Finance: Meeting the Needs of the Investment Management Industry

MEETING THE NEEDS OF THE

Investment Management Industry I S E N B E R G S C H O O L O F M A N A G E M E N T AT T H E U N I V E R S I T Y O F M A S S A C H U S E T T S A M H E R S T

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Recently, we enhanced our offerings to address the new realities of the investment management industry.�

A MESSAGE FROM THE DEAN

Isenberg is committed to fostering our unique experiential culture.

We inspire innovation and collaboration, and we develop strong critical thinkers who know how to analyze opportunities in the global marketplace. Isenberg is also dedicated to meeting the needs of our students and the firms that hire them. We are constantly adapting and improving to ensure our programs are state-of-the-art and our graduates are equipped to face the challenges of a rapidly changing business environment. Our efforts are widely heralded: In 2016, Businessweek has Isenberg as the number one public business school in the Northeast as well as the number seven best public in the nation for recruiter satisfaction. In addition, Businessweek called Isenberg the most improved undergraduate program in the U.S. from 2010-2016.

Isenberg’s world-class finance faculty and comprehensive curriculum simulate the realworld challenges students will face on the job so they are ready to tackle complex issues. What’s more, Isenberg recently enhanced our offerings to address the new realities of the investment management industry, including developing concentrations in alternative investments and risk management within the finance major. We now also offer specialized master’s degrees and have introduced a program oriented towards buy-side and sell-side research positions — all based on insights and requests from industry leaders.

I invite you to read further to discover more about our cutting-edge programs that are addressing the evolving industry realities and graduating students with the potential to solve your hiring needs. Please get in touch if you have feedback or questions.

Mark A. Fuller, PhD Dean, Isenberg School of Management Thomas O’Brien Endowed Chair dean@isenberg.umass.edu

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INDUSTRY REALITIES

Investment Management Industry Through discussions with industry leaders and in-depth research of the investment management industry, Isenberg faculty became aware of certain changes and realities that the industry was facing. Isenberg quickly adapted programs to respond to these industry changes.

There has been rapid growth in passive and alternative strategies in the last decade.

It has become difficult to generate alpha. For a number of strategies, less than 20% of funds have generated alpha for the 3 year and 5 year periods.

Percent of US Equity Funds that Outperformed Benchmark

PASSIVE (ETF & Passive Mutual Funds)

1,500

ACTIVE (Mutual Funds)

5 YEAR

20% 18%

1,000

16%

500

14% 12%

0

10%

(500)

8%

(1,000)

6% 4%

(1,500)

Small Cap Value

Small Cap Growth

Mid Cap Value

Mid Cap Growth

Large Cap Value

Large Cap Growth

Jul-16

May-17

Sep-15

Jan-14

Nov-14

Mar-13

Jul-11

May-12

Sep-10

Jan-09

Nov-09

Mar-08

Jul-06

May-07

Sep-05

Jan-04

Nov-04

Mar-03

Jul-01

May-02

Source: ICI, Goldman Sachs Group, Inc.

All Larrge Caps

0%

Aggregate

2%

(2,000) Sep-00

Cumulative Inflows (Outflows) Since September 2000

3 YEAR 2,000

Source: Credit Suisse Asset Manager Research, Aye M. Soe, S&P Dow Jones Indices Research, Note: 3- and 5-year outperformance rates are as of June 30, 2016; Outperformance is based upon equal-weighted fund counts.

Investment management firms continue to operate in an environment defined by fee and margin pressure.

Fee Pressure 2.0% 1.8% 1.6% Diversified Emerging Market

1.4%

Small Cap

1.2%

Emerging Market Bond

Source: Morningstar, The Wall Street Journal

4

‘15

‘14

‘13

‘12

‘11

‘10

‘09

‘08

Int-Term Bond Funds

‘07

0.8% ‘06

Large Cap

2005

1.0%

Globally, firms face more regulation and a call for greater transparency.

INDUSTRY RESPONSE

Investment management firms are addressing these challenges in many ways: • Consolidating to improve efficiency; • Investing in technology and data analytics in order to develop new products;

• Hiring fewer research analysts, which makes identifying high-quality, highly skilled candidates more important than ever; and • Continuing to invest in compliance and risk personnel.

