Tag: finance

Hong Liu, professor of finance and director of the master’s in finance program at Washington University in St. Louis’ Olin Business School, has been installed as the Fossett Distinguished Professor. A celebration to mark the occasion was held May 6 at the Charles F. Knight Executive Education & Conference Center.

Liu, whose research focuses on asset pricing and market microstructures, has served as a member of Olin’s faculty since 1998.

The professorship was made possible by a commitment in 1996 from Olin alumnus and world-renowned adventurer Steve Fossett. Steve, who served as a Washington University trustee, died in a plane crash in 2007.

“I am deeply grateful for the Fossett Distinguished Professorship and for the opportunity to remember Steve’s many contributions as a dedicated alumnus and generous benefactor,” Chancellor Mark S. Wrighton said. “I also wish to thank Peggy for her ongoing support. As we all continue to push the limits of academic excellence and personal achievement, we can be assured that Steve’s legacy lives on at Washington University.”

“We are pleased to recognize Professor Liu’s many accomplishments, and all that he has done for Olin Business School and its students with this prestigious position,” Provost Holden Thorp said. “He’s a leader in his field, he’s a leader at Olin, and we’re fortunate to have counted him among our faculty for the past 18 years.”

Liu earned his bachelor’s degree from the University of Science and Technology of China in 1987; master’s degrees from Shanghai Jiao Tong University in 1990 and the University of Connecticut in 1994; and his doctorate from the University of Pennsylvania in 1998.

His research interests are primarily in optimal investments and asset pricing in markets with frictions. On the topic of portfolio choice with transaction costs, he is one of the most prolific authors in terms of publications in top finance and economic journals. He and his co-authors are the first to explain some long-outstanding puzzles, such as why bid-ask spreads can decrease with information asymmetry and why investors may under-diversify.

Liu’s recent research topics include why short-sale constraints may decrease equilibrium prices and why portfolio re-balancing can potentially explain the well-documented disposition effect – that is, why investors tend to sell winners and keep losers.

Liu has served as a referee for leading journals in the finance field, including the American Economic Review, Journal of Economic Theory, Journal of Finance and Review of Financial Studies. Currently, he is an associate editor at Management Science and Re­view of Finance. Liu also serves as an academic director on the board of directors of the Midwest Finance Association, and as an academic director of the Master of Science in Finance program at Olin Business School. He has consulted for various organizations, as well as written dozens of research articles and lectured at universities around the world.

About Steve and Peggy Fossett

Steve Fossett

An accomplished adventurer and successful businessman, Steve Fossett earned a bachelor’s degree in economics from Stanford University in 1966 and went on to attend Olin, where he earned an MBA in 1968.

He began his professional career in computer systems with IBM before entering the world of the commodities broker, first with Merrill Lynch and then for himself. He founded and managed Lakota Trading Inc., and was a member of the New York Stock Exchange for 26 years.

While he made his mark on the business world, specifically in the field of investments and commodities, Fossett achieved global attention as a record-setting aviator, sailor and adventurer. The holder of official world records in five sports — balloons, airships, sailboats, gliders and jet airplanes — Fossett was perhaps best known as the first person to fly around the world alone, nonstop, in a balloon. He was declared dead in 2008, five months after his small plane vanished over the Nevada desert. He was 63.

A committed leader and generous supporter of Washington University, Fossett served on the university’s Board of Trustees and on Olin’s National Council. In addition to establishing the Fossett Distinguished Professorship, he and his wife, Peggy, provided funding for the Fossett Pathfinder Fellowships for undergraduates studying environmental sustainability and for the Fossett Laboratory for Virtual Planetary Exploration. He received the university’s Olin Business School Distinguished Alumni Award in 1995 and an honorary doctor of science degree from the university in 2006.

Peggy Fossett is a native of St. Louis and an alumna of Webster University, where she earned a bachelor of arts degree in 1966 and later served as a member of the board of trustees. At Washington University, she has continued her husband’s legacy of philanthropy. She is a life member of the Danforth Circle Chancellor’s Level of the William Greenleaf Eliot Society and has made generous contributions through the Peggy and Steve Fossett Foundation in support of Antarctic research and the Department of Earth and Planetary Sciences.

Guest Blogger: Erika Ebsworth-Goold

Photos by Jerry Naunheim Jr.

