Portfolio managers, Investment analysts "Actuarial experience is a plus"

I don’t know much about actuaries or their system of certifications, but apparently the ASA/FSA are their standard. (and apparently far worse than the CFA) How important/common are the completion of the horrifying Actuarial exams in investment management? I’m going the traditional cpa/cfa, etc. route, but more often I see this: Examples: HEDGING ANALYST -Seeks a hedging analyst. ASA, FSA, CFA or MBA preferred. Create and maintain derivative models, study portfolios, work closely with risk management and asset allocation professionals. Excellent financial, statistical and mathematical model-building skills required. PORTFOLIO MANAGER- Derivatives knowledge required - seeks a portfolio manager.ASA, FSA, CFA or MBA ideal. Actuarial experience a plus. PORTFOLIO MANAGER - Derivatives knowledge required - client has an immediate need for a portfolio manager. Compensation up to 400K. CFA or MBA ideal. Actuarial experience a plus. Fixed income portfolio management role, with derivatives & asset/liability modeling expertise preferred. In what IM positions are completion of actuarial exams almost required? The two are derivatives hedging positions and the last one is a fixed income PM role.


Sternwolf - I am an NYU Stern 07 graduate in finance/actuarial science, currently working as a consulting actuary, and I can answer your question. Actuaries are specialized in the field of managing risk, in different areas such as insurance, pension, investments, etc. For those who decided on the specialty track of investments, after finishing their ASA level exams, will take two higher level exams - Advanced Portfolio Management, and Advanced Financial Economics. Their educational system, plus their experience in asset/liability modeling, make them valuable in the world of portfolio management. I just pulled a book down from my shelf. Here’s the description of the author: “Nicholas Mocciolo, FSA, MAAA, is Assistant Vice President and Risk Manager at Hartford Investment Management, where he works on the modeling, valuation, and strategic use of equity and fixed income derivatives in support of the risk management initiatives of the firm.” Another link from Vault.com, about a day in the life of a hedgefund actuary: http://asia.vault.com/nr/newsmain.jsp?nr_page=3&ch_id=306&article_id=29034189&cat_id=3311 Many of the actuaries have both the FSA and CFA, especially those who work in investment management. I can say more about the investment actuaries in my company, and in other companies in the industry. Btw, last semester Stern’s actuarial society had one guest lecture where there was one actuary from Merrill Lynch and one from Morgan Stanley talking about a new fund they started that makes pension arbitrage. It was quite interesting.

Wolf, do u ever stfu? Stop with all the stupid questions and posts.

thanks a lot pennyless. Good info. I’m 08’. I see demand for actuarial skills in some senior portfolio manager positions, which is something I would like to aspire to someday. Which makes me wonder if I need to learn about this field someday. So for the investment minded actuary the ASA combined with the CFA would be the industry standard?

There are alot of ASAs with CFAs, but usually for investments postions, an FSA with the investment specialty track is sought after. As I mentioned above, the FSA is better educated in investments than the ASA because the actuarial exams Advanced Portfolio Management and Advanced Financial Economics are required to complete the investments specialty track. In the earlier exam system for actuaries, an additional requirement to all the exams was the completion of 50 Professional Development credits, which can be obtained by attending many actuarial seminars, writing an in-depth research paper on an actuarial topic, etc. Having the CFA would have allowed one to get half of the credits required. That’s why it is common to see many senior actuaries with CFAs. My senior just completed his FSA level exams on investments, and he will be writing CFA level II in June. The work that he does is quite interesting, which involves alot of modeling equity-linked instruments, risk-based capital, and derivative portfolios. I was told that many consulting actuaries like him, after they leave consulting, tend to accept postions with investment banks in risk management, quantitative trading or go to hedgefunds. I am interested in a career path like that, that’s part of the reason why I am planning to take CFA level 1 in June 2008. I think our Stern finance education has well prepared us for level I.

I have a question about the FSA exam, are there math/stats prerequisites? I’m finance, CPA accounting. The unfortunate part for me is that I did not major in math or statistics. Can I clear to take the FSA exams? Just curious. Also, how does the knowledge of the FSA compare to that of the MFE (since your senior is doing a lot of financial engineering.) I have also heard that the FSA is harder than and longer than the CFA. I agree, I passed Level 1 with 150 hours of studying, well below the recommended number. We’ve seen everything on the exam before. I am also a CAIA-2 candidate. thanks for the info.

