Career Insider Chat: Arbitrageur, Portfolio Manager

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By Zee

This is the 5th post of our new series to 300 Hours – Career Insider Chats, where we interview some of our readers, and get an inside look into their careers, as well as what drives them to take up the CFA challenge.

You’ll learn how it’s like to be at their jobs, what it takes to get the job, and how to balance that kind of lifestyle with something as demanding as the CFA exams.

Today we sit with Arbitrageur, a quantitative portfolio manager based in San Francisco. This interview shares how it’s like to be in the portfolio management business, what you’d expect to earn, and the number one book to read to ace the interviews.


About Portfolio Management

So what’s your official job title, and where do you work? 
Portfolio Manager; I work on global macro hedge fund strategies for a large systematic asset manager in San Francisco (which is actually enough information for anyone really curious to narrow it down to 2 firms).

Can you explain what you and your team do in more detail?
Being a quant PM is a little bit different than a discretionary one. We don’t just research a position and then put it on. First, we work with the Research Analysts (i.e. the guys with the Ph.D. in Biophysics) to build and refine models that do most of the work for us. The models tend to fall into two camps – fundamental and techincal, and both can be used to trade any number of asset classes.

We don’t take a model’s word as gospel, however, and make sure that every trade accounts as much as possible for everything going on in the markets. Of course no model incorporates every single variable – and this is why quant PMs must make judgements and adjust inputs to varying degrees the way airline captains make changes to the autopilot’s flight path.

Can you describe a typical work day in your life?
Each day is different. The mornings are taken up by running and analyzing the models and putting together trades. There can be several trades later during the day, it depends on volatility and news releases (e.g. Fed decision).

PMs are responsible for thought leadership so time is also spent writing white papers and talking to clients (generally by videoconference, obviously we rarely travel). Working on projects with the Research team takes up the rest of the day’s time.

How are the hours like, on average?
Depends on how driven you are, but nowhere close to banker/PE hours. Anywhere from 45 (slacker, happy to manage a simple portfolio and barely make a bonus) to 70 (hungry and gunning to become a lead PM) hours a week.

Is it good money?
Key point: larger firms pay less because they have more overhead and are more reluctant to cut underperformers. Obvious benefit: greater job security at the expense of lower and tighter bonus ranges (a top PM might make only 30% more than one who’s average, and even the bottom quartile may get a scrap).

Base range: $90k-150k; Bonus range: 50% – 200% of base depending on firm and individual performance. Again – firm performance matters way more at big firms. Obvious corollary: If you’re a top PM you’re supporting the slackers.


Getting Hired & Promoted

So who do they tend to hire into teams like yours? 
For quant fund PMs it’s a bit of a catch-22: ideally you should have experience working for one already. With that being said some people start as execution traders (all you need is a GRE), others come from the sell-side (macro research analysts), and we’ve hired MFE graduates into junior PM roles as well.

What would an aspiring candidate need to have to be great for a role like yours?
Statistics/Econometrics are vital as you’d expect. Some programming knowledge (MATLAB, R, VBA, and Java) wouldn’t hurt. Most importantly though, you should understand the key forces affecting global markets and the interplay across asset classes (e.g. how might increasing tensions in Iran impact the Canadian Dollar?).


How’s the interview for the job like?
Depends on who’s giving it. Could be some brainteasers, but most likely quant concepts and market theory. One book I cannot recommend enough is Timothy Falcon Crack’s Heard On The Street (aka the Crack book – and you should devour it like an addict).

What is the career progression like in your role? What are the usual or target exit opportunites?
After making it to PM you can aspire to transition into a more senior role where you spend less time actually managing portfolios and more time making high-level decisions affecting all the strategies and interacting with clients and the media.

At the top end of that is the CIO title where you oversee all PMs, quants, and traders. Of course the goal of every entrepreneurial PM is to start his or her own fund.

What would be your advice to aspiring candidates targeting your role or industry? 
Research each opening very carefully. Every firm’s approach is different and you need to make sure that you will be a good fit (in terms of how you see your investing style developing, not just whether you have enough skills to get the job). For example, if you’re a macro trader you might very well make a good PM at an FX fund, but you might not realize your full potential trading a single asset class.


Qualifications & the CFA Exams

Any qualifications that stand out?
A deep understanding of how and why markets move and how different asset classes are related (see discussion to an earlier response).

So how did you learn about the CFA exams, and why did you decide to go for it?
My CIO said that if I want to make it to the upper echelons I needed to have either a CFA or an MBA and they weren’t going to comp the $175k for the eMBA at Wharton, so here I am.

It must have been tough preparing for the CFA exams with your job and social life. How did you balance that?
I pared back the social life. I go out less, but make sure that my down time fun is maximized. I try to study 1-2 hours every work day and 3 hours on weekends. My firm gave me 3 extra vacation days and paid for Schweser and CFA fees.

Has taking the CFA exams helped you or your colleagues in their career?
I’d say half the PMs and several of the Research Analyst have them. A lot of quants are very good at tests and we have a few people with multiple designations (CFA, CAIA, CRM, etc.).

I think it’s something that is expected at a certain level. I wouldn’t say that learning the curriculum will teach you anything useful that you haven’t already learned on the job. It’s not like you’re studying the latest research.

Would you recommend the CFA exams to others in a similar role?
I delayed getting mine until I had to because I didn’t see it as applicable to my work (see above). That was a mistake. Don’t procrastinate and just get it done!

About Arbitrageur: I was born in Russia to a rocket scientist and a basketball coach. Being raised by such brains and bravado may have sealed my destiny to work in finance. We escaped to the States after communism crumbled. Coming up from nothing lit a fire under my ass to succeed and it’s been glowing brighter every day.

If you have a question for Arbitrageur, post it in the comments below!


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