EDHEC-Risk Institute PhD in Finance - Testimonial: Pablo Balan, Global Head of Portfolio Risk and Analytics, Coutts, British and American, 39
Could you tell us about your professional and academic background?
I grew up in Argentina, where I did a technical degree in systems analysis and then went to Amherst College in the US, graduating in liberal arts with a Physics major which gave me a good background in mathematics and sciences. After graduating, I moved to New York and found work at a small hedge fund where I worked for a year and a half. Realising I needed a stronger background in finance to stay in this industry, I quit to do a Master of International Affairs with a concentration in international finance and monetary theory at Columbia University, taking electives in capital markets, asset pricing, derivatives, investment banking, etc. As part of the programme, I did a summer internship with Citigroup on a derivatives structuring desk where I helped structure, price, and trade derivatives for private clients. This became a permanent job in which I stayed for two and a half years. After that, I moved to Houston for a year and a half, to work as an investment advisor to Latin-American clients and then transfered to London, where I once again focused on structured products and briefly ran the private bank’s foreign exchange and fixed income derivatives desk. In 2003, I moved to Coutts where, after a brief stint in structured products, I moved to the investment management side to look at risk management and quantitative analysis for the discretionarily managed side of Coutts’ business. While in London, I refined my investments background going through the CFA programme and obtaining an MSc in Mathematical Trading and Finance from Cass Business School. I am now fully focused on the asset management side of Coutts, doing risk management and quantitative modelling for private client wealth management.
Isn’t private wealth management low-tech?
Certainly if you compare this to running a quantitative hedge fund, but the level of techniques used in private wealth management varies greatly across institutions. In fact, the opportunities to apply advanced quantitative and qualitative modelling are vast: they encompass dynamic asset allocation, asset-liability management (ALM), integration of alternative investments into the portfolio, structured products, and of course risk management! A skilled private wealth management professional can help design products and services that truly meet the needs of clients as opposed to pushing through products designed by the investment banking side of the industry. To do your job properly, you need to combine a thorough understanding of the products and the tools to understand client needs.
What types of clients do you serve?
Our main job is running discretionary accounts from half-a-million pounds to hundreds of millions. Recently, I have become involved with Coutts’ Private Office, which caters to family offices and the top of the ultra-high-net-worth market, with which I started working on a project to deliver ALM-style solutions to clients - these will be cast in a multi-class multiperiod framework and will have to take into account multiple tax jurisdictions.
So the link with the PhD in Finance and EDHEC-Risk’s research is pretty clear...
Absolutely. Besides, as a user I have been looking at alternative investments to measure our exposure to their risks, separate alpha and beta, include them in a core/satellite model, perform factor modelling of hedge funds, and implement dynamic replication strategies. So it is fair to say, that there is quite a bit of overlap with the work of EDHEC-Risk Institute and the curriculum of the PhD in Finance: risk management, asset allocation, ALM, continuous-time finance, hedge fund risk analysis and benchmarking, use of structured products and derivatives as risk management tools, etc.
What are your expectations vis-à-vis the PhD in Finance?
First and foremost, although I have studied quite a bit in finance, there are still significant gaps in my knowledge. I want to build deep and stable foundations allowing me not only to explore specific themes in an advanced way, but also approach finance as an interrelated set of fields as opposed to a series of silos.
Second, there is the opportunity to do specific research in the fields in which I have strong intellectual and career interests, and to do so with experts in those fields. Third, there is the access to a network of colleagues—fellow students, faculty, and researchers—which I hope will help me in the future, both professionally and academically, by enhancing my ability to draw upon specialised expertise in very specific fields and, more generally, by providing the support and advice to pursue a successful career.
What are your impressions of the first week?
First, as far as I can tell, the programme is very well organised and run: core courses fit in with one-another very well and electives complement them. Second, the teaching quality is excellent compared to my experience - typically the best researchers do not make the best instructors, but EDHEC-Risk Institute has managed to assemble a team of highly respected scholars who yet manage to be very precise and didactic. Third, the quality of the class is better than in my past experiences - students have strong academic foundations, a wealth of industry experience and high ambitions. It also seems that there has been a lot of effort on the part of admissions to achieve diversity, which is a good thing. Finally, the first week has confirmed that there is a lot of material to cover and hard work ahead.
Who would you recommend this programme to?
In my mind, the programme serves a very niche market of people who have prospered in their careers but feel that the changes taking place in the industry mean that advanced technical skills and a thorough understanding of finance will be indispensable to remain competitive and keep progressing. Whilst some people feel that attending the occasional industry seminar will keep them current, this programme is intended for those not willing to sacrifice on academic rigour.
Do you already have an idea of what you would like to focus upon in the dissertation stage?
At this stage, my first paper could be concerned with ALM for private clients, and my second paper with factor analysis of hedge fund returns. Both of these happen to be of common interest with the team of EDHEC-Risk Institute. Naturally, my final choices will depend upon the evolution in my job: as interesting as a topic might be intellectually, it needs to be applicable in my work and relevant to my career goals.
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