Job Advice On Fixed Income Job Offer

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Another letter from a reader:

Hey David,

I am an avid follower of your blog and find your insights tremendously helpful in aiding my own decision-making framework.

An opportunity was recently offered to me, and I hope you can provide some guidance, given your vast experience in both the fixed income and equity fields.

As background, I am 29 and have been in the finance-investment industry for just over seven years. The first couple of years were spent at a discount brokerage, primarily in a trading role. After that I joined a group called the ZZZZZZZ, which provides advice to the 1,500 investment advisors in the YYYYYYY channel. Over the last several years, I have worked as an associate on the NNNNNNN Equity Team and later moved on to a role that provides coverage for ETFs, mostly from a product perspective but also increasingly from an asset allocation standpoint (i.e. portfolio construction, macro commentaries on major and sub-asset classes).

Several positions have recently opened up on the Fixed Income Desk. My understanding is that the job will involve a lot of relative value analysis of individual securities, including preferred shares. I have spoken to several people regarding the potential opportunity, and the main theme that has emerged is that fixed income is generally less exciting and more technical, whereas equities is more of an “art”, which I don’t necessarily disagree with. Having said that, the fixed income position would offer what I would consider valuable experience in looking at debt instruments and some exposure to bond trading, which are areas that I have close to zero knowledge.

In any case, you probably have fielded similar questions in the past, and with your experience, likely have some invaluable insights to share. Any guidance on the potential switch from equities/ETFs to fixed income would be much appreciated.

Dear Friend,

It is easier to move from bonds to equities than vice-versa.  The mindset that embraces risk does not easily embrace a more risk-constrained setting.

That said, I would encourage you to pursue the opportunities on the fixed-income desk.  It will broaden you.  My years in fixed income prepared me for what I do now.  Understanding fixed claims and variable claims creates a robust investor.

Think of it as a 3-5 year stint in fixed income, which will make you a richer candidate for other roles in investment banking.

Sincerely,

David

Via: alephblog

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About the Author

David Merkel
David J. Merkel, CFA, FSA — 2010-present, I am working on setting up my own equity asset management shop, tentatively called Aleph Investments. It is possible that I might do a joint venture with someone else if we can do more together than separately. From 2008-2010, I was the Chief Economist and Director of Research of Finacorp Securities. I did a many things for Finacorp, mainly research and analysis on a wide variety of fixed income and equity securities, and trading strategies. Until 2007, I was a senior investment analyst at Hovde Capital, responsible for analysis and valuation of investment opportunities for the FIP funds, particularly of companies in the insurance industry. I also managed the internal profit sharing and charitable endowment monies of the firm. From 2003-2007, I was a leading commentator at the investment website RealMoney.com. Back in 2003, after several years of correspondence, James Cramer invited me to write for the site, and I wrote for RealMoney on equity and bond portfolio management, macroeconomics, derivatives, quantitative strategies, insurance issues, corporate governance, etc. My specialty is looking at the interlinkages in the markets in order to understand individual markets better. I no longer contribute to RealMoney; I scaled it back because my work duties have gotten larger, and I began this blog to develop a distinct voice with a wider distribution. After three-plus year of operation, I believe I have achieved that. Prior to joining Hovde in 2003, I managed corporate bonds for Dwight Asset Management. In 1998, I joined the Mount Washington Investment Group as the Mortgage Bond and Asset Liability manager after working with Provident Mutual, AIG and Pacific Standard Life. My background as a life actuary has given me a different perspective on investing. How do you earn money without taking undue risk? How do you convey ideas about investing while showing a proper level of uncertainty on the likelihood of success? How do the various markets fit together, telling us us a broader story than any single piece? These are the themes that I will deal with in this blog. I hold bachelor’s and master’s degrees from Johns Hopkins University. In my spare time, I take care of our eight children with my wonderful wife Ruth.

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