AMA: From Big4 Audit -> Big4 Advisory -> MBA -> AM Portfolio Manager

Hi all,

I've been a long time reader of WSO, but rarely posted anything in the last couple of years. Thought I'd change that and give back to the community helped me out in the past.

So here's my story (I'll keep it short):
From Eastern Europe, raised and studied there. After uni, joined Big4 audit team in London, did CFA, then moved to advisory (TAS/Valuations/CF), also did a few years in a developing country with the big4 setting up a new advisory team. Then went to a top European MBA and after joined a large pension fund in Europe as an equity portfolio manager. It is a direct investment role in global equity markets.

Feel free to ask me anything about my path, the work I did in each place, or anything really. If I can't answer (such as what are my portfolio positions), I'll let you know.

Comments (20)

Jan 22, 2019

How did you get a PM role without any previous investment experience? What is the AUM of your fund/ the total AUM at your firm? Total comp? How has ETFs/Quants affected your fund's performance as well as inflows/outflows? Same question regarding your firm.

Most Helpful
Jan 22, 2019

It's a fundamental equity portfolio, fairly concentrated. They were looking for someone from a principal investing or transaction background, who can analyze industries/companies and see patterns well. The CFA helped slightly. We don't have a lot of investment analysts in house, so even as a PM I also do some of the investment cases (for reference mostly). So I learned most of the portfolio and risk management/position sizing/rebalancing etc. on the job.

My fund's AUM is 1-2bn, entire AUM is over 30bn. Total comp not amazing (it's a pension fund in Europe after all) - about $120k + 30%-40%, with extra perks.

Inflows and outflows not really an issue, as it's a pension fund, so only thing that worries me, apart from performance of course, is reallocation to other asset class, which means I would need to sell large chunks. Of course it could work the other way, but I'm more than happy to get a few more mm to manage.

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Jan 22, 2019

What's your relation with quants on the team, if any? How does the investment process look like? Do quants sometimes become pm?

Jan 22, 2019

We have quant PM/quant analysts and quants in risk. The quant PMs came from analysts/risk or external.

I work with quant PM/analysts every now and then. Both fundamentals and quants sit together, and quants are more focused on the core portfolios, smart betas, min vol strategies. But they also look across the entire equity platform, so I talk to them on certain factors risks, performance attribution, or even algo's to screen stocks etc. We also have some quants in the risk team, and we talk on exposures, concentration, tracking errors etc.

The investment process is more bottom up. I would generally get an idea from a conference, analyst meeting, company roadshow, or even a conversation. Then I dig deeper into the idea with research analysts or internal analysts. We have a research company that can do deep dives into ideas, make financial models etc. If I think the idea has potential, I then pick which companies I believe will do well (probably do an investment case on the ones I feel I should add to the portfolio, unless an analyst does the case). Seems a bit simplistic, but there can be a few months of work between idea and some names to invest in.

Before adding new investments, the other PM and I discuss each others ideas and we make a decision based on potential upside vs risk. I then size the positions and send the buy orders to the traders. We monitor positions daily, but try no to trade to often (generally between once a week and once a month - but on multiple names at once).

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Jan 23, 2019

Thanks for the AMA!

Did it matter (if at all) which sub-division within Advisory you worked in at the Big4 with respect to gaining a place at your MBA and/or Current Role (i.e. would it have mattered whether you gained experience in TAS vs Lead Advisory)?

Did you have other offers following B-School such as IB/Alternative Investments, if so, could you highlight what areas of finance they were in? Really interested in understanding the career options post Big4 Advisory + MBA.

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Jan 22, 2019
  1. For the MBA applications, it matters very little which advisory team you're in. It's the job progression, getting more selective roles (eg. moving from audit to advisory, back office to front office etc.), and showing leadership that matters most. That being said, top US schools are a bit biased against Big4 experience in general, especially if you are based in the US. As I was in based in Europe, I did manage to get interviews/accepted by US top 10 schools as well.

For my current role, the experience that was helpful was working on transactions (understanding capital structures, financing), being able to do valuation models and financial models in general, and being able to understand a company well just by reading some financial statements. A lot of the interviews was similar to consulting, but the cases were more comprehensive, and there was a focus on independent thinking. I think if you only had financial DD experience, some of the things above would be hard to demonstrate.

  1. The good thing about an MBA is it can help you reinvent yourself. My goal was technology (strategy/corp dev) or investments, but I also did some consulting interviews (followed the herd a bit on that one). So at the end, I chose between 4 roles: strategy consulting (not MBB, but better pay), associate/VP at a LMM PE (almost a start-up PE, but with some decent partners), internal strategy at a tech firm (based in continental Europe) and this PM role. The PM role was the more interesting job, even though not the highest paid.
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Jan 23, 2019

Thanks for the great response.
I've heard that in the US there is a fair amount of bias against candidates coming fresh out of Big4, not just regarding B-School but also career moves such as IB/MBB. Coming from London, I've seen numerous ex-colleagues successfully apply to top European B-Schools, Corporate Finance/Consulting roles and even the odd Asset Manager.

