HKSI Career Talk Series An Insider View of Developing Your Career in the Financial Industry 16 Nov 2

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HKSI Career Talk SeriesAn Insider View
ofDeveloping Your Career in the Financial
Industry16 Nov 2007
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Knowing our Strength

• Our strength as an international financial centre
• Location in the region proximity to PRC
• Infrastructure
• Talent pool
• Finance services as the pillar industry of HK
  economy 6.2 GDP in 1985 gt 12.8 GDP in 2005

• No. of practitioners grows steadily SFC
  licensees 20,201 in 2003 gt 32,208 in Sep 2007
• HK licensing regime upholding the standards of
  practitioners

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Grooming of Talent

• HKSI is a professional and examining body,
  dedicated to grooming new talent and contributing
  towards building a professional work force within
  the local finance industry through the following
  initiatives
• HKSI Sponsorship Programme
• Jobs2Click (online recruitment service)
• Membership services (professional development of
  new entrants)
• HKSI Career Talk Series (provide useful and
  practical guidance)
• Senior industry practitioners or the Insiders
  regularly share their real-life experience
  provide advice to those seeking a career in
  Financial services.

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Asset Management - the Opportunities AheadMs
Samantha Ho (MHKSI)Member of HKSI Membership
CommitteeInvestment Director of INVESCO Hong
Kong Ltd
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Number of Licensees / Registrants
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Responsibilities Asian Investment Team

• Provide quality control on investment
  team/process and introduce enhancements if
  appropriate
• Resolve cross-border issues and leverage best
  practice
• Risk management
• Ensure disciplined investment process is followed
• Coordinate research efforts, supervise investment
  team
• Provide regional overview and strategy directions
• Coordinate portfolio construction and
  implementation within the context of a specific
  mandate
• Monitor and ensure synchronization buy/sell
  decisions
• Macro-economic research/liquidity analysis
• Specific country and portfolio responsibilities
• Stock research and analysis ? Monitoring List and
  Country Models
• Risk and performance attribution analysis /
  investment team IT
• Best execution within compliance/audit structures

• Head of Investments,
• Asia Pacific Region

2. Chief Investment Officer
3. Fund Managers
4. Risk and Performance Analysts
5. Centralized Dealing
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Top Down Country Allocation Process
External Factors
Regional Factors
Currency US
Interest Rates US Europe Japan
Technical Fund Flow Commodity
Economic Growth CPI, i rate M Supply Trade,
C/A FX
Valuation Absolute Relative Yield Gap
Market Outlook US Equities US Bonds
Growth Earnings EPS Trend
Economic Growth US Europe Japan
Technical Liquidity Market Accessibility
Political Country Risk Govt Policy
Bull Bear Profile
Regional Ranking
Country Allocation (100 Equity)
Cash Level
Asset Allocation ( Equity Cash)
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Investment Process - Overview
Country Allocation
Model Portfolios
Stock Selection
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Stock Selection Process Research
ExecutionFundamental Stock Analysis
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Stock Selection Process
STEP 3 STOCK ANALYSIS

• Transparent and Disciplined Investment Process

Portfolio
First Cut Analysis
Company Visit
Detailed Analysis
Prepare Report
Peer Review
Identify Stock
Portfolio
Discard
Key Considerations

• Screening
• - PBV Historical
• - EPS Changes
• - Growth
• - Dividend
• Research
• Internal
• External
• Monitor List
• SDRN

• Financial
• ROE, ROI
• Cash-flow
• Balance Sheet
• Valuation
• DDM
• PER, PCF, PBV
• -Sector relative
• -Country relative
• Franchise Management
• Growth

• Management
• Integrity
• Capability
• Product

• Business Model
• Value Chain Analysis
• Industry Food Chain
• Product Analysis
• Macroeconomic Issues
• Update
• Growth assumptions
• - ROE Cycle
• Financial Analysis
• Management
• DDM
• Price Implied Growth
• Identify Catalysts

Stock Checklist Target Price

• Critique
• Business Model
• Growth Assumptions
• Discount Assumptions
• Identify
• Confirmation Bias
• Accessibilty Bias
• Representation Bias

Key Output
Identify Missed Assumptions
Free Cash-flow Leverage ROE gt WACC Sustainable
Growth - At least 15

• Business Sustainability
• Relative Position on Food Chain
• Value creation
• Growth Assumptions
• Normalized ROE
• Normalized Payout ratio
• Takeover Value
• - Private market
• Management buyout
• Catalysts
• Management
• Industry
• Technology
• Target Price

For illustrative purposes only.
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Risk Management
Process Description

• Set performance and risk objectives
• Set risk budget for portfolios
• Monitor portfolio holdings, tracking error,
  active stock, sector and country bets through
  BARRA and FactSet reports
• Monitor portfolio active TE contributions, stock
  liquidity
• Monitor portfolio performance vs benchmark and
  peer group
• Review performance attribution analysis
• Review portfolio realized TE vs target TE
• Monitor portfolio characteristics
• Ensure product integrity
• Quarterly portfolio review

1. Risk Budgeting
2. Risk Monitoring
3. Performance and Risk Management Review
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Overview of Operations Flow
OPERATIONS

• Make investment decisions
• Create orders

Fund manager

• Execute orders with brokers
• Ensure best execution

Central Dealing Desk

• Confirm trades
• Send settlement instructions to custodians

Settlement

• Cash management
• Asset reconciliation
• Fund valuation and pricing

Fund Accounting

• Monitoring conduct of the firm and employees
• Monitoring investment guidelines
• Providing advice and direction on compliance
  with and
• interpretation of relevant regulations
• - Developing compliance manual

