Is a Financial Engineering degree helpful in AM?

jianbozh's picture
Rank: Chimp | 15

I'm currently a master student in financial engineering and I plan to pursue a career in AM, but I'm not sure how much of the financial engineering education can be useful in an AM position. I know it's more suitable for trading.

I'm a rookie here, any advices are very welcomed and appreciated!

Comments (23)

Mar 24, 2011

A financial engineering degree is utterly useless unless you want to be a quant-oriented trader.

Mar 24, 2011

That's not even close to true. You can easily do quant research/programming, fixed income AM, or some other type of quant-based AM although the most natural fit is fixed income. There's also risk management. Just look up the employment outcomes documents of places like Berkeley, CMU, NYU, and Princeton. It's a great pedigree for a place like BlackRock or PIMCO.

http://mfe.berkeley.edu/careers/placement.html
Btw, you chose to pursue the degree without knowing what your options were like? WTF?

Mar 24, 2011
laudrup10:

That's not even close to true. You can easily do quant research/programming, fixed income AM, or some other type of quant-based AM although the most natural fit is fixed income. There's also risk management. Just look up the employment outcomes documents of places like Berkeley, CMU, NYU, and Princeton. It's a great pedigree for a place like BlackRock or PIMCO.

http://mfe.berkeley.edu/careers/placement.html
Btw, you chose to pursue the degree without knowing what your options were like? WTF?

I certainly know what my options are, i know enough about financial engineering but i need to know more about AM since this option just came into my mind recently. I looked up some threads in this forum and it seems to me most of the time people are talking about equity investment management, so that's why I wonder financial engineering is useful or not.

Mar 24, 2011

statistics and time-series analysis is always useful in finance.. AM included.

Mar 24, 2011

you can work in quant research for fixed income/global macro and transition over to PM or work in a good statistical arbitrage shop if you're bright enough

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Mar 24, 2011

Finally someone else with an MFE! Two people from my MFE class are in portfolio management at OTPP which is a very difficult place to get into. I think you can definitely leverage it to get into AM. Depending on how good the school is, you might even get those jobs advertised through OCR.

Mar 24, 2011
manbearpig:

Finally someone else with an MFE! Two people from my MFE class are in portfolio management at OTPP which is a very difficult place to get into. I think you can definitely leverage it to get into AM. Depending on how good the school is, you might even get those jobs advertised through OCR.

MFEs seem very rare here. I'm currently in USC, I would say it's a decent school in west coast at least, but the MFE program here in USC is very new and not famous compared to those in CMU, UCB ..etc. Besides I'm an international student, I think a FT job for me is very hard to find.

Mar 24, 2011
jianbozh][quote=manbearpig:

Besides I'm an international student, I think a FT job for me is very hard to find.

Unfortunately, I think it is the "international" part that is going to hold you back.

My thoughts:

1) Aim for big quant shops or big firms with quant shops in them. The big firms are more likely to spot you on the Visa thing. (Editorial: it's really awesome that we send smart people, educated in the US back to their home countries. Seems like a great plan ... for those other countries.)

2) Explore the CFA program. That could be your ticket to segue into AM.

Mar 24, 2011

Going in the opposite direction, if I find myself unable to handle a financial engineering degree (like stochastic, simulation, time series etc.), does that mean I don't have what it takes to do fixed income portfolio management?

Mar 24, 2011

People don't generally get MFE's for AM, is that an incorrect statement? They usually get them for quant trading. Sure you can go into any analytical-heavy group... but that doesn't change the fact that you're a quant trader or supporting quant traders... even if it happens to be at BlackRock instead of JPM.

I don't see why you need an MFE to go into fixed income? Seems a bit silly. If you spent the money on a degree, you should atleast enter an area where one of the requisites is that skillset.

BTW... I recently saw a quant trader position with a $180K base with a $250K guaranteed minimum bonus, so not sure why thats not the obvious choice if you can get an opportunity there.

Mar 24, 2011
Marcus_Halberstram:

BTW... I recently saw a quant trader position with a $180K base with a $250K guaranteed minimum bonus, so not sure why thats not the obvious choice if you can get an opportunity there.

hmm...why not make the base 430K then? It would make cash flow management easier for the company...

Mar 25, 2011
Marcus_Halberstram:

People don't generally get MFE's for AM, is that an incorrect statement? They usually get them for quant trading. Sure you can go into any analytical-heavy group... but that doesn't change the fact that you're a quant trader or supporting quant traders... even if it happens to be at BlackRock instead of JPM.

I don't see why you need an MFE to go into fixed income? Seems a bit silly. If you spent the money on a degree, you should atleast enter an area where one of the requisites is that skillset.

BTW... I recently saw a quant trader position with a $180K base with a $250K guaranteed minimum bonus, so not sure why thats not the obvious choice if you can get an opportunity there.

My situation is kind of complicated, I didn't apply for MFE at the first place, I studied something else then I transferred my major to FE. I don't see myself as a trader type of person, but sadly there is no MSF program in my current university. i can't afford to transfer to another school to start over again, so...MFE is the most related major i can find.

