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Meet Karen Finerman, $400m hedge fund manager

Just stumbled upon this excellent and in-depth profile of hedge fund founder and investor Karen Finerman in the Guardian. She is CEO of the hedge fund Metropolitan Capital Advisors. Why they had to put this into their LIFE & STYLE section rather than their finance section, I don’t understand. It is a very interesting read nevertheless, and has a list of more women who’ve made it to the top in the finance world at the bottom.

I am not sure why Karen Finerman wasn’t included in the 2011 list of 50 Leading Women in Hedge Funds – particularly because that list contains A LOT of women who aren’t actually hedge fund managers – but I recommend you read the interview. I especially enjoyed the part where she talks about how she got started:

[quote]‘When I was 15 years old I read an article about Ivan Boesky, the well-known takeover trader – turned out years later it was all on inside information! But before that came to light he was very successful, very flamboyant. And I thought, “This is what I want to do”. So I’m 15 years old, I decide I’m going to Wall Street. And I apply only to the Wharton school at the University of Pennsylvania. I was obsessed with making money.’ Why? ‘It seemed like a good thing to have!’ She laughs.[/quote]

For those hoping to read that it is easy to combine managing millions and having children, they may be surprised to read that she employs a whopping FOUR nannies to help take care of her four children. That’s the highest number of nannies I have ever heard of!

Turns out she is a contributor to CNBC’s Fast Money Program, where you can catch her, and there is a keynote speech she did on youtube for those who want to hear more from her. It is not so much on the specifics on finance but more on the category of women and personal finance, but interesting nonetheless to see her in action:

but before that… if you are interested in working for a hedge fund, make sure you read my guide to hedge fund careers.

 

What we can learn from two women entrepreneurs you have to know

As I told you previously, I am following a lot of great entrepreneurs and mumpreneurs recently to see how they got started. Two young women with incredibly inspiring stories that I admire are Alexa von Tobel, 27,  founder of Learnvest, and Shama Kabani, 25,  founder of the Marketing ZEN Group. They have several things in common and I will talk about what I think we can all learn from them.

For those of you who don’t know them, a quick introduction:

SHAMA KABANI, 25, did her master’s thesis in organizational communication at the University of Austin, Texas, when she discovered Twitter in its early stages and immediately understood the power of social media for online marketing. She contemplated doing consulting upon graduation and realized she should play to her strengths and focus on social media and its implications for online marketing. She first thought she was too young, but then understood this was an asset, not a disadvantage. She could tell clients they had to learn from the youngsters who had grown up with the internet and gadgets, and they agreed! She then started web TV shows on online marketing and wrote the book “The ZEN of Social Media Marketing: An Easier Way to Build Credibility, Generate Buzz and Increase Revenue, which became a marketing bestseller on amazon. She now runs her online marketing group with 20 employees and was voted one of the “top 25 entrepreneurs under 25″.

ALEXA VON TOBEL, 27, studied psychology at Harvard, then worked just over a year as an analyst on a credit trading desk at Morgan Stanley, briefly became a business manager at venture backed start-up Drop.io in New York and then enrolled at Harvard Business School in the fall of 2008 (the year I graduated from London Business School and became a trader!). Having realised while working in investment banking that she could be responsible for large sums without knowing how to manage her own money, and seeing no good books on personal finance, she pitched a business plan for Learnvest at a business plan competition, won it, and used her savings from Morgan Stanley to start Learnvest. By now, she has raised $24.5m funding for the company and has already managed to reach 100,000 online members who subscribe to her personal finance newsletter and take part in online personal finance courses (some of which are paid). She has won numerous awards, among them “25 Women-Run Startups to Watch” by Fast Company, Worth Magazine’s list of “20 Entrepreneurs to Watch” and BusinessWeek’s “Best Young Tech Entrepreneurs”.

What do they have in common and what can we learn from them?