Our Masters of Finance class began the day of May 19 refreshed, having gotten an extra hour of sleep the night before. Our first meeting was with Alexander Heil, the Chief Economist of the Port Authority of New York and New Jersey. The Port Authority was established in 1921 and is responsible for operating airports, tunnels and bridges, buses, PATH trains, marine terminals, and the World Trade Center Site. It is also responsible for the development of waterfronts and ports in the states of New York and New Jersey.

We learned that their main goal is the optimization of the operation of the different modes of transportation. They operate a unique financial structure in which they are self-supporting, despite some services running at losses of almost $300 million, such as the PATH train, which is a transit service connecting northern New Jersey to lower and midtown Manhattan.

The objective of this organization is to provide services to the people without worrying too much about losses, because the alternative would be to cease offering such services, which would deny the people an important transit service. The revenues of the Port Authority from aviation and from operating bridges and tunnels (tolls) more than offsets the deficit.

We also gained insight into the daily operations of the Port Authority and learned that they are one of the largest issuers of long-term municipal bonds as a way to finance their infrastructure projects, with their most recent issuance being for the renovation of LaGuardia Airport.

The Port Authority is faced with a unique dilemma: making projections for such large scale projects involves modeling revenues and expenses for periods of almost 15 years, and taking into consideration that each project, such as a bridge or tunnel will provide service for around 100 years. As a result, the reliability of the numbers comes into question. Making the situation more complex is the fact that economic conditions and trends such as demographics can change vastly in a short time period, thus rendering infrastructure capacities useless.

In the end, we understood how important it is for services and functions that are in essence monopolies to be run by governments in order to avoid exploitative price increases and how an entity such as the Port Authority provides an invaluable service to the people that is so deeply ingrained into their day to day lives.

In the afternoon, we went to Standard & Poor’s (S&P) Global Ratings, which is one of the most well-known brands in the credit rating business. Located in downtown Manhattan, S&P Global plays a major role in the entire financial ecosystem.

John Newcomb, Director of Ratings Analytical Training, walked us step-by-step through the ratings procedure. He talked about S&P Global’s mission and values, S&P Ratings’ leadership, the ratings criteria framework, and credit risk dimensions.

Next, Satyam Panday, the US economist, talked about US economic outlook macros. He mentioned the impending interest rate hikes and conducted a poll about their likelihood. After that, we participated in a panel discussion with Weili Chen (Senior Director in Structured Finance), Laurence Hazell (Governance Specialist), Eden Perry (Director in US Public Finance), and James Fielding (Senior Director in Corporate and Government Ratings).

We discussed in detail the causes for Puerto Rico’s recent municipal bond default, the impact of the financial crisis on the ratings procedure, and how there is greater transparency now than ever before. They fielded questions about industry ratings, rating independence, and when and how S&P adjusts ratings.

All in all, the meeting really helped us get a 360-degree view of the Financial Crisis of 2008.

Later in the afternoon, we met with Bob Eick, Partner at Waterfall Asset Management. He started the discussion by asking the class what we knew about hedge funds. Being the good masters of finance students that we are, we shouted out conventional answers, such as “rich, mysterious, and unregulated”.

Bob went on to explain that one of the reasons why hedge funds are an attractive asset class to invest in is due to their greater returns as compared to traditional asset classes. However, along with greater returns came greater risk and greater losses.

Bob’s hedge fund invests in distressed debt and collateralized debt. Bob touched upon which entities invest in hedge funds–specifically, sophisticated investors, institutions, foreign sovereign wealth funds, and pension funds. He went on to describe the number of asset classes within the hedge fund, managing risk, and how to differentiate between hedge funds. Furthermore, he instructed the students to write down one important message: that all hedges have thorns, meaning hedging comes with a large cost and it is vital that the benefits outweigh the costs when utilizing a hedging strategy. Furthermore, Bob compared leverage to the boogieman. He said using too much leverage was a sure way to achieve losses and that it was possible to achieve consistent returns without using leverage.

Bob’s parting remark was especially memorable: “I enjoyed speaking with you today and I wish you guys a failure, reminding us that the best learning experiences come from failures.”

Xi’an Famous Foods, a small chain of fast food restaurants located all over New York City, serve authentic western Chinese dishes. Jason Wang, BSBA’09, CEO of Xi’An Famous Foods, has opened eleven branches within New York City.

