Portfolio Management test

Arti's picture
Rank: King Kong | banana points 1,216

I'll have a test for a PM role at a local retail bank next week. It's mostly about managing the pension funds + some mutual funds and individual portfolios, also the position is related to equities only. I assume the questions would be similar to CFA 1 lvl portfolio management material. Would appreciate if you could share some prep materials with quant/theory questions that I might get asked.

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Comments (6)

Jan 13, 2019

Hey Arti, I swear if I had a silver banana for every lonely thread I posted too I'd be richer than @compbanker ...

I hope those threads give you a bit more insight.

Jan 16, 2019

It's been a while since I did my CFA lvl 1, but I would expect the questions to be more related to the material on level 3, eg. asset allocation, risk/return, risk tolerance etc.

Is it more of a quant/fundamental type role? Will you be investing direct or buying passive exposure to markets (fund of funds/ETFs)?

For more quant type role, learn to answer how you can use algorithms/software to guide investment decisions. R/Python are used most, and you should research some strategies, such as minvol, factor investing, smart beta.

For more fundamental roles, you should also have a few investment cases you can talk about. Difference between analyst and PM role interviews, you should know how to best trade and manage the position over time and what triggers are important to trim/add.

For all roles and FoF, know your metrics and how to use them: Sharpe ration, Information ratio, tracking error. Also be prepared to speak about hypothetical portfolio optimization/allocation, style portfolios or strategies.

Jan 17, 2019

Thanks, took the test today, it was pretty basic. One question baffled me though, there were given 4 bonds, all with same maturity date, 1) no coupon, 2) no coupon, sinkable, 3) 5% coupon, semi annual, 4) 5% coupon, annual. It was stated that the yields will plummet, spreads are going to stay the same, which bond will I chose? I think I went with the 3), but it was just a wild guess, since I can't see which one should outperform.

You killed the Greece spread goes up, spread goes down, from Wall Street they all play like a freak, Goldman Sachs 'o beat.

Jan 16, 2019

Good luck with the role.

But the answer to your question is 1) no coupon.

Effectively, this is a question of what is the bond duration (interest rate risk) for each bond. If yields go down, bonds go up. So you want to hold the bond that has the highest interest rate risk (duration). A zero coupon bond with no amortization has the highest duration, which is equal to the time to maturity. So the no coupon bond would go up in price the most if yields plummet.

Jan 17, 2019

Ah, yes, correct, i tried to think about it in terms of cash flows, but forgot the time period multiplication. Anyway I got the offer, I think they are low-balling me on the comp and HR is not mentioning the amount of the bonus (variable part), but I can estimate it from the AM's annual report. I really want the job, but at the same time do not want to end up with a below mkt comp. However since it will be my first year maybe i should go with it and work my way up.

You killed the Greece spread goes up, spread goes down, from Wall Street they all play like a freak, Goldman Sachs 'o beat.

Jan 16, 2019
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