8 Things About a Winning Team
“Our firm is kind of like a teaching hospital,” said Kim Shannon, President, Founder and CIO of Sionna Investment Managers. The second part of her presentation to the CFA Society Toronto at the National Club on March 5, 2014, described what she looks for in her employees, and how the team works. Below are eight insights on selecting and retaining top talent. Grow their own – Shannon noticed early on that the most successful investment firms grew their own talent, namely, they hired junior employees and trained them over a period of years for senior positions. Greed is not good – […]
The Value Proposition
“I believe financial statements are as much marketing documents as statements of fact,” said Kim Shannon, President, Founder and Chief Investment Officer of Sionna Investment Managers. She was addressing a crowd of analysts and financial managers at a breakfast meeting organized by the CFA Society Toronto on March 5, 2014, in the historic National Club. The first part of Shannon’s presentation tied in directly with her new book, The Value Proposition. Shannon wrote 80 pages of the first draft, and then stopped while she established the company and guided it through the next decade (which included the 2008 financial crisis). Years […]
Commercial Credit Analytics 2: A Missed Opportunity
Many banks are wasting the loans data they capture, according to David O’Connell, Senior Analyst, Aite Group, a financial services consulting group. This posting summarizes the second half of his webinar organized by the Global Association of Risk Professionals on February 20, 2014. O’Connell contrasted marketing teams with underwriting teams. Marketing teams use predictive analytics to decide which customers are most likely to respond to certain campaigns. They are very forward-thinking in devising the “customer next best action,” he said. O’Connell encouraged the credit and underwriting teams to have a similar outlook—to also make use of predictive analytics to determine “borrower […]
Commercial Credit Analytics 1: Under-utilized Tools
“There is a surprising under-utilization of common tools,” said David O’Connell, Senior Analyst, Aite Group, a financial services consulting group, during a webinar organized by the Global Association of Risk Professionals on February 20, 2014. He was referring to a survey by Aite Group of about twenty North American commercial loan underwriting professionals (responses as at quarter end Q3 2012). O’Connell characterized the under-utilization as “surprising” because loan underwriting is such an important part of banking. O’Connell was formerly a loan underwriting and loans officer, and was clearly familiar with the details of commercial lending and its role in “Banking […]
Trading Book Capital: Repercussions of a Revised Framework
“Currently, there’s a large gap between models and the standardized approach. [The members of the Basel Committee] are trying to bring these back into line,” said Patricia Jackson, Head of Financial Regulatory Advice at EY (formerly known as Ernst & Young). She was the second of two speakers at a GARP-sponsored webinar on recently proposed changes to the trading book capital requirements. Strengthening the boundary between the banking book and the trading book “could have a significant impact,” Jackson said, because it will be harder to move positions. The change was made “to reduce arbitrage opportunities for placement with respect […]
Trading Book Capital: A Revised Framework
The proposed changes to trading book capital requirements are “a regulatory trade-off among the objectives of simplicity, risk sensitivity, and comparability,” said Mark Levonian, Managing Director and Global Head at Promontory Financial Group, and the first of two speakers at a webinar sponsored by the Global Association of Risk Professionals held February 11, 2014. Levonian acted as “tour guide” for the Basel Committee’s recently proposed changes to the trading book capital requirements. Highlights of the changes are: the revised standardized approach, more rigorous testing, and replacement of the value at risk (VaR) measurement with expected shortfall. “The perception from the […]
Pension Plan Risk, Old and New
“It’s not about volatility of returns; it’s about volatility of funded status,” said William da Silva, Senior Partner at AON Hewitt, a multinational company specializing in risk management and human resources. He was referring to financial risk management in the face of the developing pension crisis. He was the second of two speakers on the evening of January 30, 2014 at the GARP Toronto Chapter meeting held at First Canadian Place at King & Bay, Toronto. “It’s been a decade of pain,” da Silva said, noting that the median solvency ratio of pension plans had gone from a healthy 110 percent funded […]
A Low Volatility Equity Strategy
Despite conventional wisdom, “the returns on more volatile equities have not exceeded the historical returns on less volatile equities,” said Grant Wang, Senior Vice-President and Head of Research at Highstreet Asset Management in London, Canada. He was the first of two speakers at the GARP Toronto Chapter meeting held at First Canadian Place at King & Bay, Toronto on the evening of January 30, 2014. Wang began with a brief survey of the increased volatility in equity markets over the past several years: the 2001 tech bubble, the 2008 housing crash, and the 2011 European debt crisis. “VIX has posed […]
Stress Testing, Part 2: Data, the River
A common theme throughout contemporary financial stress testing is “data, the risky river,” said David O’Connell, Senior Analyst, Aite Group, a financial services consulting group. He was the second of two speakers to address issues around data in stress testing in a webinar organized by GARP on January 28, 2014. The recent financial crisis has permanently altered the relationship between the central bank and all other financial institutions, said O’Connell. The central bank is now looking at them as potential customers for a line of credit, and thus must carry out due diligence including asking for proof that the financial […]
Stress Testing, Part 1: The Data Mountain
Demands by regulators for increased frequency of reporting and more granularity of data in financial stress testing “are creating a data mountain,” said Jon Asprey, VP Strategic Consulting, Trillium Software. He was the first of two speakers to address the issue of data in stress testing in a webinar organized by the Global Association of Risk Professionals on January 28, 2014. He contrasted the new demands with early (pre-financial crisis) days of Basel reporting, when the summary level was sufficient. The data mountain has a significant impact on financial institutions, creating “the month-end panic,” Asprey said, since reporting at most […]