Q&A - Analyst at $1.5B Endowment Fund
I have been reading WSO for a few years now and would like to give back and help out all of the younger readers on here. When I was going through the interview process for my current role, I had a hard time figuring out what exactly I was getting myself in to, so hopefully I can provide some insight to those of you who are in the same position I was. I am married with an 8 week old daughter, so my perspective may be a little different from other WSO members. I will aim to check this 2-3 times a day this week and see what I can do to answer your questions.
What is your current job title and a one sentence description of your primary job responsibility?
My title is Investment Analyst and I work for a $1.5B endowment fund. The endowment supports a non-profit that does early stage medical research. We manage approximately 20% of the money in-house (this entire amount is hedging strategy meant to reduce our drawdown and limit our upside) and give 80% to outside managers. It's a lot different than most of the jobs people on here are talking about. If you have ever wondered where hedge funds, PE funds, credit funds etc. get their money from... the majority of it is from pensions, endowments, and foundations.
We have an Investment Policy Statement (IPS) that was created by the Board of Directors and the Chief Investment Officer that outlines our target allocation (and a lot of other things), and my teams job is to invest the endowment within the guidelines of the IPS. The most important function of our team as a whole is selecting the best managers to give money to. Most of the time your actual allocation will not look exactly like your target, because 1) you only have slight flexibility to stray from the IPS and 2) your endowment's benchmark is based on your target allocation, and your bonus is calculated based on how you perform relative to the benchmark, so you are incentivized to keep your allocation relatively close to your IPS. Essentially, the majority of your out performance is going to be determined by your manager selection.
My primary responsibility is our quarterly performance report that goes to the Board of Directors. I started 12 months ago, and I spent the first few months getting familiar with the process. I completely automated the report in Excel. The prior analyst was hard coding performance numbers for each manager, which took forever to update and was prone to human errors. I have started creating a few different automated Excel reports for the team. The biggest one I am working on right now is a master spreadsheet that maps out our entire PE/VC/RE program, giving us the ability to project future cash inflows/outflows for all of our PE/VC/RE investments for the next 10 years.
What are previous positions you have held and how many years of experience do you have?
Prior to this job, my first job out of undergrad was as a Credit Analyst at a community bank for 18 months. I live in a small city in the Midwest (200k population, 750k in the entire metro area), and this first role was arguably my best opportunity to get the experience I was looking for while staying in the area.
I double majored in Accounting and Finance. I graduated with a 3.0 cumulative GPA, with a 3.7ish major GPA. I did not focus on school the first two years (played way too much Halo) and had to dig myself out of a hole. I got my last 60 credits over three years instead of two, taking 3-4 classes per semester and doing paid internships so I could avoid student loans and focus on increasing my GPA. I had seven internships during school prior to my first full-time job. The first two I saw as part-time jobs to make money, the next five were my way of slowly getting more and more experience to make up for my poor GPA (which ended up looking a lot better when I graduated).
I went to a non-target school in the same city I currently live/work in. There is a PE firm that hires unpaid interns (I interned there for a semester) and a few F500 corporations that recruit on campus, but there is literally zero traditional wall street presence. There is one small investment bank downtown that has no formal recruiting process and very rarely has openings, and also a firm that does in-house equity research. Theoretically a job at either of these two might have looked better on my resume, but I figured my most realistic shot at getting the experience I was looking for was to take the job at the bank.
What was your most useful class and why?
For me, the most useful classes were the Intermediate Accounting classes. If you do well in those, a lot of the "interview prep" questions you see on WSO are very easy to understand and memorize since you have the strong backbone from taking the more difficult accounting classes (or you already memorized them for class). I also took a class called "Business Communication", which essentially went over writing effective emails and giving presentations. I thought it would be an easy Gen Ed class in my last year, but I actually ended up learning quite a bit. TL;DR version of the class was to get to the point quickly in your writing and to always double-check your work.
What advice would give to current students (ugrad and/or grad students) to help them succeed?
I wrote a WSO blog post two years ago on 6 Ways for Undergraduates to Jump-Start Their Careers. These were what helped me the most when it came to setting myself apart from other competitive candidates at my school.
If you are thinking about doing any kind of buyside role where you need to think like an investor, I found the WSO Hedge Fund Interview Prep Pack extremely valuable. It comes with a lot more information than I was expecting. You could probably spend 100s of hours digging around online and finding similar information on your own, but it is all presented for you and laid out so efficiently that you can pretty much just spend a weekend sitting back on your couch reading through it. As someone who invests in hedge funds (only a year of limited experience), I even learned a few things about the structure and the history of the industry. The sticker price seems high at first, but there is so much information, all written by industry professionals, that it is worth it if you can swing it.
