Tag: GMF

On the first day of the immersion course in New York City, we started our morning by traveling to the Federal Reserve using the subway system. After a short break, we headed to Brown Brothers Harriman to get a deeper look at the 200-year-old private bank. At the end of the day, we went to J.P. Morgan to meet with seven bankers, who shared their experiences in and knowledge of the banking system.

We went to the Federal Reserve Bank of New York in the morning. It was a great tour for us to understand the U.S. financial system, and we had the privilege to enter the vault to see some of its gold reserves. From the tour, we know that the Federal Reserve system consists of 12 regional Reserve Banks and a Board of Governors in Washington, D.C.  The creation of Federal Reserve System was not easy: it took the government three attempts to finally establish the system in 1913. The major responsibilities of the New York branch are implementing monetary policy, supervision and regulation, international operation, and to provide financial services. The system has evolved over time; for example, after the financial crisis in 2008, the Federal Reserve Bank started to tighten regulations. Today, large financial institutions like Goldman Sachs are also subject to the regulation of the Federal Reserve.

Welcomed by Mr. W. Carter Sullivan, Partner of the Private Banking department, we arrived at Brown Brothers Harriman & Co. (BBH), the only partnership bank in the US. Mr. Sullivan reviewed the history of the firm and introduced us to the major business lines of the company, which are investor services, investment management, and private banking. He emphasized their investment strategy of focusing on downside risk, which was derived as a result of their investors’ high requirement of liquidity and safety. Following him, Mr. Win Thin, Senior Vice President of Investor Services, presented an inspiring discussion on issues including the new normal of the world economy, reasons emerging markets remain under pressure, and the primary risks for the world economy in the near future. After a macro view of the world, we moved on to the Private Banking department. Mr. Michael L. Vellucci and Mr. Lewis Hart, both vice presidents in the Corporate Lending Department, talked about their customers’ borrowing needs and the application of their investment strategy: by focusing on companies with strong financial statements, excellent earning records, good collateral, risk hedging, and not sharing the profits of their investors, in order to avoid overaggressive investing behaviors. Another thing worth mentioning is the reason the bank puts capital financing and wealth management under the same roof: They believe that excellent capital financing services will result in good relationships with their customers, and leads to demand for more services, such as advisory services and wealth management.

Being able to spend a few hours at the JP Morgan office was extremely insightful. The visit offered us insight into the investment bank from various angles, such as the career path of sales and trading, the working life of a corporate treasury, and the authoritative data for the industries. Mr. Chad Parson, Managing Director of ABS Special Opportunities, gave us a brief introduction of JP Morgan and the general overview about early investment banks. In the round table discussion, seven professionals from JP Morgan shared first-hand industry experience with us.

These three visits helped us to build a general perspective of how the relationship between the federal government and financial markets has evolved over time. The speakers in each visit helped us to construct a comprehensive understanding of various sectors in the banking system during their lectures. This is an unforgettable experience, and we are looking forward to learning more from the remaining visits.

Guest Bloggers: Yi (Neo) Li, Mengxiao Fan, Zhipeng Liu, Wanxing (Vera) Wang (GMF 2016)

This is 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.

Our Global Masters of Finance class concluded our trip to New York on a beautiful day.  Before touring Wall Street, we had two speakers from the Private Equity (PE) sector and one from high-frequency trading. Their knowledge and experience impressed us very much and triggered our further interests in the industry and real business world.

First, Scott Budoff of Saw Mill Capital gave us a lecture about how different types of PE funds operate and the strategies they employ. To differentiate Saw Mill Capital from other PE funds, they focus on the lower-middle market, which means the business has $50 million to $250 million revenue.

Saw Mill also focuses resources on adding value to the company. Budoff believes this is much more important than the sourcing and transitioning of the deal. Budoff also talked about how to motivate people with a base salary and a transparent bonus system.