  • Chutzpah, chutzpah, chutzpah!!! Let’s face it, 99% of us spend our final year in college and business school looking for the “dream job” and hoping somebody will pay us and tell us what to do in return, and we hope that if we work hard we get rewarded and thanked for it. I am incredibly impressed by Shama Kabani simply deciding to do freelance consulting straight away, winning her own clients and learning as she went along. Same with Alexa – I have read hundreds of books on personal finance and financial markets and trading and investing and worked at McKinsey and in trading for years, and still I keep thinking I don’t have enough experience or knowledge to set up a personal finance business. And this girl realizes there is a market that needs simple advice that she can give, packages it nicely and voila – raises $25m! It takes a lot of courage to say “hey, you classmates can go to job interviews and try to find that dream job – I’m just going to do my own thing”.
  • Self-confidence: you can always doubt yourself and focus on your weaknesses and all the things you don’t know. Shama and Alexa, however, played to their strengths, knew they had found a market gap, and hired help where they needed it. They knew they could sell their story, whereas many in their shoes might have stopped and thought nobody would buy it.
  • Marketing, marketing, marketing! If you have read “Rich Dad, Poor Dad” (which I strongly recommend, by the way, it is one of my favourite non-fiction books and I have made it a habit of re-reading it at least once a year), you may know the story of how he advised a talented writer in Singapore on becoming a best-selling author. He recommended her to work in sales and marketing or do a quick marketing course, and she became offended. But he insisted that she wanted to be a best-selling author, not a best-writing one, and that made all the difference. The point here is that what they might have lacked in actual years of experience or in-depth knowledge, they made up for in intelligent marketing, networking, finding the right backers, getting discussed in the national media and on TV, and this brought them the audience to market their businesses. I cannot stress enough how important this is. It’s important because we often hesitate to start a business because we think we are not ready yet in terms of experience or content, and their story shows that you are never ready, that you can focus on marketing aggressively and work on the content and product as you go along.

Entrepreneurs are those that just go out and make things happen instead of saying “it would be great if there was this product or that website”, and Alexa and Shama are fantastic examples for that. I think they are great role models for any aspiring young entrepreneur. I hope this gives you food for thought and inspiration in case you are contemplating your own business idea. What’s stopping us?

Diversity initiatives in employers as a symptom of decline?

I have been wanting to write this post in a long time. I still haven’t reached a conclusive answer but there’s one issue I’m thinking about a lot. It’s about diversity initiatives of big employers, in particular women’s initiatives. The truth is, I’m still not sure if they are such a good thing (though on the surface they obviously bring advantages to women working in those companies).

What got me thinking was a comment made by a senior colleague I worked with a lot during my time at McKinsey. Before becoming a management consultant, he worked for Hewlett Packard for many years. One day he was commenting how HP used to be a great company but that now it had lost much of its attractiveness. Then he went on to say that it was when more and more women reached the top levels of HP that things really started to go down. I was startled by the remark because he is a very fair and reasonable person who has enjoyed working with me and has respected and supported me very much over the last couple of years. In fact, his wife was a very intelligent feminist and a full-time working mum, so he wasn’t the usual type you would expect such a comment from. So I concluded that his observation might have been correct, I think he just got the causal relationship wrong. Maybe things were starting to go down at exactly that time, but I believe the decline of males in the company was not the cause but the effect of the decline.

I have found a lot of evidence for this hypothesis. Doesn’t it surprise you that investment banks and management consultancies are launching all these women’s initiatives these days? Doesn’t it surprise you that when things went badly in 2001/2002, these same companies fired women in droves, and now they somehow want to have a lot of women working for them? Obviously, they say they want “the best talent” and therefore can’t focus only on 50% of the “talent pool”. Though this makes sense, I think it is also a symptom of the declining attractiveness of an employer – for some reason, the top students aren’t applying as much anymore, so they need to go fishing for applicants in additional “pools”. For example, have you ever heard of any private equity firms or hedge funds launching “women’s initiatives”? No? Isn’t it interesting? They have not even got half of the female share of i-banks and consultancies, but they don’t feel the need. The industry is booming but somehow they can hire more than enough people fishing only from 50% of the talent pool, because many guys who would have wanted to work in i-banks and consultancies in the old days want to workfor PE or VC firms nowadays.