CASE STUDY

Investment Firm Responds to Market Dynamics To proactively adapt to market realities at the firm level, Isenberg faculty reached out to a number of companies, including a Boston-based investment management firm that has been shrinking its associate program due to pressures on assets under management. As a result, Isenberg better understands how the firm is answering industry challenges and has developed academic and experiential programs that prepare our students to make the most impact as associates within this organization — and others.

This firm hires for three disciplines: Equity, Fixed Income, and Quantitative Research. Each discipline prioritizes slightly different criteria and preferences. Quantitative roles require technical aptitudes; Fixed Income looks for well-rounded candidates, aka “best athlete”; and Equity roles often go to candidates with a “pedigree,” such as to graduates from Ivy League schools.

The firm has reduced the number of schools where it conducts on-campus recruiting to 14, focusing on schools that have delivered high-quality students with the right skills for Equity, Fixed Income, and Quantitative. Telephone interviews are administered for strong candidates from non-target schools.

Although this investment management firm has been reducing its associate program, it still hires approximately 8 to 10 candidates per year.

The firm’s portfolio managers have become increasingly interested in graduates who actively demonstrate affinity for investment management while in school. Portfolio managers are particularly interested in students involved with student-managed funds and students who compete in pitch competitions — two strong offerings at Isenberg.

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ISENBERG RESPONDS

How Isenberg Is Addressing the New Market Realities Faculty and staff used feedback from industry leaders to develop programs that satisfy the needs of our students and the market — and to give our graduates the experience and the expertise they require to help companies thrive in today’s complex business environment.

Concentrations Since 2013, we have offered four concentrations within the finance major: Alternative Investments, Corporate Finance, Financial Analyst, and Risk Management. Three are focused within the investment management industry and have graduated 385 students since launching. Featuring a suite of core classes, internships, research opportunities, seminars, mentoring, and more, these initiatives deliver the specialized knowledge and skills that allow students to succeed in these fields.

Isenberg Finance Graduates by Concentration

250

200

150

100

50

0

2013 2014 2015 2016 2017

All finance

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Alternative Investments

Corporate Finance

Financial Analyst

Risk Management

New Master’s Degrees

Targeted Coursework

Isenberg now offers a 1-year master’s degree in

Isenberg’s classes are responsive and real-world

Business & Analytics and a graduate Certificate

focused. A few examples: In Advanced Investments,

in Business Analytics. Both programs provide the

students prepare and present an equity research

business and data analytics tools and techniques

report complete with a company and industry analysis,

that are increasingly necessary to be effective in

a full projection model, and a discounted cash flow

organizations of all kinds.

analysis as well as a comparable company analysis.

In 2019, we will launch the world’s first Master of

In Fixed Income, students prepare a credit analysis

Finance in Alternative Investments (AI). As global

on a high-yield credit complete with a credit model, a

financial markets become increasingly complicated

covenant analysis, and a comparable spread assessment.

and investors seek greater diversification, there has never been more demand for expertise in

The expansive and rigorous curriculum with an honors

this field. And with the world’s leading experts,

capstone sequence provides many choices and

Center for International Securities and Derivatives

opportunities for students to specialize in one or

Markets (CISDM), conferences and connections to

more of four tracks. Students interested in investment

industry leaders, there is no better place to study

management can take courses such as: Capital

Alternative Investments than at the Isenberg School

Markets & Institutions, International Finance,

of Management. In fact, CISDM places Isenberg at

Advanced Investments, Fixed Income, and Business

the forefront of academic institutions that conduct

Strategy & Stock Analysis, Financial Engineering -

research into derivatives, alternative investments,

Options and Alternative Investments.

and asset and risk management.

Programmatic Activities We have designed a variety of specialized programmatic activities that are embedded within the finance major to prepare students for careers as investment analysts. These immersive experiences — pitch competitions, conferences, boot camps, clubs, and more — teach hands-on problem solving and allow our graduates to deliver from their first day on the job. Financial Analyst is our most popular concentration and represents some of our most sought-after graduates within Isenberg.