After the presentation, Mr. Budoff was kind enough to answer a specific question about how to motivate employees in a non-profit organization. He believed that they should screen out employees that work only for money and noted that the motivation should come from their satisfaction of doing what they really wanted to do. In the meantime, organizations should give an additional 10% bonus if the employees have really done a great job. Five minutes spent with Mr. Budoff helped solve a complex problem. It’s a wonderful experience with professionals from different industry backgrounds.

The next presentation came from Jim Wilson and Dr. Ruediger Stuecke from Warburg Pincus. Mr. Wilson not only gave us insights of Private Equity from a more comprehensive perspective, in terms of strategy, geographic and industrial focus, but also shared how Warburg Pincus operates on a global basis for sourcing deals, diversification, and risk management.

Mr. Wilson also offered advice on how young Masters of Finance graduates can differentiate themselves to get into the PE industry and stand out.

We also learned about Warburg Pincus’ portfolio composition and its identity as a growth-oriented investor, as well as how it generates value for investors. Lastly, he shared with us how Warburg Pincus formulates investment theses.

In the afternoon, we were honored to hear from Washington University alumnus, Mark F. Dehnert, BSSSE ’89, MBA ’89, who serves as  Partner and Managing Director in Goldman Sachs Execution & Clearing, L.P. He joined the Hull Group, now part of Goldman Sachs, as a Financial Engineer in 1992.

Mark F. Dehnert, BSSSE ’89, MBA ’89 was honored as an Olin Distinguished Alumnus in 2015

Mr. Dehnert talked about the relationship between hardware and algorithm. Speed-oriented strategy would not last long; on the contrary, algorithms have the greatest influences on value creation. Obviously it’s better to take advantage of both in high frequency trading.

With respect to the phenomenon that issuing volume is increasing much faster than trading volume in China, Mr. Dehnert offered his comments that the Chinese secondary market is still illiquid, as companies could suspend themselves when the market is not doing so well.

At the end of the day, in order to give us an institutional taste of finance and America’s history of financial institutions, we were led on a walking tour of Wall Street to learn more about the iconic buildings. We were fascinated by the history as well as the architecture.

Guest Bloggers: Siyuan Ma, Anqi Guo, Qinyu Pan, Jingbo Yang (GMF 2016)

This is 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.

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.

During a recent trip to Israel, Greg Hutchings, senior advisor in the Weston Career Center visited with four of Olin’s Global Masters of Finance (GMF) students who are working on their Certificate in Innovation and Entrepreneurship at the Interdisciplinary Center (IDC) in Herzliya, Israel.

At the end of their 11 month program, they will also receive a Masters of Science in Finance degree.  At IDC, the students are focused on venture creation and are interning with financial services and venture capital firms. IDC’s Zell Entrepreneurship Program has evolved into an acclaimed venture creation program, providing students with an opportunity to apply advanced entrepreneurial studies to the creation of real business ventures.

Israel is well-known as “the Startup Nation.” In proportion to its population, Israel has the largest number of startup companies in the world. Also, there are a lot of accelerators and venture capital companies in the Israeli market to invest in those potential startups. We took a visit to two accelerators, “StartupEast” and “Samurai House-Israel,” located in Tel Aviv.

Guest blogger: Kaibo Xue is currently in Israel as part of the Global Master of Finance program. GMF students will earn a certificate in innovation and entrepreneurship from Olin’s partner school, IDC Herzliya. During their immersion at IDC, students learn first-hand from entrepreneurs in Israel.

StartupEast is an Israeli-pan-Asian startup accelerator and microfund. “With more and more Asian investors being active in Israeli startups, our main goal is to create and nurture successful joint startups across the continent,” said Amos Avner, one of the founding partners, during a brief introduction about StartupEast.

Founded in Tokyo, Samurai House is the largest startup accelerator in Japan. It shares the same goal with StartupEast to connect the startup and innovation ecosystems of Asia and Israel.

In order to retain enterprise culture, the office was decorated fully in Japanese style, which gives workers a casual and relaxing working environment.