  1. Agreed regarding FDD. A lot of people (at my office anyway) are fixated on Audit>TAS>Exit as the client size in TAS is greater than Lead Advisory, however, my thought process is that gaining exposure only to FDD may be limiting.
  2. Congrats on the great offers! Did you have an attempt at recruiting for roles pre-MBA, if so, were the roles similar/different (if similar, I assume lower comp)?
Jan 22, 2019

I tried recruiting after my first year in big4, and a bit again a few years after that, but it didn't help that I came from a no name university (good in my country, but not known in London). I also graduated during the financial crisis, so banks weren't really hiring much at the time.

I had mixed experience with recruiters as well, as most of the roles they were pitching to me were more middle office, albeit higher salary. Still, not somewhere I wanted to go to. Then decided an MBA would be the best route.

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Jan 23, 2019

hey mate

did you do the cfa instead of aca at the big 4 shop you were at? or did you do both?

how easy was the transition audit >> advisory?

cheers

Jan 22, 2019

I was in a small specialist team in audit, where I had a choice to do CFA or ACA. I was more interested in a career in AM/banking, so I chose CFA.

I would say the transfer was not too difficult, it's a common move. However, a lot of people try to make the move, so you do have an imbalance of supply and demand. But I did two key things:
1. I networked heavily, meeting people in advisory for coffees, learning about what they do and soft signaling my interest. People can be quite open for chat, especially at Senior Associate/Manager level. The team I eventually moved into was aware of my audit team, as some people had transferred there in the past and were well regarded.
2. I managed to get very good performance reviews. Although I am not sure if there was a clear cutoff, being ranked in the top quartile was definitely helpful in interviews.

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Jan 23, 2019

fair enough - mind detailing the types of audit teams where cfa is offered?

yh that was my main concern - audit >> advisory >> MM M&A etc obvs there are more people gunning for that than there are positions available.

guess meeting and pleasing (eg being the right fit, moving from the right group etc etc) the right people is as important as the other stuff as well i guess.

cheers again mate

Jan 23, 2019

He, thanks for doing the AMA!!

I am currently enrolled in a target school in Europe (3rd Semester out of 6) and have an internship in big 4 audit and small cap M&A.
My Problem: My GPA is less than impressive (~2.8-3.0 depending on how you convert it, I am maybe to up that to 3.5 before graduating)

Do you think a CFA Lvl 1 would help me to land a Analyst gig after school? Would it be worth the time and cost?

Again thanks for the AMA and looking forward to receiving your answer !

Jan 22, 2019

CFA Lvl 1 gives you a marginal benefit, as it shows interest in finance and you get some useful knowledge for interviews. But more so if your degree is not finance/economics related. If you are studying a relevant subject, it is less of a benefit to your profile.

Also, analyst is quite a general description. Are you looking at M&A, asset management, research analyst? For IBD, you don't really need CFA. Internships/school/grades matter more. Plus some networking. For asset management or research, it is more relevant.

So, for you, I would say your focus areas are increasing your grades and getting a top internship (not sure if banks/AM firms are still recruiting for the summer). Then you either convert the internship or recruit from a stronger footing in your final year.

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Jan 23, 2019

Thank you for your reply!

I am mainly interested in M&A, so I guess I will just try to somehow up my grades since SA recruiting is pretty much done. Thanks again for helping out!

Jan 24, 2019

To be honest, I am rather surprised that you are running a portfolio of individual equities at a $30B pension, even as a $1-2B sleeve. In the US even the largest (~10X your size) pensions outsource a large portion of their equity investment. We regularly get RFP requests from them for both our quant and fundamental equity strategies.

Jan 22, 2019

Not sure really what you're implying here... that I must be managing less or that my job is selecting managers and not direct investments?

Firstly, the fund is bigger than $30bn, but I don't want to say how much because there are not many pension funds our size in Europe. Overall, we have more than $10bn in direct equity portfolios, so I'm managing just part of that.

Secondly, we outsource about 15%-25% of our equity allocation to external active managers and have a 5%-10% allocation to hedge funds. They serve as a good diversification tool and somewhat a benchmark for our internal performance (if investing in similar strategies).

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Jan 24, 2019

No, I was comparing and contrasting how different pensions can be in Europe from the US. In the US it is rare for even large pensions to manage any equity strategy in-house, and FI is trending the same way. They may ask for an AM firm to build a custom strategy for them, however.
To give you an example, a few years back, CalPERS (A ~$300B pension) wanted to tilt money towards companies that had women in management. They went to State Street (SSGA), and the end result was that SSGA launched an ETF, SHE that did that, and CalPERS seeded it with $250M. There are rumors that SSGA is kicking most, or even all of the management fee back to CalPERS, and that makes sense, as getting an ETF on people's radar and approved at the wirehouses is a huge deal, and at that AUM you basically get a free-pass everywhere.

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Jan 26, 2019

Thanks for the AMA:

1) What are your exit opps?

2) Does your pension have a funds investment team too?

3) Do people move over from funds investing to your equity PM kind of role?

Jan 22, 2019
Comment
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