Do you have any professional certifications (CFA / CAIA / CPA / CIIA, etc.)?
I passed Level 1 of the CFA this past June, and am taking Level 2 in June of 2017. One of the main reasons I got my current job was because I told my bosses in the interview that I specifically wanted to obtain the CFA. They said they would pay for me to take it, so I signed up for Level 1 a few weeks after I got the job.
When studying, I got into the office early and studied for an hour and also studied during lunch. This gave me 10 hours during the week, and I studied for 2-3 hours each morning on the weekends to hit the recommended 15 hours per week and 300 total hours. I have a wife and daughter (wife was pregnant during CFA studying), so for me it was hard to find time after work to study. My team was very supportive of me studying for the CFA, so they were okay with (and even encouraged) me getting in early to study before work
How did you initially "break-in" to the industry?
I found my current job posted on Indeed.com the week before my wedding. I had met the CIO of the endowment at a few networking events on campus (she is an alum of the same school). When I saw the job posting, I shot her a quick email and asked if the role would be on her team. She responded within an hour, telling me that it was on her team and that I would be a good fit and should apply. I applied a week later after I got back from my honeymoon, had two interviews over the next two weeks, and started about five weeks after sending her that initial email.
The big reasons I got the job were that the CIO is very supportive of her alma matter, and that I was so involved on campus that the professors/staff she knew at the school were able to put in a good word for me. I also had relate able experience, as I underwrote debt for three PE deals while at the bank and could speak to my limited knowledge of the asset class. I also had been investing my $5k~ savings and was able to talk about my experience during the interview process.
I also think I proved that I would be very valuable to the team during the interview. The job posting requested "spreadsheet programming" experience, specifically related to creating the endowment's performance reports. They wanted someone who was good with Excel, and I knew that I was. I gave a few examples of huge Excel projects I had done at previous jobs and was able to show/tell what I would do to the performance report if I got the job, which I know both of the interviewers liked.
What is a day in your life like during the workweek? Can you give us an hour by hour run down of your typical day?
Like all of these "day in the life" posts you see on WSO, all my days are different.
7:30-8:30am - Usually get into the office somewhere in here. In the 6 months leading up to CFA Level 1 exam, I got in at 7:30 and studied for an hour before anyone else on the team got in. Recently, my team has been very supportive and flexible of our new daughter and some days I get into the office a little slower around 9am.
8:30-9:00am - Take action on any important e-mails I received over night. Usually these are account statement's from hedge funds that I plug into the performance spreadsheet, or capital calls for PE/RE/VC investments. About two-three times a week our PE investments call capital, which I need to coordinate with our accounting team to send the money to the fund. We have a special account that we use only for capital calls, so 99% of the time it is fairly straight forward and I am not scrambling around to try to raise cash to fund the call. We usually receive notice for a call 10-15 days before they are due, so it gives plenty of time to figure out a way to raise cash if we need to.
9:00-10:00am - Usually spend this time reading through emails and staying up to date on everything going on around the world. I try to have a broad range of sources/newsletters that I subscribe to, so I get a wide range of opinions.
- Between the Hedges (usually some good reads in here, links to Bloomberg, ZeroHedge, and a few others)
- ZeroHedge Frontrunning
- CFA Institute Newsletter
- Dealbook (NYTimes)
- WSJ (FYI if you copy/paste the title of a WSJ article and Google it, you can read the full article through the Googlelink)
- Stratechery (good big-picture write-ups on the tech industry, subscribe to the 1 free article per week)
- Stratfor Daily Intelligence (interesting GeoPolitics articles, similar trick to the WSJ above to read articles if you do not have an account)
- FiveThirtyEight Newsletter (sometimes has a good article)
- Musings on Markets (blog posts by an NYU finance professor, probably posts about once a week)
10:00-11:00am - Have a call with either a current or prospective manager. If they are a current manager, they are giving updates on their current views, any strategy changes, and their positioning in the market. If it is a prospective manager, there might be some more introductory type discussions on getting to know how they operate, but they also share a bit on their strategy and positioning.
11:00-12:00pm - Work on any small tasks/projects someone else on the team gave me to work on. These are usually just making quick changes to Excel sheets or making a call to a manager to ask a clarifying question or get more information on something that came up in a conference call.
