Category Archives: Hot Topic Commentary

WIIF Women in Investment & Finance: a swing and a miss – a series exploring why companies aiming for diversity are striking out

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Spring Training

Spring is nearly here. In spite of the seemingly never-ending snow and cold, the days are getting longer, and the sun just a bit brighter. With a new season just around the corner, optimism is in the air. There is always so much hope in the beginning – so many promises, so much potential, young rising stars, and real progress seems just around the corner. And then – WIIF! We are hit smack in the face with reality.

I am speaking, of course, about another International Women’s Day. Another year where we proclaim the importance of expanding diversity in the investment business, diversity in executive ranks. We women all march off to our conferences where we learn about the many ways in which we are inhibiting our own careers. We listen to inspirational stories from incredible women who have succeeded against the odds. We learn yet again how important diversity is to organizations, as they affirm their commitment to our careers.

And yet the numbers are not budging. According to research by the New York Times women represent just 10% of portfolio managers. CFA Society Minnesota’s own numbers show the number of women who hold a CFA remains stuck in the teens. We have adopted this notion that we just need to introduce women to the business sooner, we need to make them aware earlier. If we could just let them know when they are Sophomores in college, First years, high school students, toddlers. None of that explains, though, why boys somehow figure out there are good career options, and girls don’t.

Maybe girls are not stupid. They are, perhaps, responding appropriately to the very limited set of career options they see as available to them. The are rejecting a culture that appears to them to herald The Wolf of Wall Street, a frat-ish atmosphere that seems anything but welcome. They are reminded of the sense of powerlessness that haunts so many of them in so many ways as they realize what the world has in store for them.

If we expect girls to embrace opportunities in the investment business, they need to see that there is a future for them. They need to see powerful, smart intelligent women succeed in the business – not because they need role models, but because they need to believe that success is possible. It’s hard to see that success is possible when for women, it has been so rare.

Here’s my suggestion for demonstrating that success is possible: Hire and promote talented senior women. We are all weary of hearing that “the women just aren’t there.” Go out and find them.  The last time your organization had a senior opening, what did you do to identify a diverse candidate? Was any compensation or bonus tied to success in finding diversity? Did anyone work on a strategy for identifying diverse talent? Did you do anything different from your normal process? If nothing different is attempted, it’s hard to imagine different results.

This is a country that has put a man on the moon. We carry computer/television/phone/gps tracking devices in our pockets. We have developed a pillcam to take pictures of the small intestine, antibacterial nanoparticles, autonomous vehicles. But somehow, we are unable to figure out how to hire diverse candidates to manage our portfolios? This is not even plausible, and lays bare the insincerity of the effort.

It’s time to stop pretending that you want diversity, while doing nothing about it. If you say you want to succeed in this game, then take a swing. Every strike will bring you closer to the next home run.

#changingperceptions

Are you interested in contributing a blog to this important series? E-mail Diane at support@cfamn.org to volunteer.

CFA Society Minnesota Annual Dinner Recap

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By Claire Underhill, undergraduate Finance major at the Carlson School of Management. Claire is also on the Healthcare team of the Carlson Growth Equity Fund, and has been involved with the program on a volunteer basis for over a year. 

The 2019 CFA Society Minnesota Annual Dinner featured a conversation with author Bethany McLean, moderated by Andrew Rem, CFA (CFA Society of Minnesota Board member), and aided by Past President Josh Howard, CFA. McLean is currently a contributing editor at Vanity Fair, and has also written multiple books such as “The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron.” The evening featured a wonderful discussion as McLean tracked the progression of her career from starting as an analyst at Goldman Sachs, to joining Fortune Magazine as a fact-checker, which ultimately led to her first novel and current role.

Her latest work, “Saudi America: The Truth about Fracking and How It’s Changing the World,” explores the economics around fracking. McLean is skeptical of the drive for energy independence, and makes the case for how fracking might change the geopolitical landscape – though not in the way you might think.

