If someone here has a subscription to risk.net, I would like to get the key facts/opinions on this article about the CFA not really being necessary: http://www.risk.net/credit/opinion/1722865/is-cfa-qualification-worth-sweet-fa
I only read Risk magazine, no subscription to the other publications, this article is with Credit. Can you summarize the article? But an article that starts with: “Many successful hedge fund managers are not CFAs” and showing the CFA logo above it, seems not entirely well educated. There are about three code of conduct violations and the logic that statement implies is akin to saying: “Many drugged and drunk drivers never have an accident.” Yet, the risk is too high to allow these people to continue the practice. That said, building a business, any business, most likely requires more sales skills than certifications.
so…anyone gots the hookup with a subs to credit yo
Chartered Financial Analyst, the qualification that is de rigueur for any aspiring fund manager, fails to address the principles of proper risk management. Advertisement We have all heard the old saying that investment is an art, not a science. For those of us working in the investment business, we know in our heart of hearts that this sentiment is absolutely correct. At the same time, most of us appreciate we would never get paid the amounts we do if we admitted to it. The ultimate expression of the science of investing is that vital title of chartered financial analyst. Membership of the CFA Institute now runs into the hundreds of thousands and it is becoming more and more difficult to gain any desirable position in the market without those critical three letters after one’s name. But as one portfolio manager, now a divisional head at an asset management firm, remarked to me many years ago upon gaining his qualification: “It’s all fine and dandy but I still don’t know whether the markets are going up or down.” Some might even go so far as to argue the dominance of CFAs in the institutional investment business has, other than generating an eye-watering flow of annual membership fees to the Institute, not added a lot in terms of expertise or value. To put it another way, do CFAs generate superior returns or are they just better at explaining why they haven’t? That said, the key discipline of the CFA qualification is admirable, especially when it comes to analysis and ethics. However, the naturally gifted investment professional will get the joke whether he is a charter holder or not and the less gifted will be out of his or her depth, irrespective of having the qualification. Perhaps the most telling factor about the definition of the CFA is the absence of any mention of risk management. All the exams in the world do not seem to have prevented trillions of dollars worth of investment capital from been wiped out in the past three years. Benchmark performance is all well and good but those who have provided their savings for investment managers to work with – the Joe Six-Packs at the top of the drip feed of cash into financial asset markets – like to look at their annual statements. As long as there is a bigger number on the bottom line of the statement than there was on the top line, they are happy. And this is where things can go horribly wrong. CFAs are taught how to minimise the risk of making mistakes. This is a laudable process, but it is very much like a book-keeper who adds up a stack of figures three times and if the same sum comes up, is certain the result must be correct. What the discipline does not teach is how to deal with the question: “What if I’m wrong?” Risk management – proper risk management – is about disaster recovery: framing the downside risk and factoring the potential cost into the investment decision before it is taken. This is a crucial feature of capital preservation, but wherever benchmarking against and outperforming often spuriously constructed bespoke indexes is the centre of the process, capital preservation can disappear. Absolute return investors understand this and hedge funds are likely to be the most obvious exponent of that species. And here is where the value of the CFA qualification can be called into question: a large number of successful hedge fund managers are not CFAs. The greatest risk to the business is the large number of modestly talented portfolio managers who are led to believe that the qualification makes them bullet-proof. Unfortunately for them, being tooled up with a models-based approach to valuation and probable performance renders them easy meat for investment banks and their salesmen who know how to set the trap. There is no easier defence to penetrate than the one that is advertised. Whether you are looking at the dotcom boom or the credit and real estate bubble, these managers pretty much all walked into it with their eyes wide shut. That is not to say that plenty of others without the qualification didn’t; just that the charter did nothing noticeably different to protect holders from the same fate.
My guess is that the author couldn’t get passed L2, and decided to become a writer. Although he has some valid points, I’ve never met anyone that held themselves out to be masters of the market solely b/c they held the charter. It’s not a panacea for the natural inclination of investors to create bubbles, nor does eliminate the fact that markets can be inefficient by virtue of behavioral factors (covered extensively in level 3). If the author had gotten to Level 3, he would know that hundreds of LOS’s were devoted to risk management, both in terms of portfolio construction, and within a corporate management structure. Lastly, his argument seems to be predicated on the idea that attaining the charter should turn a flesh and blood person into a calculating and infallible machine incapable of making mistake. People, and the analysis they produce, is subject to their own bias, interpretation, and colored (perhaps flawed) world view. The CFA charter can give you the tools and knowledge to allow you to recognize/hedge those risks, but it won’t eliminate the possibility of making the types of mistakes that humans tend to make.
It seems that the writer is p!ssed off with some charter holder. But who the hell cares! CFA never told anyone not to learn risk management, someone investing blindly with a charter will do the same without it too. CFA teaches security analysis, it doesn’t mean it must teach Excel too.
PeteyPete Wrote: ------------------------------------------------------- > Lastly, his argument seems to be predicated on the > idea that attaining the charter should turn a > flesh and blood person into a calculating and > infallible machine incapable of making mistake. > People, and the analysis they produce, is subject > to their own bias, interpretation, and colored > (perhaps flawed) world view. The CFA charter can > give you the tools and knowledge to allow you to > recognize/hedge those risks, but it won’t > eliminate the possibility of making the types of > mistakes that humans tend to make. Even bill gross goes wrong.
Thank you brain_wash_your_face!! Agree with the previous posters, the first half on the article was not bad before he went on a long rant on how the CFA doesnt teach you risk managment…
Any risk management system based on VAR is terminally flawed. I get that. But the CFA gives you the tools to understand what is out there and to then go out and decipher s–t yourself. The author missed the point.
I have had the impression Incisive Media does proper editing and fact checking in their publications - not in this case.