) program is administered by the CFA Institute, a non- profit, international organization of investment professionals. The CFA program involves successfully passing three exams which are offered annually in June (recently a December administration of the Level I exam was also introduced), as well as meeting certain professional qualifications. Those who hold the CFA charter are recognized to have mastered a body of knowledge specific to the investment profession, and to have made a commitment to standards of ethical conduct. It is important to note that the CFA designation does not share the same footing in the investment profession as do the CPA in the accounting profession, or the bar in the legal professional. It is by all rights an optional credential, not a requirement. Moreover, there are varying opinions 26 September 2004 8
  • 9. Roadmap to the Buy Side Stephen M. Ross School of Business about the designation. Ask a dozen different professionals about the merits of the CFA program, and you will get a dozen different answers. Many firms hold the credential in high regard and consider it interchangeable with an MBA. Others place no value in it. All this being said, the pursuit the CFA charter will demonstrate your commitment to becoming an investment professional, because it involves a substantial time commitment. It is foreseeable that the focused and enterprising MBA student can complete Level I of the CFA exam immediately following the first year of the program (or, with the advent of the December offering, during it), and Level II shortly following graduation, leaving only the third level left to be completed as a professional. The CFA Institute, as an organization, also consists of local chapters of investment professionals. Often, these local chapters will host events for educational and/or networking purposes. As such, it is highly recommended that students aspiring to become investment professionals also become a member of the local member society. For southeastern Michigan, the local organization is the Investment Analysts Society of Detroit, Inc. One can visit its web site (www.detroitanalysts.org) for contact information and events. 6. & 13. Prepare Stock Ideas By the end of your first semester at Michigan, you should have several stock recommendation ideas prepared for (on campus) summer internship interviews that take place in the early part of the spring semester. Invariably, the interviewing investment professional you will ask you to make a stock recommendation. With respect to this there are several things to keep in mind. They are the following: 1. Write up your ideas in order to collect and organize your thoughts. Confine the idea to one page. Elements of a stock pitch should include the following: a. Leading information: what the recommendation is (SHORT or LONG), ticker, price, market cap b. What the investment thesis is (“play on broadband adoption”, or “restructuring story”, or “economic recovery play” are examples) c. Three supporting points d. Valuation metrics e. Price target and time frame to reach it (next 6-12 months) 2. Have at least two long recommendations and, if you are interviewing with a hedge fund, a short sale recommendation. 3. Make sure the recommendation is appropriate to your audience. For instance, a micro cap name shouldn’t be recommended to a large cap manager. 4. At the same time that the idea must be appropriate, it should also be novel. In other words, avoid recommending a name that the interviewer owns. There are two reasons for this. First, it decreases the odds that the interviewer will be intimately familiar with the name, and thereby more likely to find flaws or omissions in your analysis. Secondly, recommending a name that is already owned is not value added. Granted, an interviewer would never expect to come away from an interview with an idea that could be put to work. However, the closer you come to looking and sounding like a professional; the closer you will be to becoming one. 26 September 2004 9
  • 10. Roadmap to the Buy Side Stephen M. Ross School of Business 5. For similar reasons cited in 4, generally avoid recommending large cap names, as they are generally well understood. 6. Avoid stocks with terrible charts (rolling over, falling knives) otherwise you’re likely to lose credibility quickly. It is ok if the stock is down for the year, but it should have some support. 7. It is a good idea to recommend stocks from the industry of your pre-MBA experience. The chances are favorable that you have, or can convey, an information edge. A student with an automotive background may wish to recommend the stock of a components supplier, for instance, or an OEM. If nothing else, the industry experience will lend greater credibility to your call. 8. Before you finalize your report, read some sell side research on your stock idea to make sure you are aware of what is being said about it on the Street. The Wall Street Journal is not a reliable source for individual stock ideas, and is often late in publicizing brewing developments. Therefore, you are best served to get hold of Wall Street research through the university, Fidelity.com, et. al. 9. Know the bull and bear case on your names and have a sound reason to advocating the bullish case (or in the short recommendation, the bearish case). 10. Have answers prepared for the obvious questions. 11. Verbal presentation of the idea should be succinctly scripted and last no more than three minutes. 