Throughout her career, Mclean has documented multiple instances of business gone wrong and has learned a few things about what she calls “the progression of rationalization.” She talked about the need we have as a society to find who the bad guys were in the wake of crisis, and punish those responsible. Oftentimes, though, the world is not so clear-cut. The line between a visionary and a fraudster can become blurred by the complex human drama and emotions that naturally surround the process of building something innovative. McLean’s key tool in deciphering these dramas? Curiosity. When asked about how she gets people to talk to her, McLean stated that being genuinely interested in what people have to say goes a long way. Through this approach, McLean has developed a unique lens for people who have crossed ethical lines. Good people taking gambles to cover-up for their last mistake. Powerful culture that inflates egos.  

What can be done to fix these problems? McLean said the challenge with regulation is that it is always backward looking and often lacking in imagination. Regulators are always stuck trying to fix yesterday’s problems without the ability to predict what might happen next. Furthermore, even if all accidents are prevented, McLean argues that creativity would also leave the system. This system has failed in front of McLean many times, yet she still views business as a signal of hope. After spending so much time writing about unethical behavior, McLean describes herself as a skeptic, not a cynic, and loves to see the transformative power that business can have in a community.

Managing Me Event Recap

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By Matt Chruscielski, Society intern, recent University of St. Thomas MBA graduate and CFA level III candidate

It’s a new year which means it’s time for resolutions to become better versions of ourselves. One thing I’m sure we all struggle with is managing our time. Much like losing ten pounds, it’s something many of us want, but few achieve. Balancing time between family, career and ourselves can seem like we are on a treadmill repeating the same steps over and over without getting closer to our long-term goals. In the Managing Me session put on by CFA Society Minnesota last week, University of Minnesota, Carlson School of Management Professor, Arthur Hill, talked about how it is possible to identify the trivial things that eat up our time. Time that could be spent doing the important tasks on our to-do list.

In the hour session, Professor Hill led an engaged audience through an interactive presentation on the six steps to better manage ourselves: aim, sort, select, do, review and break, all summarized below. Professor Hill’s process encourages one to write on sticky notes to help visualize the steps and ideas, because what’s in our heads does not seem as daunting once it is written down.

Aim: Define roles and responsibilities. Set daily, weekly monthly and longer-term goals that are regularly assessed. Schedule more difficult tasks early in the day and save easier or favorite tasks for later making up energy with passion.

Sort: Process inputs through filters to assess when to respond. Professor Hill described six filters related to how valuable, actionable, incremental, outsourceable, timely and capable the input is along with a filter for new projects.

Select: Use goals to pick the best task from the list. Only consider tasks that we have the time, energy and tools to do in the present. Prioritize tasks based on importance and urgency. Avoid multitasking when we are trying to complete a task that has a high cognitive demand.

Do: Complete selected tasks with focus and discipline. Focus on just a few goals. Take breaks but avoid distractions and interruptions as it can take up to ten minutes to get fully focused once disturbed. Avoid reading emails first thing in the morning. Emails can quickly derail a day as some of the audience attested to having over a thousand emails unread emails that day.

Review: Reflect, evaluate, celebrate and improve. This is to help with Aim. Did we take a step closer to goals this day, week, month? What did we learn? How can we improve? This is where we can keep track of our habits and create new ideas the next time we Sort. Don’t forget to celebrate reinforcing the good habits we want.

Break: Take breaks to recharge both at and away from work. We need to take regular breaks to replenish our attention and refresh our energy throughout the day. Pursue activities that boost energy. When away from work, really unplug. Don’t sneak a peek at the work email. Live in the moment and enjoy the time with family and friends. Work on a hobby or new skill to keep the mind fresh.

Overall, the session provided helpful tips and tools, and will hopefully allow for better time management in 2019. As Professor Hill said, “we are all guilty of letting ourselves get overwhelmed by the amount of noise in our lives which is why it is so important to have someone teach us how to filter out the small things so that we can focus on what really matters.” Judging by the large crowd in attendance it seems we all can use a friendly reminder now and then.

Event Recap: AI and Machine Learning in Investment Management

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Rick Roche, CAIA, of Little Harbor Advisors, entertained a full house as he presented an overview of Artificial Intelligence and Machine Learning in the Investment Management Industry. The audience was diverse, ranging from industry veterans to a Senior in High School (I must admit that I wasn’t as forward-thinking at his age). For Mr. Roche this was a homecoming of sorts, having lived in Linden Hills for 22 years before moving to Boston last year.