Compliance
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Investment Banking - the entrance and keys to
successMr John Williamson (MHKSI)Director of
HKSI BoardChairman of HKSI Membership
CommitteeChief Financial Officer of Search
Investment Group
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Career Options

• Some high-powered jobs, such as those in
  investment banking, demand long hours.
• Other roles, such as Business Support, are
  becoming increasingly demanding.
• There are jobs for specialists
• IT
• Legal
• HR
• Finance
• Operations

Compliance Officer
Fund Managers
Private Bankers
Research Analysts
Portfolio Manager
Operations Staff
Risk Managers
Traders

• In short, whatever your degree subject, if you
  want to work in the financial services industry
  and have the necessary skills and personal
  attributes, there is likely to be a job for you.

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Investment Banking

• Investment bankers often seen as the most
  glamorous people - key roles high financial
  rewards.
• Work very long hours, enormous job pressure and
  must maintain the keenest awareness of risk
  management, stock market conditions, and economic
  trends.
• Investment banking spans a wide remit including
• corporate finance (raising capital for companies
  by issuing shares or bonds)
• mergers and acquisitions
• capital markets (trading in shares and bonds to
  make money).

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Corporate Finance

• What
• Give advice to companies, institutions, and
  governments about how best to raise finance.
• Help their clients to implement and achieve the
  desired results.

Team Players Resourceful Ambitious Committed

• Who
• Many of those entering investment banking are
  young and highly ambitious they have a work
  hard, play hard attitude.
• Graduates looking to go into corporate finance,
  debt capital, or equity capital will need to be
  high academic achievers, capable of processing
  large amounts of information in a short space of
  time. Competition is high, but the rewards can be
  substantial.
• Firms recruiting in this area will be looking for
  team players - you will need to be resourceful,
  ambitious, and committed. The hours can be long
  and socialising is often done within the group,
  so it is important that you like your colleagues!

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Mergers and Acquisitions

• What
• advise clients as to which companies make good
  takeover prospects or, alternatively, advise
  potential targets on how to avoid being taken
  over.
• Advice can range from simple strategic
  suggestions to detailed advice on how much to
  bid, how to finance the bid, and launching any
  counter-bid.

• Who
• As a graduate, you will be involved in the
  financial analysis, looking at the companys
  profits, strengths, and other key factors, as
  well as undertaking preparation work such as
  checking documentation.
• You will also increasingly be involved in
  face-to-face meetings with clients, including
  chief executives entrepreneurs from a wide
  range of companies.
• The hours in MA can be horrific. As deals are
  closing, working weeks may exceed 90 100 hours.
  However, the financial rewards can be significant
  and international travel is commonplace.

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Capital Markets

• What
• A trading department where dealers buy and sell
  shares, bonds, and other assets such as
  derivatives (futures and options).
• The job is highly pressurised. Dealers buy and
  sell on behalf of clients and banks, to maximize
  money or to minimise financial risk.
• Teams of researchers will feed information to the
  dealer for making informed decisions about
  whether to buy or sell.
• A successful dealer needs a great deal of
  insight, good personal judgement and an element
  of luck!
• In volatile markets, trading becomes frantic and
  large sums of money can be made or lost in
  minutes.

• Who
• Graduates seeking to go into the trading
  environment will need to have self-confidence,
  determination, be able to think on their feet and
  make informed decisions quickly.

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What You Must Know Before the Interviews with
Banks

• How Banks Are Organised and Structured
• The Top Ranked Banks
• What Qualities Banks are Looking for In the
  Interview Process
• What Qualifications You Need and How You Acquire
  Them
• Fundamental Valuation Techniques
• How To Get Invited to Interviews With Banks
• Why Choosing The First Employer Is Crucial For
  Your Future Career

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The Future of the Financial Industry

• Increasing globalisation and use of information
  technology
• Structural changes in the financial sector
• More electronic transactions and outsourcing of
  functions
• New and different forms of capital
• Investment in technology, media, and
  telecommunications
• Pensions gap pressure on investors
• Emerging markets
• Reputation and brand value
• Access to finance

Globalisation Outsourcing New forms Branding
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In the Coming 10 or 20 Years

• The sector will continue to attract able people
  who will, with the right combination of talent
  hard work, find enormous satisfaction in the
  intellectual stimulation, teamwork, financial
  rewards that the industry provides.
• New jobs in the financial sector may emerge,
  requiring more specialist skill in niche markets
  and a greater focus on added value and
  creativity.
• New and different forms of capital will dominate
  the investment scene, with greater mobilisation
  of individual wealth including private equity and
  more widely accessible start-up capital.

• Global financial service institutions will
  require the right expertise to respond to these
  challenges, seeing the need to understand and
  respect the differences in the way markets
  operate, while applying universal principles to
  each.
• Forward-thinking financial institutions will
  generate market advantage and superior returns by
  taking a longer-term view on company performance,
  allocating capital towards activities which are
  more inherently sustainable, providing
  innovative solutions to the issues of
  environmental degradation, social inequity, and
  climate change.

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My Advice is

• Think about your aspiration carefullytalk to
  others in the industry.
• Consider what kind of skills or talent you have
  or want to develop.
• Learn about the history and developments of
  industry.
• Explore the sector(s) that interest you most.
• Decide how you are going to prepare yourself to
  succeed in this exciting but demanding industry.