12. It is highly recommended that you practice pitching ideas with fellow students and get feedback on your recommendations from alumni. Note: feedback on prepared stock analyses actually become the perfect excuse to contact alumni (as well as other professionals in the business), as opposed to just talking to them about being in the business. 7. Attend the Wall Street Forum The annual Wall Street forum is a means for first year MBAs get acquainted with better-known Wall Street firms and also with some alumni. The forum traditionally features a reception that is attended by investment professional alumni. You can use the opportunity to make or solidify contacts. The visit to New York is an excellent chance to arrange interviews, whether informational or bona fide. 8. Interview for Internships On-campus interviews for summer internships will take place in the January and February. However, off-campus interviews can take place any time, even before B-school begins! In fact, when you attend the Wall Street Forum and meet with people, the meeting could very well serve as the interview (without it even being identified as such). In such cases, the student needs to advance the timeline from what is laid out here. Buy side summer internships will largely result from an off campus search. One will have to leverage the contacts that have been built in the prior semester to find jobs. In targeting a summer internship there are several considerations to be made: 1. Ideally, the internship takes place at a shop that you can return to following graduation. 2. The internship should give you the opportunity to get exposure and visibility. In other words, portfolio managers should see, hear, and be able to act on your ideas. 26 September 2004 10
  • 11. Roadmap to the Buy Side Stephen M. Ross School of Business 3. In the internship, a specific mentor should be assigned to you. You will need a mentor to sponsor your work and give you guidance and direction. Multiple mentors (or the lack thereof) are generally non-optimal. 4. The internship should ideally allow you to work on ideas that will be your own, as opposed to helping an analyst to do a better job of covering ideas that are his own. Remember, there are more than 5000 listed stocks. I have yet to know of a shop that has every publicly stock covered. 5. Even though you’re targeting the buy side, a sell side summer internship is an acceptable alternative, and better than no internship at all. 6. You shouldn’t have to work for free in a summer internship. However, if need be, and financially possible, working for free for the right experience is something you should be willing to do. 7. Note that smaller firms with strong performance are likely to pull the trigger faster on hiring decisions than larger firms. 8. Most important thing is to get into the game! Before attending an interview should already know a number of key items, including, but not limited to the following: 1. Why you have decided buy side and not sell side a. Intellectual freedom. b. Singular focus: to make money in stocks. c. Less writing, modeling, more idea generation and analysis. d. Breadth of coverage (you can cover 200 stocks on buy side instead of, say, 20 on the sell side). e. Analytical purity. Seeking the truth, not the sale. 2. The basics about the shop you are interviewing with (assets under management, structure of their assets (whether mutual fund, separate accounts or the like), management style, the number of PMs and analysts and structure of the organization (e.g. sector analysts covering all caps, or generalists covering certain caps).) 3. The stock pitches (which has already been discussed). 4. How you are going to sell yourself as the ideal candidate for the position. 5. How you are going to demonstrate that you have the “fire in the belly” to be an analyst. Visit Appendix B for a partial list of questions that you may consider asking in an interview. 9 & 17. Prepare for the CFA Exam Given that a fair degree of the CFA curriculum overlaps with the academic material of the MBA program, the MBA student focused on investments is in a favorable position to take the exam. This is not to say that the student may forego the routine preparation, but rather that he or she may have an easier time of it. There are various practice guides available to help you prepare for the CFA exam. Stalla (www.stalla.com) and Schweser (www.schweser.com) are among them. These organizations and also local chapters of the CFA Institute sponsor exam preparation courses. 26 September 2004 11
  • 12. Roadmap to the Buy Side Stephen M. Ross School of Business Local societies often help CFA candidates form study groups so that they can aid in each other’s preparation for the exam. Given the logistics, it makes the most sense to form a study group with fellow MBA students. One thing to bear in mind in CFA exam preparation is that it’s never too early to do practice problems! Don’t put them off until the last minute. Start doing them even if you haven’t finished going through the material. It’ll help you identify weak areas and help you master the material more quickly. 10. Excel in the Internship During a summer internship, the aim is to accomplish the following things (in order of importance): 1. Produce several products of quality investment research. 2. Demonstrate passion, dedication and work ethic to the people at the firm. 3. Achieve as much visibility within the firm as possible. Suggestions and Recommendations: 1. Land an internship in a major financial center. New York, Boston, Chicago and the Bay area are all excellent choices. Being located in a major financial center will greatly facilitate your networking endeavors. 