From the Executive Director
Providing Continuity and Diversity
The Investment Professional Celebrates One Year in Print
It has been a year since we launched the Investment Professional, and we have received a great deal of positive feedback from you, our members and readers. We set out with the mission to provide unbiased coverage of industry developments, detailed analyses of current data and trends, engaging profiles of preeminent players, and keen insights into career management. Many of you have told us that we have gone a long way toward fulfilling that mission; others have given constructive feedback on how we can improve the journal. The task of providing content that is relevant, engaging, and useful to practitioners continues to be a challenge, but one that we eagerly embrace.
Several salient themes have emerged over the past year: the origins of the financial crisis and its effects on global markets; ways to better define and manage risk; the culpability of regulators, firms, and corporate boards in the meltdown, and the need for reform among these groups; the evolving role of the securities analyst and other professionals within the financial industry; the emergence of developing economies, and the investment opportunities they provide; and the growth of sustainable investing initiatives. Our authors have taken diverse approaches to these core issues, and in this latest volume they return to some of the same themes:
- Risk. David Spaulding offers a handy primer on VaR (value at risk). Steven Abernathy and Gunny Scarfo propose a new model to assess risk: the CaR (average daily capital at risk) ratio, which measures the percentage of invested capital that a portfolio would lose if the value of every stock and bond dropped to zero—in other words, the amount of risk that managers actually took, independent of the outcomes of the returns. Paul Richards elucidates a method of estimating a forward-looking equity risk premium based on prospective market multiples, in contrast to the typical backward-looking methods that rely on historical estimates.
- The Aftermath of the Crisis. Amy Buttell examines whether the proposed changes to the international regulatory system will suffice to curb systemic risk and avert another catastrophe. Stephen Harbeck, the president and CEO of the SIPC, and Irving Picard, the court-appointed trustee in the Bernard Madoff case, discuss the difficulties presented by and lessons learned from the Lehman and Madoff cases. Our book reviews cover titles that deal with the meltdown from a variety of perspectives: some investigate why firms such as AIG and Lehman collapsed, and others tackle broader topics including the underestimation of risk in times of uncertainty, the use and abuse of derivatives, and the need for an alternative to the efficient market hypothesis.
- Changing Roles and Opportunities for Financial Professionals. As research budgets dwindle and large firms reduce the number of companies their analysts cover, independent research firms are well-placed to pick up the slack, as Neil O’Hara explains. Career opportunities within the federal government are on the rise, as newly funded agencies look to staff up and older agencies expect to add more workers; Constance Gustke offers practical advice for landing a government job. Susan Grant outlines the steps to becoming a registered investment advisor.
- Developing Economies. Bruce Chadwick considers how recent political and economic liberalization has made investing in Egypt attractive despite the risks stemming from the country’s authoritarian political structure, ageing president, unequal wealth distribution, and fundamentalist social movements. Joel Shulman presents the results of a study incorporating approximately 700 entrepreneurs in 36 countries, and finds that foreign entrepreneurs tend to outperform major benchmarks.
- Sustainable Investing. Susan Arterian Chang explores the “sustainability gap”—the lack of meaningful exposure to sustainability in most business schools’ curricula—and those schools that are providing rigorous graduate and adult-education programs to help fill that gap. She also examines the complexities of water risk and ways in which companies are responding to investor demands to better manage and report this risk.
We want to know how we can develop our publication to better meet your needs. Send comments, suggestions, and questions to editor@theinvestmentprofessional.com. We look forward to receiving your feedback.