Jason Wang shared an inspiring story of how he was able to create a successful chain in New York City, a city that is flooded with small restaurants on every street. Our Master of Finance class learned of the obstacles faced by Jason when establishing and developing his business in a highly competitive city, especially as a foreigner. It was amazing to hear how he left his decent-paying job to pursue his dream of opening his own business. We hope Jason can continue to expand his restaurant business in the United States.

Guest Bloggers: Zhe Yu, Prerna Gulati, Aneesha Patel, Qingchun Wu (GMF 2016)

This is part of a series of  blogs chronicling the experiences of 41 Global Master of Finance (GMF) dual degree students during their two week long immersion course in New York and Washington, DC. Each blog will be written by a small subset of students during their experience.

On the morning of May 18, our Global Masters of Finance class traveled to Neuberger Berman, one of largest private investment management firms. We were eager to learn. Dan Smith, Bill Arnold, Randy Gross, and Jeff Bolton, a group of highly reputable professionals with years of enriched industry experience, gave us a very informative and inspiring presentation.

To begin, Bill Arnold, CFO of Neuberger Berman, talked about Neuberger’s history
from its inception in 1939, through struggling and spinning off from Lehman Brothers during the Global Financial Crisis.  Today, Neuberger has Assets Under Management (AUM) over $250 billion.

Bill also explained the overall investment strategy and philosophy of Neuberger, their unique view of risk, trying to be cautious and long-term, and how they excelled at re-positioning portfolios.

Mr. Gross, from the fixed income department, shared his insights about the impact of negative interest rates and the growing popularity of municipal bonds, while Mr. Smith, an expert in equity, provided his insights regarding recent trends in utilities and other sectors. At the end, Mr. Bolton not only spoke about how to be successful in investing, but also provided advice and guidance about work balance.

We walked back to the conference room after the tour while looking at amazing architecture along the way.

“How many of you guys are in debt?”

The first afternoon speaker was Steve Wood from Jefferies. He started with an interesting question: “How many of you guys are in debt?” The question helped us understand the debt concept better and think it through more clearly. Through his speech, we learned a lot about public finance and municipal bonds. Specifically, most of us in the masters of finance class were amazed by the fact that there are over 70,000 different municipal bond issuers. We actively participated throughout his lecture, and some of us even continued the discussion about the default of governments like Puerto Rico in his speech. He explained in detail how a government facing a credit crisis could possibly turn things around, such as cutting expenses, increasing revenue, reconstructing their debt, and so on.

Endowment Funds

After learning about bonds, Michael Garvey’s talk kept us engaged after lunch. As a J.P. Morgan Investment Specialist, he spoke briefly about the endowments and foundation groups in an interactive and informative way. He informed us that the interest rate change is shifting the proportion of debt in traditional portfolios to 40%.

After one of our masters of finance classmates raised an insightful question, Mr. Garvey explained that the proportion of cash and domestic equity in asset allocations go down with an increase in the size of endowment funds. So in that case, the size of alternative investments, such as hedge funds and private equity, also increases, since alternative investments have longer time horizons and hence provide a liquidity premium. He also mentioned that during times of stress, the movements of different markets converge. For example, equity of emerging and developed markets become correlated, when they are intended to be diversified. He concluded that no single measure of risk can fully characterize a portfolio.

The day was nicely wrapped up by Mitchell Moss, an Olin grad, BSBA & Master of Finance & Accounting’00, from Lord, Abbett & Co.  Mr. Moss spoke with us about his work experience in the finance industry, especially in the power and utilities sectors.

He also gave us some tips about how to get a job in financial institutions and what it would be like in different positions within the industry.

After the presentation, Mr. Moss left about 30 minutes for Q&A, and we raised a lot of interesting questions, such as “What are the fundamental factors that an equity researcher and a credit rater would take into account for a company?” and “What is your daily life like at work when you are in different companies in finance industry, ranging from consulting, credit rating, buy-side, to sell-side companies?” Mitchell answered all of our questions adequately and left us satisfied and motivated.

Guest Bloggers: Kaibo Xue, Zihao (Zach) Gong, Mallika Mital, Lin (Angie) Wu, Xiaoqi (Kay) Wu (GMF 2016)

This is part of a series of blogs chronicling the experiences of 41 Global Master of Finance (GMF) dual degree students during their two week immersion course in New York and Washington, DC. Each blog will be written by a small subset of students during their experience.

The Finance Club is hosting a panel discussion on mergers and acquisitions Wednesday, April 27, 5:15-8:00 p.m in Bauer Hall, Room 240. The panel’s topic is “Leveraging Firm Expertise Through the Acquisition Process.”

