< The Finance Professionals' Post: May 2014

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8 posts from May 2014


Taking a Forward-Looking Approach to Your Career

Throughout my early career, I spent a lot of time and effort trying to gain an understanding of my strengths and weaknesses based on past experiences. I probed into how my background had shaped who I was and what I valued. I’m not sure who said it first, but the popular quote goes something like this: “We are the sum total of our experiences.” Perhaps that’s true, but as I’ve progressed through my career, I’ve realized that it is far more productive instead to think of yourself as the sum total of your future experiences. Let me illustrate exactly what I mean by sharing a moment in my career that helped me understand the value of a forward-looking approach.

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The Top Five Best Paid Jobs in Risk Management Globally When You Have Five Years’ Experience


Risk management is in. In the same way that shabby has become the new chic, risk management has become the new sales and trading. Sort of. Ok, you don’t get paid as much in risk. You won’t be eating lobster tails for breakfast, but you will at least have a job.

If you want to maximize your earnings after five years, which branch of risk management should you go into? We’ve scoured risk management salary surveys for the City of London and Wall Street and come up with the league table below. The figures are drawn from the combined salary surveys of Barclay Simpson, Kennedy PierceMichael PageHudsonRobert Walters, and Robert Half. They don’t include bonuses. They may be a little toppy as we’ve taken the maximum you can earn with five years’ experience in each position. And they may be a little skewed towards London as London-based finance recruiters issue more surveys than most.

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How Paranoid Should These Senior BNP Bankers in the U.S. Be Now?


There’s more bad news for BNP Paribas’ U.S. sales and trading business. Only months after laying off some of its U.S. bankers, including senior sales and trading professionals, it’s being widely reported that the French bank will have to pay a $5bn fine in the U.S. for breaking trade sanctions with Iran and Sudan. Worse, it’s being suggested that BNP might be subject to a temporary ban on transfers of money into and out of the U.S. something which could drive many of its corporate clients especially to take their services elsewhere.  Shares at the bank are down 4% this week and may fall more.

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Recent Research: Highlights from May 2014

"Constraints and Innovations for Pension Investment: The Cases of Risk Parity and Risk Premia Investing"
The Journal of Portfolio Management (Spring 2014
Wai Lee

In the current low real-yield environment, institutional investors are challenged as they try to achieve their often-fixed targeted returns within the confines of their investment policy guidelines. If much-discussed solutions, such as risk parity and risk premia investing, are the new answers, they must improve portfolio efficiency and flexibility in taking risks. This article explores the ways these proposed solutions may be successful. The author argues that the solutions neither introduce new assets that offer non-replicable, non-redundant return and risk characteristics, nor do they offer new asset-pricing theories that improve forecasts of asset returns or risks. Instead, their value proposition is more in the category of improved portfolio construction. They primarily benefit practitioners by providing more-efficient risk allocations, which they do by relaxing constraints to which pension investors are often subject, including restrictions on using leverage and short selling.

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Book Review: Unbalanced: The Codependency of America and China


The codependency between China and the US has been obvious for a long time. China's exports to the US help maintain employment, a key component to economic and social stability. This stability is seen as essential to the continued power of the Communist party. The US has become dependent on flow of capital from China's high savings rate, and on imports of cheap consumer goods. The thesis of Stephen Roach's Unbalanced: The Codependency of America and China is that this dependency is "unbalanced," and is starting to change dramatically. We are facing a "realignment of the world's two largest economies." Both countries are viewed as "on the cusp of important transformations."

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3D Risk Management: A Survivorship Framework

Disparte, Dante picture

For most firms risk management is a necessary evil, increasingly consigned to being an adjunct to compliance, finance and other so called “business prevention” functions. Non-financial firms traditionally address risk through a series of transfer mechanisms, such as insurance, self-funded vehicles or they merely absorb unforeseen losses with their earnings. The financial sector, on the other hand, applies sophisticated statistical methods in a form of speculative risk management that captures the upside and the downside of risk-taking. These approaches are used to calculate value at risk (VaR), regulatory capital and other internal and external risk measures. Many of these methods, however, are based on backward looking book values and a permissive fox watching the chicken coop environment, wherein financial institutions often develop their own internal risk metrics with loose guidance from regulators. 

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Book Review: Financial Blogging


Famous among CFA societies for her effective-writing workshops, Susan Weiner has produced a powerful resource that provides on-point guidance for mastering the blog as a short form of communication and also functions as an excellent tool for sharpening longer forms of investment writing. It will benefit novice and senior advisers alike.

Resolved: to write effectively! Susan Weiner, famous among CFA societies for her effective-writing workshops, has produced a powerful reference guide that should become the single best source for assisting independent and fee-only advisers in their blogging activities. The lessons contained in Financial Blogging: How to Write Powerful Posts That Attract Clients are highly accessible. Through exercises and outlines, reinforced with a workbook-style appendix, the reader quickly learns what it takes to accomplish excellent short-form communication.

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High-Frequency Trading Is a Blight on Markets. Tobin Tax Can Help.

This blog post previously ran in The Guardian's Business section.

The dark side of the world of algorithmic trading in financial markets has twice been in the spotlight this week. First was the release of Michael Lewis' explosive new book, Flash Boys: Cracking the Money Code, which highlights many worrying practices in a sector that accounts for about half of all trades on the New York and London Stock Exchanges. Second was the FBI's announcement on April 2 that it would begin a criminal investigation into wrongdoing in the sector.

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