What does make one a good investment manager? Or, how to become better investment manager? Obviously, my question goes parallel with CFA program but does not intersects it. Rephrasing it, how does a CFA Candidate or Member improve his/her investment skills, intuition, other qualities that allow for better and more consistent returns?
I guess those skills would depend on what the manager would be investing in. Do you have a specific area in mind?
I guess my question is about professional development of investment managers, regardless of an asset class. As an example it could be government bonds, but I do not think specifics matter here. Suppose one works in this field, takes CFA exams, finally succeeds at passing them. Then what?
There’s a huge difference between being a stock/bond manager and managing a pool of real estate, private companies, commodities, currencies, etc.
Since you mention bonds, I’ll address those. Your original post said ‘allow for better and more consistent returns’. If you want to develop your skill-set to make you an attractive colleague at a successful bond trading firm, you first need to identify what a successful bond trading firm looks like. How would we define success? Well, I’d suggest that we define success as the ability to deliver returns to clients that are higher than average for the industry…like you say, better and more consistent.
Since we know that passive bond funds outperform active bond funds >90% of the time over any long investment time horizon, and the number goes up as we add more time to the equation, I think we can safely define a successful bond manager as one who can capture fixed income market returns at a low cost, with low turnover and high tax efficiency. Now, the skill-set that would be attractive to one of those managers would be a person who thoroughly understands how to trade in fixed income markets, how to measure market liquidity, how to understand the risk involved in each trade…as well as obviously having a strong understanding of the flaws of active management so that they’re not tempted to deviate from the defined strategy of the fund.
Thanks for giving the detailed definition of a successful bond manager, but the question is about how this manager becomes “even better”. Constant improvement is part of the business, I believe. Question is, how you do it.
Well, your first question was what makes a good investment manager…and I believe I did mention several areas in which you could focus to improve. As stated above…focus on improving your knowledge of trading within fixed income markets, on understanding how to measure market liquidity and on understanding how to lower costs associated in maintaining a portfolio. Almost none of this is discussed in the CFA program, very little of this will be learned by reading.
I understand, thank you.