2. On the job, demonstrate commitment and dedication. Arrive early, work late. This will leave no doubt as to your work ethic. 3. Make sure that you are well positioned for visibility in the internship. You should obtain a forum for presenting your ideas in person, whether it is through one-on-one meetings with PMs or a presentation to a group. Also, make sure to speak to the PMs on a regular basis and give them your products. 4. Don’t procrastinate on your research projects. Start out with a bang. Produce a report as soon as you can, to show that you can hit ground running. (You will lean on your mentor to make sure that the content and quality of your work are up to standard.) Make sure to market your ideas personally to the PMs. 5. By the end of the summer you should ideally have produced several company reports and an industry report. It is important to have something to show for your efforts. 6. It is also important that you get connected to somebody who is a strong mentor. Ideally the person is patient and willing to make time for you but at the same time is a valued and well-positioned resource in the firm. Also, aim for a person who is willing to sponsor your work and your efforts in the firm. 7. Ideally you should set yourself up with a firm that has a pretty good chance of giving you a full time job post graduation. However, the chances of lining up such an opportunity will ultimately be dictated by market conditions. 26 September 2004 12
  • 13. Roadmap to the Buy Side Stephen M. Ross School of Business 8. Show a hunger for learning. Recognize the fact that, as an intern, you don’t know everything. Ask questions when the opportunities present themselves. 11. Expand the Contact Network Concurrent with your summer internship is the task of building your contact network. As you spend your days and weekends conducting research and writing reports, you should be spending your evenings meeting professionals at other shops. In major financial centers, this should be easy to do given the concentration of investment professionals in each. You may wish to begin with alumni in the locale, and ask to arrange to meet them after work. If you have a pre-established relationship with the alum, then you may even ask him or her to bring a colleague, so that you can expand your network even further. Or, you can ask them to refer you to another professional with whom you can meet. Get to know the institutional equity salespeople that cover our internship firm, and as many of them as possible. As earlier mentioned, theirs is a livelihood based on relationships. They can be an excellent source of information about what’s happening on the Street. In short, try to get to know as many people as you can, because with the more people you know, the greater the chance you will have at finding a full time position post-graduation. 12. Take Level 1 of CFA The exam, already discussed, is generally held on the first Saturday in June (although Level I is also offered in December). Given the scheduling of it, the CFA exam will likely coincide with your summer internship, making planning and logistics a challenge. However, CFA Institute will allow you to request a change a test center change through March 31. (This would come in handy if the candidate had originally expected to be in New York for the summer, but landed an internship in San Francisco instead.) 14. On-Campus Interviews Students should take advantage of any and all on-campus interviews related to investment management. To be sure, they will be few and far between, and competition for the available positions will be for fierce. However, even if the interview does not lead to a suitable position, it may result in a useful contact for the future. Just as with off-campus interviews, stock pitches are crucial and likely to be expected during on-campus interviews. Refer to sections 6/13 and 8 on stock pitch and general interview preparation, respectively. 15. and 16. Off-Campus Interviews Off-campus interviews are obtained using targeted searches. You should leverage your network (which, after the prior year of network and the summer internship should be fairly rich by now) to seek out opportunities. As discussed in section 4, you should use Nelson’s guide to uncover shops that relate to your style. Tap into your network, Nelson’s guide and Bigdough.com to target firms. Bear in mind that the firms with the better performance and growth of assets are more likely to be the firms that are hiring. Target those firms. Use job postings on Bloomberg and CFA Institute chapter web sites to find postings. If you’re not a member of the CFA institute, become one. Note that HotJobs and Monster aren’t generally very helpful for buy side job searches, but they can occasionally yield an opportunity. Headhunters are also a resource. 26 September 2004 13