Some of the actuarial exams are more math-intensive, while others are less. For the first actuarial exam in Probability Theory, with application to risk management, you need to have the background of Calculus I, II, III, Linear Algebra, and at least one class in mathematical statistics, not the Stern 6 credit statistics type of class though. The second exam, Financial Mathematics, is actually way less intensive than Probability, despite the word mathematics in its name. FM is only 2.5 hours in duration, and tests knowledge of discounted cash flows, portfolio durations, and basic derivatives knowledge in options and futures. Professor Tenebein’s course Mathematics of Investments will prepare you for this exam very well. The third exam, Models for Financial Economics, is also not that quantitative. It involves alot of options knowledge, and the math involved does not go beyond algebra, though there are some topics like interest rate models that may require the knowledge of stochastic calculus, but very few questions are asked on that. I think Professor Figlewski’s class Futures & Options can get you pretty well prepared for this exam. The other two exams after that are very quantitative in nature and will require approximately 400 hours of studying for each. Companies that hire actuaries will usually allow paid study days of 12-15 days for each exam and a good compensation package of a raise of up to 6000 for an exam and a first sitting bonus of 2-3,000, which encourages passing exams and getting your credentials fast. Passing the FSA exams will require between 5-10 years (there are 10 exams in total), while taking two exams every year. That is longer than what it takes to pass the CFA, on average, that’s why people tend to say it’s harder. Unless one really loves learning about risk, or being in the exam compensation program of a company, I don’t see the reason why a person would spend so much time passing the exams. As for the comparison with the MFE, they are not quite directly comparable. One is a master’s degree, the other is a professional credential, though alot of knowledge overlap. The investments exams involve alot of financial engineering topics, but the overall exam process takes alot longer than an MFE (NYU Courant takes 1 year and so does Columbia). Actually, one of the guys in our firm working on derivatives project with my senior has a PhD in Operations Research with a financial engineering focus from a very well know university, and has completed his FSA. I am pretty sure his financial engineering knowledge has been a good complement to his actuarial experience.

My impression has always been that unless a person has a math, statistics or actuarial degree, the chances of passing the actuarial exams, which I also gather have lower pass rates than the CFA exams, would be very low.

I love this topic, here is the link, you can find out more: http://www.actuarialoutpost.com/actuarial_discussion_forum/showthread.php?t=17582

Excuse me everyone, what is the full name of FSA and ASA. I cannot google them anywhere.

huakbb, ASA stands for Associate of the Society of Actuaries, and FSA stands for Fellow of the Society of Actuaries. ASAs have passed their preliminary exams in Probability, Financial Mathematics, Models for Financial Economics, Life Contingency Models, Construction of Actuarial Models, FAP Modules 1-5, FAP Modules 6-8 + Final Assessment, and passed the ASA Seminars. ASAs become FSAs if they pass the fellowship exams in their selected field of specialization, such as pension, life insurance, enterprise risk management, or investments, plus attaining the required professional development credits, which I think are in the process by being replaced by FSA modules now.

Pennyless, your info is excellent. What’s your major? Actuarial science, Finance? So to complete the investment racked FSA would be 10 exams with total math prerequisites of Calc. I-III, Linear Algebra, mathematical stats? I would need to study Calc. II/III/ Linear/Math stats on my own then…or through a community college(for the sake of costs) just to complete the FSA. I kind of regret not studying math in college. I scored perfect 800 on both the SAT II IC/IIC (i know, child’s play) but was never interested in math. Now having quant skills in addition to finance/ accountancy skills has become very crucial. I never took Futures and options at Stern. I took Risk management instead. In any event, I’m going to sit for the FRM next nov. which is basically a six hour text on risk management and futures &options. I’ve heard the whole track takes a whopping 3,000 hours of work. That makes the CFA look like a joke. I’ve always wondered if there were certifications or some sort of self study thing for financial engineering, but there probably aren’t…

So, apparently having quantitative background as well as the FSA is advantageous for being a hedge fund PM.

I’ve never met an FSA in any hedge fund I’ve ever been at. I’ve never interviewed one or even heard of one working in hedge funds. I’ve never met one that I know of at any academic risk management conference. I don’t think FSA is a particularly good credential for getting a job at a hedge fund. As for 10 years passing them, I used to teach them with no years. They really aren’t any harder than CFA exams; they just require more math.