Though Artificial Intelligence and Machine Learning is complex and often begs to be gone through with fine detail Rick presented a view that was “a couple feet deep and a mile wide” – for the 43rd time in the last 13 months we were told. The hour ranged from 1) a history lesson of Machine Learning to 2) the fascinating amount of data and capabilities currently available and 3) some thought provoking views of the disruption that may (will?) be caused by the uprising of the machines and those who run them.

Mr. Roche parroted Gary Kasparov in his book “Deep Thinking”, where he reflected upon losing to IBM’s “Deep Blue”, blaming it on “Losing emotional control … and never getting it back” — for those in the investment industry this emotional control may strike close to home. That the Wealth Management industry is a laggard when it comes to the adoption of the advanced techniques (as reported by PricewaterhouseCoopers) is odd as it has two of the key ingredients necessary to foster the revolution, high margins and emotional participants. A quick poll of the audience seemed to support this idea that the industry lags behind as only about a quarter of those present had some exposure to machine learning with most of these having only done some light reading on the topic.

As a CFA charterholder, and someone who is not looking to be displaced by a robot in 10 years, some of the more riveting aspects of the presentation focused on the world around me, including:

  • Algorithms developed through Machine Learning techniques account for more than 98% of the trades happening on Wall Street and have sped up to the rate where 40,000 trades can now execute in the time it takes to blink our eyes.
  • By 2025, 163 Zettabytes of digital data will be available (roughly equivalent to the storage capacity of 635 billion of the top of the line iPhones) — to put this in comparison it is estimated that the totality of human speech in all of history would cover 42 Zettabytes (if digitized as 16 kHz 16-bit audio).
  • Algorithms have been developed to understand how much fuel is being transported based on reviewing satellite images to see how low tankers sit in the water.
  • The keywords of “Data Scientist” are bigger than “Quant Analyst” and “Fundamental Analyst” on Indeed by a factor of three, and growing
  • More than half of the people surveyed would consider becoming a client of Google, Apple, Facebook or Amazon if they were to offer wealth management services — and this number increases if you were to ask Millennials and those with over $20MM net worth.
  • Alibaba has the World’s Largest money market fund

In the words of the legendary investor, Paul Tudor Jones, “No man is better than a machine. And no machine is better than a human with a machine”. In the words of another legendary investor, BlackRock co-founder Robert Kapito, “Apple was not in music industry, Google was not in mobile phones, and Amazon was not in groceries — until they were”. Mr. Roche’s presentation highlighted the risks for those who are not willing or able to transform and inspired those who are willing and able to become, what he called, a Computerized Financial Analyst.

That we came together on Halloween and enjoyed a Thanksgiving feast may be a bit of a foreshadowing that blending two seemingly foreign concepts, humans and computers, can work if you sent apart your preconceptions and embrace it.

For those who were unable to come to the event, and for those who would like to see it a second time, please watch the video through the link below. For those who are interested in the topics of programming, machine learning, artificial intelligence, etc. please send an e-mail to the Society (events@cfamn.org).

View the session video here:
https://penxy.com/widget/?e=xelol

-Tom Crandall, CFA

Articles Referenced:

Asset Management Firms are Laggards in ML Adoption

Asset & Wealth Management Revolution: Embracing Exponential Change

2018 CFA Societies Compensation Survey – results released for MN, ND and SD

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CFA Societies Financial Compensation Survey Results - Minnesota, North Dakota and South Dakota

[This replaces an earlier post with incorrect links]

CFA Society Minnesota is pleased to release the findings from our fifth Financial Compensation Survey for Minnesota, North Dakota and South Dakota. Click the image to download, at no charge, this white paper summarizing high-level survey findings in an easy-to-read format. In return for the white paper or for deeper data requests, please complete the contact form below. Your feedback is welcome and appreciated.

    As in the past, we expanded the survey to other CFA Societies – this time, across the entire US. Watch for a consolidated report in the coming weeks summarizing results for nearly 6,000 respondents from coast to coast and border to border.

    If you’d like to download copies of our previous MN/ND/SD survey results, please use the links below.

    2016

    2015

    2014

    2013

    Thanks for your interest!