Panelists include Mike DeCola, President & CEO of HBM Holdings,  Bob Dunn, Managing Director of Thompson Street Capital Partners and Tom Manenti, Chairman and CEO, MiTek Industries, Inc.

Register here.

After being officially installed just under a year ago, members of Olin’s Beta Alpha Psi (BAP) executive committee attended the Missouri Valley Regional Conference in Omaha, Nebraska, April 1-2. Professor David B. Pearson (Chapter Co-Faculty Advisor), Gina Choi (VP of Professional Events), Lin Lui (VP of External Relations), and Casey Wagenaar (President) represented Olin and were sponsored by the Weston Career Center and the Specialized Masters Programs.

The Regional Conference began with keynote speaker Alexi Wellman, Vice President of Finance at Yahoo! who provided students with insights on the value of taking risks and creating opportunities for oneself. The three students and the faculty advisor had the opportunity to network with 157 students from 17 other colleges and universities and Professional Partners from several accounting and professional services firms.

Additionally, participants had the opportunity to attend a myriad of chapter and professional development sessions.  The chapter development sessions, which were student led, provided insights into how other chapters recruit and retain members, select meaningful service projects, and provide students with valuable professional experiences and meetings. The professional development sessions included a BAP alumni panel, personal branding sessions, ethics and fraud, first audit engagements, and many other opportunities.

Lastly, Gina Choi and Casey Wagenaar participated in Deloitte’s Best Practices Competition presenting on the Alignment of Officer Activities. This was the first regional meeting in which the chapter was eligible to compete, and the chapter looks forward to competing in the future.

Guest Blogger, Casey Wagenaar, MAAC & BSBA’17

Many of us who have no formal training or background in accounting/finance find ourselves overseeing big budgets. As we continue to advance in our careers, the size of those budgets continues to grow, along with the expectations and LIABILITIES. Brookings Executive Education (BEE) Finance for Non-Financial Managers course addresses some of the potential pitfalls for federal employees with no professional training in the field, yet who are responsible and held accountable for major budgets every day. Below, BEE instructor Sallyanne Harper offers us a little advice on successfully managing this process and three key tips to keep us out of hot water.

Risk management is a key component of what we explore in the BEE Finance for Non-Financial Managers course.  What risks do we mean? Typically the risks on the business side of the program arise from the resources management areas like finance, appropriations and budget, acquisition management, and internal controls. These are likely outside of your comfort zone, but essential to your success and typically among your hidden vulnerabilities as a line manager. Because they involve public funds, these are risks that can derail your career and program, lead to unwelcome headlines, or earn you an invitation to testify in front of a Congressional oversight committee.

Programs often end up in trouble when problems arise over the money, contract support, and property associated with executing the program or running the operations. The lack of adequate controls leaves them vulnerable to fraud, waste and mismanagement of funds and other resources.

So what can you do to mitigate some of the inherent risks associated with federal resources management? The good news is that you do not need to become an expert in procurement law, finance and internal controls, or the nuances of appropriations and budget execution. However, there are a few important steps you can take to lay the groundwork for managing program risks associated with resources management, starting with understanding how to assure adequate internal controls.

Step 1:  Tone at the Top

“Tone at the Top” describes the program or operations manager’s commitment to transparency, honesty, integrity and ethical behavior, and the accountability to that commitment of the leadership team and each employee on the team. It is the essential foundation for all other resources management (funds, people, contracts, budget, and property) risk mitigation. If you and your managers uphold honesty, integrity and ethical behavior, and you do so openly and transparently, your employees are likely to uphold those values as well. That is your first and most powerful line of defense. If you get this right, you have taken one of the most important steps you can in addressing resources management risks.

Step 2: Ask the Right Questions

While you do not need to be an expert in all the business disciplines associated with getting things done in the federal government, it pays handsomely if you have some basic underpinnings. Knowing the right questions to ask (based on understanding the basics) will help you avoid potential catastrophic control failures.

Step 3: Build Your Network

You need to know who to call when in doubt or need. Build a network of key relationships beyond the technical side of the house.  This would include your key contacts in the budget shop, the procurement shop, the appropriations law folks, and your financial manager.  This network of expertise will not only help you know who to ask what when, but it will also help you and your program navigate the inherent bureaucracy of administrative business functions like contracting, budget and finance.

Click here for more information on the course Finance for Nonfinancial Managers.