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EXPERIENTIAL LEARNING

Isenberg: Meeting Employers’ Needs Early Career Planning Research directors and portfolio managers told us what they wanted: The brightest and hardest-working graduates who could contribute quickly. To satisfy this demand, we engage students in career planning in their first and second years so they have more time to specialize and prepare for the most challenging opportunities in their chosen fields.

Networking Training and Events

Business Meeting Etiquette

SECOND-YEAR

Professional Skills Training

Organizational Skills

Email, Social Media, and Phone Etiquette

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Mock Interviews

Dress for Success

Professional Skills Training

are ready to tackle complex, real-world issues. Case

The Isenberg experience goes beyond our rigorous

in point: Students selected to participate in our three

classroom curriculum. Students participate in a wide

finance clubs — Minutemen Fixed Income Fund

range of experiential activities and training that brings

(MFIF), Minutemen Equity Fund (MEF), and Minutemen

data and theory to life, including professional skills

Alternative Investment Fund (MAIF) — learn concrete

training that incorporates organizational skills, business

money management and fund administration skills.

meal etiquette, meeting etiquette, and more.

They have achieved a nearly 100% placement rate for internships and employment upon graduation,

Specialized Finance Clubs

including at the companies highlighted here.

What’s more, Isenberg’s finance department simulates the challenges students will face on the job so they

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EXPERIENTIAL LEARNING

Comprehensive, Hands-on Training

Pitch Competition

Guest Lecturer, Gary Cameron ‘89, Former Managing Director, JP Morgan Chase Required Bloomberg Training and Certification

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Program Mentor, Robert Feingold, Former Managing Director, Group Head - Global Event Driven Investing/ Alternative High Yield, Babson

Advanced networking training

Modeling boot camp

Buy-side research field trip

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ALUMNI IN THE FIELD

Alex Mesisca, ’17 Fixed Income Associate Analyst, T. Rowe Price Former Member, Minutemen Fixed Income Fund “The Minutemen Fixed Income Fund gave me guidance on how to network with alumni and provided me the knowledge foundation for the job I have today. The fund gives an introduction to much of what professional fixed income research analysts do on a daily basis. It equipped me with insight into doing fundamental, bottom-up research analysis of a company; developing an investment thesis; and pitching an idea.”

Katharine Geldart, ’16 Credit Research, Loomis Sayles Former Member, Minutemen Fixed Income Fund “Being involved in a student-managed fund allowed me to explore, practice, and learn more about what I had chosen as my future career path.

It also exposed me to other students and alumni who shared the same passion that I did for investments, while teaching me the basic technical skills necessary in my field. I was able to graduate and move directly into a research role, confident in my ability to execute and secure in the fact that I was in the correct career for me.”

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Yazan Malas, ’16 Equity Research Associate, Fidelity Investments Former Member, Minutemen Equity Fund, Investment Club, Finance Society “I attended my first Investment Club meeting and learned I really liked stocks, which led me to apply to the Minutemen Equity Fund (MEF).

After getting real investment experience through MEF, I fell in love with investing and decided I wanted to pursue a career in asset management. The end result was that Isenberg helped me find what I love, and now I love what I do.”

Jacqueline Krusemark, ‘17 Investment Research Associate at Wellington Management, Former Member, Minutemen Fixed Income Fund, Finance Society, Investment Club In addition to providing a top finance education Isenberg helped prepare my for my career by fostering a community among highly motivated students interested in breaking into the investment industry. With their support we were able to gain hands on, practical experience in investing that was instrumental in setting us apart from other college students applying for jobs in investing.

Joe Russo, ’16 Associate Analyst, T. Rowe Price Former Member, Investment Club, Finance Society, Minutemen Fixed Income Fund “Professor Schurter’s public speaking course was by far the more influential class I took during my time at Isenberg. Effective communication of ideas is a skill that plays a huge role at my job today when pitching investment ideas to portfolio managers. The ability to practice the techniques I learned in the course was instrumental for improving my ability as a communicator.”

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Isenberg School of Management University of Massachusetts Amherst 121 Presidents Drive, Amherst, MA 01003 isenberg.umass.edu