Sternwolf, I was a finance & actuarial science major, but basically took all the statistics classes offered by Stern. I read some of your earlier posts that you are taking alot of concentrations within Stern. I think sometimes it’s better to focus more in one or two things instead of four though. Since you still have one more semester to go, I suggest that you register for some of the statistics courses. Regression & Multivariate Analysis is a very useful class, and the professor puts the main focus on regression techniques used in analyzing stock prices, since Stern is heavily finance. Forecasting of Time Series is also a very useful class, with most of the topics being in econometrics and financial time series. Robert Engle’s famous ARCH model for time-varying volatility, with applications to option pricing, is discussed in that class. Neither of the two classes mentioned above requires any mathematical background, and there are no exams in the classes. You just have to do a few projects and analyses on your own by selecting datasets you like. They are offered by the graduate business school for those MBAs with no prior background in analysis, but want to do trading or hedgefund after graduation. Undergraduates can apply to take them too. Not too hard to get A’s.

I actually haven’t heard of any hedge fund people with FSA either. (to my very limited experience) However, I’ve been seeing the phrase “Actuarial experience a plus” or “FSA, ASA preferred” quite a few times in good hedge fund jobs. Joey, so you are Ph.D, CFA? Do you have any other designations? I’m actually very curious about the logical track to become a hedge fund PM. Most are ex-researchers and traders but I am unsure of how important it is to have strong quantitative risk management abilities or would those be handled by the specialized risk manager.

Yeah, I did. I was intended to go into brand management so I finished up marketing/international business with great rapidness. I did internships in marketing but realized that it was a serious misguided mistake. Afterwards, I cleared Finance, general accounting, CFA, CAIA, and this, being my last semester will be when I finish the CPA track. This “career change” within the last two years has damaged me somewhat as I only have one finance internship in equity research while my prior experiences don’t really count. It’s been difficult and I have wasted an enormous amount of time going the brand management/marketing track. Thanks for the good advice, but this is my last semester. I would really like to take those classes. I’ll buy the books and borrow the syllabus for reference for regression & Multi variable analysis and Forecasting time series. They actually were tested in the CAIA exam in a qualitative manner and were the parts I was least familiar with.

JoeyDVivre, most actuaries in hedgefunds do not use their credentials at all. They are just mixed into the other researchers, traders, modelers. They want to be recognized as financial professionals, and not just simply actuaries. Teaching an actuarial topic does not require that you have passed an exam, especially if it’s just statistics/probabilities. Actuarial science is financial and economic theories with application to insurance. People don’t take exams because they want to teach it. You haven’t seen any actuaries at an academic risk management because most of them are working as actuaries, and not being academias. Actuaries have always been recognized as people making a profession dealing with risk, nonetheless. You can say that FSA is not quite a particularly good credential for getting a job at a hedge fund, because after all, most people are taking them because - they want to be actuaries. Same logic applies to CPAs. Having the credentials help, but they are not must-haves. Many hedgefund managers don’t have any credentials. Sternwolf, I think the only logical track to being a hedgefund PM is starting out with a job in a hedgefund and getting to know the business well. Credentials can help but are rarely required at any hedgefund. Currently I am reading the book “Hedgehogging”. t has some very interesting insider stories about hedgefunds and investment managers. Read it if you have time. This is the time of the year that Sternies are going through the painful full-time interviewing process, are you scheduled to interview with hedgefunds?

Yeah, I’m aware of that. But hedge funds are still investment management firms and the same educational credentials (CFA, etc.) apply in a similar fashion. In the hedge fund I interned in, many people had the CFA, CPA. The PM had the CFA as well. I interned with ER of a hedge fund. It wasn’t the greatest experience but I started to learn about the skillsets I needed to acquire. I was basically a bumbling idiot the entire internship. My senior research analyst, after realizing that I didn’t know much about accounting, basically told me straight out to get the CPA if I wanted to “get into the business”. His educational background was general accounting/math/stats with the CFA. I guess my experience in that HF kind of shaped my goals; to get a strong basis knowledge in finance, accounting, and possibly financial mathematics (actuarial science) before I start my career journey (knowing that it’s hard to mix education with a demanding job at once). I’ve seen the book and I have a bludgeoning collection of light, practice investment reading. Hedge hogging is an experience book so I suggest you pick up “In the House of Money” afterwards. It’s a series of interviews with Hedge fund macro managers. I just bought two light investment texts recently: “Active Value investing” by Vitaliy N. Katsenelson and Trading Strategies for capital markets by Benning. Will read it in a few months. As for my questioning about the FSA, given the quantitative nature of the hedge fund PM role I was wondering if having the mathematical base with risk management training the FSA provides would be a necessary skillset to successfully operate as a HF PM or rise up to become one. I mean, are there really successful HF PM’s without advanced mathematical and risk management knowledge out there who rely only on fundamentals and accounting skills ? Many PM’s are former traders, who obviously have the strong mathematical background.