  • 14. Roadmap to the Buy Side Stephen M. Ross School of Business If it’s the spring and you’re still lining up off-campus interviews, you need a fall back plan. At some stage you will need to bring in some money for sustenance, but this should in no manner slow down your efforts to get into the business. Don’t put them on the back burner. Continue to make contacts and to knock on doors for a job in the industry. Follow up with old contacts and ask them if they’ve heard anything. Tell them you want the first call, when they hear of an opening. 18. Concurrent Activities There are a few things that you should be constantly doing over your 20 or so months of being an MBA (seeking to become an investment professional): 1. making and developing contacts; 2. maintaining your involvement in the club; 3. staying on top developments in the market; 4. investing with real money (perhaps one of the best ways to be in the game … it also lends credibility to stock pitches when you own the stock you are recommending); 5. coming up with stock ideas; and, 6. reading books about investing (Appendix A provides a list of books recommended by alumni). Postscript Details in the investment management business are certainly not to be discounted and this document has aimed to focus on them. But at the same time one must not lose sight of the over- arching importance of passion and persistence. These two qualities, in combination, are in my opinion the most important factors to determine the success of your job search (and of your career to follow). The individuals that tend to meet their goals in this business are those who just simply refuse to give up. If you truly wish to be in this business, are passionate about investing, and refuse to relent, then you will join it! On a closing note, this document should be viewed as a “good start” in cycling alumni knowledge and experiences back to the student body of the business school. But a good start is just that, and so your feedback is welcome. Feel free to contact the author with your comments (see iMpact for contact info). Please, no emails! I wish you the best of luck to you in your career endeavors. 26 September 2004 14
  • 15. Roadmap to the Buy Side Stephen M. Ross School of Business Appendix A: Recommended Reading: Books Let’s face it. You won’t have time to read this entire list of books during MBA program. But it’d be a good idea to get a couple under your belt, if for no other reason than to add some depth to your perspective on stock-picking, and to demonstrate passion for the career. The list appears in no particular order although the first four come highly recommended by your alumni. Suggestion: divide up the reading list among members of the investment club and, throughout the year, have members deliver mini-presentations on each with key takeaways. This way, you can leverage the manpower of the club to get the general message from each book. 1. Money Masters of Our Time, John Train 2. Making of an American Capitalist, Roger Lowenstein 3. Beating the Street, Peter Lynch 4. A Random Walk Down Wall Street, Burton Malkiel 5. Financial Shenanigans, Howard Schilit 6. Valuation, Copeland, Koller, Murrin 7. Investment Valuation, Aswath Damodaran 8. Common Stocks and Uncommon Profits, Phil Fisher 9. One Way up Wall Street (The Fred Alger Story), Dilip Mirchandani 10. The Intelligent Investor, Benjamin Graham 11. Winning a Loser’s Game, Charles Ellis, John Brennan 12. Tomorrow’s Gold: Asia’s Age of Discovery, Mark Faber 13. Reminiscences of a Stock Operator, Edwin Lefèvre 14. Sold Short, Manuel Asensio 15. One Up on Wall Street, Peter Lynch 16. The Trouble With Prosperity: A Contrarian's Tale of Boom, Bust, and Speculation, James Grant 17. Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment, David F. Swensen (Yale University Endowment Fund) 18. The Mind of Wall Street: A Legendary Financier on the Perils of Greed and the Mysteries of the Market, Leon Levy (founder of Oppenheimer funds) 19. Alchemy of Finance, George Soros 20. Security Analysis, Benjamin Graham and David Dodd 21. When Genius Failed, Roger Lowenstein 22. Fooled by Randomness, Nassim Taleb 23. Devil Take the Hindmost, Edward Chancellor 24. The Great Game: The Emergence of Wall Street as a World Power: 1653-2000, John Steele Gordon 25. Adventure Capitalist, Jim Rogers 26. Manias, Panics, and Crashes: A History of Financial Crises, Charles Kindleberger 27. Conquer the Crash, Robert Prechter, Jr. 26 September 2004 15
  • 16. Roadmap to the Buy Side Stephen M. Ross School of Business Appendix B: Questions You May Ask During a Buy Side Analyst Interview 1. How long do you hold on to positions? 2. Do you have screening criteria for the names you can and cannot own? 3. To what extent and in what ways does the firm utilize sell side research? 4. How are the communications between analysts and PMs best handled (emails, meetings, office “drive by’s”)? 5. Do you make sector or macro bets? 6. Where is the line drawn between the responsibilities of the analysts and the portfolio managers? (This question may not be applicable to all firms.) 7. How is analyst performance measured? 8. How often is analyst performance measured? 9. How is analyst bonus compensation determined? 10. What are the research output expectations of the analysts? (In terms of format, number of ideas.) 11. What is the professional growth proposition within this firm? 12. How do you maintain and promote integrity at the firm? 13. How much importance does the firm place on the CFA designation? Appendix C: Things that MBS Alumni Can Do for Students 1. Hire them! 2. Inform them of openings at other firms. 3. Provide advice on the job search. 4. Critique a stock pitch. 5. Share perspectives on other firms and opportunities. 6. Share perspectives on trends in the industry. 7. Serve as a reference. 8. Introduce them to other investment professionals. 9. Pass their resume on to other investment professionals. 10. Sponsor their CFA charters. 11. Talk about stock ideas with them! 12. Talk about sell side research with them! Appendix D: Things MBS Students Can Do for Alumni 1. Link them to other alumni. 2. Provide fresh stock ideas. 3. Provide updates on what’s happening at the business school. 4. Enhance the perception of MBS within the industry. 5. Return the favor (down the road). 26 September 2004 16

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