Here’s one thing I observed at business school: lots of guys I talked to want to go to “Private Equity or Venture Capital”. One fellow admit from India even joked at dinner “if I hear the word Private Equity one more time today, I’m leaving!!”. Equally, my husband commented the next day that all the female partners he talked to during the partners’ club event proudly declared “my husband wants to work in PE” and “my boyfriend wants to work in PE”. So, interestingly, most of the guys now want to work in PE (=more money than IB/MC), while the women are happy and grateful that for some mysterious reason, the i-banks and management consultancies are hosting women’s events and handing out scholarships.

So that is what I think about the whole issue. I think women should control their enthusiasm about these developments. We should think harder about what they mean. In the most likely case, they mean that there are more attractive and better paid jobs out there now, and that guys have higher aspirations/ higher self confidence and go for the most attractive jobs. At the same time guys start looking for other jobs to take, women are grateful to get the chance to work in very tough jobs that were previously associated with high prestige but have already peaked.

I know this post may be provocative or disappointing to some, but I think it helps to be realistic about what’s going on in the job market. Also, I’m hoping to hear other people’s thoughts on this issue, what do you guys and ladies think? Do you think diversity initiatives are a good thing?

Interview questions to prepare for Sales & Trading interviews

This is a list of interview questions I prepared for applicants from my business school. Lots of questions are easy if you follow the markets and have been in the field before, but for career changers there is actually a lot to prepare! Also check out my sales and trading interview reading list!

Technical questions

  • How are bond prices and yields related?
  • How do you price a bond?
  • How do you calculate implied forward rates?
  • How do you price an option?
  • What is a Credit Default Swap? How does it work?
  • What is a CDO? How does it work?
  • What happens to bond prices when interest rates rise? What happens to equity markets? What happens to currencies?
  • What is an inverted yield curve and how do you interpret it?


  • What is a carry trade? How does it work?

Market awareness

  • Know the price of oil, gold, the level of the FTSE, S&P500, Nikkei, Dax, know FX rates USD/EUR, USD/Yen, EUR/GBP, what have these been doing over the last months?
  • Know central bank rates of US, Euro area, UK and Japan, what have they been doing over the last months, what does the term structure look like, why?
  • How would you invest $1million?
  • Have you ever invested money?
  • Tell me a trade idea?
  • What stocks do you like and why?
  • What do you think the Fed/Japanese Central bank etc. will do at their next meeting?
  • Where do you think interest rates are going?
  • What happened in the markets yesterday?
  • Draw me the US yield curve. Draw me the UK yield curve. Why is it inverted?
  • What do you think about the current credit markets?
  • What’s your view on the US economy?
  • What do you think is the next big investment opportunity in the markets that can offer spectacular returns?
  • etc. (all questions like that to check if you have an opinion and read the newspaper, answer can be short and concise, there is no right answer as long as it is logical and moderately well informed)
  • + questions that you provoke -i.e.
    If you say you are interested in emerging markets, they will ask you about which EM stock you like or what happened in Thailand last year,
    if you say you are interested in oil they might ask what’s going on in Venezuela or Kazakhstan,
    if you say you come from financial engineering they might ask something more technical,
    if you say you want to do sales they might say “sell me something now” and so on

Fit

  • Why do you want to do this?
  • Why do you want to leave your previous job?
  • We have invited 15 of your classmates for the final round. Why should we take you and not your classmates?
  • How will you decide between different offers?
  • What do you like about Deutsche Bank/Lehman Brothers etc.?
  • Why Sales & Trading and not Investment Banking?
  • Tell me about a time in your work when you really felt the power of a team and what a team can achieve


The difference between the buy side and the sell side

Buy side/sell side joke

Passed on to me by a friend on the buy-side (if an investment banker ever asks you to tell him a joke in the job interview, this may a a great one for him ;-) ).

“What is the difference between a buy-side and a sell-side trader?”
“One says “f*** you” and hangs up the phone – the other hangs up the phone and then says “f*** u”

hehehe.