12:00-1:00pm - It seems like I get a lot of conference calls at lunch. I plug my headphones into my computer and take notes while I eat, check out what the market is doing, and maybe read a few longer interesting articles that I saved from earlier in the day. Also, while studying for the CFA, I studied at lunch almost every day.
1:00-2:00pm - Every quarter (and monthly for some), our managers send out letters with their thoughts on the market and updates on the portfolio. I typically spend early afternoon reading through any of these that I have sitting on my desk. Some days I have two or three to read through and some days I have none, just depends on the time of the year.
2:00-4:30pm - I usually spend afternoons working on various projects that I have going. I keep a list of longer term projects/ideas I can work on (making a spreadsheet that will give us additional info that we do not have yet, adding a feature to an existing spreadsheet, watch a specific webcast, call someone to set up a new account somewhere, etc.)
Lately I have been heading home or going down to the gym to workout between 4:15-5pm. As a senior in college, I would have never thought I would have a job where I would be leaving work before 5pm. I DID bust my ass the first few months to set up a bunch of automated spreadsheets, so my first few months I definitely put in quite a few more hours than I do now.
What is the company culture like at your firm? What is the size of your firm?
I work for a non-profit that does cancer research and my team sits right by all of the operations staff (accounting/grants/business development/IT) so it is nowhere near your typical wall street environment. I am out of the office by 5pm about 75% of the time, so incorporating that I usually work through lunch, I usually work about 40-45 hours a week.
There are about 320 employees, 15 finance/accounting staff (a few of which I interact with every day), and 4 members of the investment team plus an admin assistant. My team specifically consists of a CIO, Deputy CIO, Portfolio Manager and Analyst (me). No one on the team has specific roles or sectors they cover (as in one analyst covers hedge funds, one covers private equity, one covers fixed income, etc), which it seems is not very common in the pension/endowment world (most have specific roles/sectors for each employee). We have an official team meeting once a month to talk about the portfolio, prospective managers, travel schedules, and asset allocation, but we see each other every day so we are constantly communicating. I get to be in on every discussion, so it is really interesting to get the opportunity to learn about how large money managers think about allocating their capital. Our team travels to meet every manager we invest with (typically the CIO and deputy CIO), which makes for some cool trips to China, Europe, South Africa, etc. The Portfolio Manager goes to a decent amount of investor meetings for our managers, so he goes all over the US. I had an opportunity to go to a PE due diligence meeting for a manager that was a 2.5 hour drive away, and that was a cool experience. If I stay in the industry, I can definitely see myself enjoying the fact that I get to go on two week trips all over the world, 3-4 times per year.
The job is not stressful at all, even on days like Brexit or the morning of Election 2016 when the market is down 3-5%. Since we give our money to outside managers and our internal strategy is a hedge to the rest of the portfolio, there's nothing we do to interact with the portfolio throughout the day. Sometimes we'll buy a 3-month TBill in the hedging strategy at in the afternoon mid-week, however that is not a spur of the moment thing, and is planned ahead of time. Theoretically, we picked good managers who will be doing that for us so our job is to sit back, observe, and see if there is anything we can learn from the situation.
Are the sacrifices you've made to date worth the benefit realized by you so far in your career?
This is a tough question, and I am not sure that I have an answer to it yet. My job is nowhere near as stressful as the typical wall street job, but I also am not making as much money ($50-60k. Adjusted for NYC cost of living, my total compensation is about $120k/year). I have a small family, so it lets me spend more time with them, however I may potentially have to work longer since it will take me longer to save up enough to retire/leave the business.
I see myself as being someone who will always be working in some kind of capacity, so even if I tried to move to NY, get a job at a BB for two years, move to PE, and have a $10M net worth by the time I hit 30, I would still be out there working just as much. The path I took is definitely better for my health and personal relationships, so I am very happy with how everything has been going so far.
If you weren't working in finance, what do you think you would be doing?
Honestly, I have no idea. I have always wanted to run my own business, doesn't matter what it is, and my wife wants to own a bed & breakfast. As of right now, my plan is to retire once I have saved up enough money to live off 2%~ of my portfolio per year, and then rent out our house on AirBnB full-time. We always think of crazy products that would make parenting easier, so maybe we will finally come up with something worth pursuing and start our own company.
Overall, I have enjoyed my time here so far. I am getting a wide variety of experience and learning to think like an investor. While I could easily make more money if I was in a different industry, this one is very enjoyable and I feel like I am able to learn about pretty much whatever I find interesting. Hopefully this gives everyone a brief overview of what my role looks like. Feel free to ask any questions you may have!
Throwback Thursday - this was originally posted Nov 2016