Mar 25, 2011

I'm sure HR related cash flow management is high on their list of priorities.

To not give you the benefit of the doubt and assume you really don't know the answer to your question... guaranteed bonuses are used to incent people to join initially... it smooths out some of the uncertainty of "how much will I really get?" and is often used in situations where there could be a J curve in terms of the group/firms initial profitability... so they're saying regardless of how we do in our building years, you're still going to get paid. Guarantees are usually not extended past one, maybe two years.

So 2 years out there won't be any training wheels on this guys comp... if the firm flops, as does he. If you bake it into the base... then #1- go back to finance 101, simple TVM and #2- its not too well received when you lower someone's base salary and #3- if you don't lower his base, you essentially guaranteed that all-in comp for the rest of his career at the firm.

Mar 25, 2011
Marcus_Halberstram:

I don't see why you need an MFE to go into fixed income? Seems a bit silly. If you spent the money on a degree, you should atleast enter an area where one of the requisites is that skillset.

I didn't mean to imply that an MFE was a prerequisite for fixed income. It's just that I've always heard/assumed that FI portfolio management was pretty quantitative, so I was wondering if I could still succeed in that, considering I am barely surviving in MFE courses like stochastic models, simulation etc. I'm not focusing on the specific degree here, but on the aptitude necessary to complete the degree (or lack thereof in my case). Would be great if people could chime in on that. Thanks.

Mar 25, 2011
chewingum:

I didn't mean to imply that an MFE was a prerequisite for fixed income. It's just that I've always heard/assumed that FI portfolio management was pretty quantitative, so I was wondering if I could still succeed in that, considering I am barely surviving in MFE courses like stochastic models, simulation etc. I'm not focusing on the specific degree here, but on the aptitude necessary to complete the degree (or lack thereof in my case). Would be great if people could chime in on that. Thanks.

The answer to this question will vary depending on the desk/group. More often than not, a large shop is subdivided into multiple product/strategy focussed/benchmark funds. Within FI, some groups like structured products, quant-rates, quant-fx are pretty much all PhDs (or some equally impressive quant background). There are also more straightforward funds conservative benchmarks that employ people with sound fundamentals (FI is intuitive to them, but they won't be able to construct a term structure model for you). Focus on the later if high-level math is not your cup of tea, but make sure you have the fundamentals down cold.

Mar 25, 2011
LTV:
chewingum:

I didn't mean to imply that an MFE was a prerequisite for fixed income. It's just that I've always heard/assumed that FI portfolio management was pretty quantitative, so I was wondering if I could still succeed in that, considering I am barely surviving in MFE courses like stochastic models, simulation etc. I'm not focusing on the specific degree here, but on the aptitude necessary to complete the degree (or lack thereof in my case). Would be great if people could chime in on that. Thanks.

The answer to this question will vary depending on the desk/group. More often than not, a large shop is subdivided into multiple product/strategy focussed/benchmark funds. Within FI, some groups like structured products, quant-rates, quant-fx are pretty much all PhDs (or some equally impressive quant background). There are also more straightforward funds conservative benchmarks that employ people with sound fundamentals (FI is intuitive to them, but they won't be able to construct a term structure model for you). Focus on the later if high-level math is not your cup of tea, but make sure you have the fundamentals down cold.

How can you tell if a group is looking for quant-oriented kind of person or just ordinary equity investment person, if you don't have any more information about this group? I mean, if I apply for ,say the AM department of GS, how can I possibly know what kind of questions they will ask me during the interview, quantitative ones or market-related ones? Thanks in advance.

Mar 25, 2011

I'd rather hear you chime in on why you're getting an MFE to start with? Would provide some context to base our answers off of.

Mar 25, 2011

Marcus, I'm not enrolled in a MFE program, just taking a few of those classes for my undergrad degree and finding myself completely overwhelmed.

LTV, thanks, but what do you mean by straightforward funds conservative benchmarks? Any examples of what exactly it is they do?

Mar 25, 2011
chewingum:

Marcus, I'm not enrolled in a MFE program, just taking a few of those classes for my undergrad degree and finding myself completely overwhelmed.

Then what the hell is the use of this thread? You're an undergrad which means that what you learn in school has literally 2% applicability to your on the job work. The only time the previous statement doesn't hold true is if ur vying for more analytic-heavy roles like quant reaserch, algo-trading, CDO structuring etc... If I was an undergrad trying to work as a CDS trader or quant, I'd take some MFE classes and talk it up on resume/interviews... but thats not your case. So what does this thread have to do with anything? If you're trying to get into Asset Management, MFE skills are not going to tip the scales for you. You need to focus on other areas that will provide more bang.

Mar 25, 2011

I cant believe how much wrong info there is in this thread!
OP, I will send you a pm with my take when I have some time. I never did a MFE but I have worked with quite a few of them since I have been in quantitative fixed income research for 3 years since graduating from undergrad.

Mar 25, 2011
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