what's portfolio management?

efiL4zaggiN · Post by **efiL4zaggiN** » Sat Mar 12, 2005 8:35 pm

one of my friends just got a job in portfolio management for a major IB - but it's supposedly a trading role... something to do with looking after the banks portfolio of debt, but i have no clue. could anyone shed some light on how much trading these guys do?

IAmEric · Post by **IAmEric** » Sat Mar 12, 2005 9:13 pm

This will probably sound silly, but when I got invited to join NP, I thought of it as kind of an honor. I thought this place really was invitation only. Only later did I find out that any yahoo could join. I wish it was invitation only. We've seen what happens to a forum when it gets run over by noise. This place is already becoming noisy (including noise from me... sorry about my career stuff!).

I know this topic has been discussed already, but times change. In light of the recent increase in noise level, what do you think about reconsidering? It's not like we'd set the bar very high to join. Would it be possible to make most of the forum for members only, but have the "Recruitment" forum public? That way, anyone could make their case as to why they should be able to join the phamily and we'd vote in the Recruitment forum.

Just a thought from a sheah rookie who needs to work on his own personal noise level...

Eric

chiral3 · Post by **chiral3** » Sat Mar 12, 2005 9:17 pm

WTF???

There is buyside and sellside port management. I assume you mean sellside and you mentioned debt. Based on this I am guessing that you are referring to balance sheet securitization. A bank holds debt (corporate debt, retail debt (mortgages, cards, leases)) and this gets structured for financing or to adjust the risk of the portfolio.

chiral3 · Post by **chiral3** » Sat Mar 12, 2005 9:20 pm

Oh, I wouldn't call it trading the way you are thinking of it. It does require pricing, but it is risk based pricingm with payments in time (waterfall structure or whatever). You can take quite a while to prepare and tweak a deal (they are securities regustered with SEC). Sometimes it is just between two banks.

FDAXHunter · Post by **FDAXHunter** » Sat Mar 12, 2005 9:24 pm

That's like asking how much trading will a trader do.

A portfolio manager's responsibility usually consists of optimizing a portfolio under a set of constraints (duration, convexity, names, etc) and implementing it. Depending on your constraints and the resulting flexibility and what the portfolio represents you could be doing alot of trading or once every 6 months. If you are heavily constrained then you will not be able to get very creative in your allocation and hence your trading will mostly focus on optimizing what you have.

EDIT: crossed posts with chiral3.

Ultimately, what you're probably going to be looking at is alot of analyzing the portfolio with regard to changes in credit structure and talking with Loan Syndication, Trading, Risk Control, IB, Underwriters, bla, bla.

IAmEric · Post by **IAmEric** » Sat Mar 12, 2005 9:25 pm

By the way, efiL4zaggiN, my little rant wouldn't apply to you because you [i]were[/i] voted in. I'm just saying that in general things seem to be getting worse lately...

On the topic of the original post, I've actually had similar questions myself. What is the difference between a trader and a portfolio manager? I'd think that a trader "manages a portfolio" too, hence my confusion Blush

efiL4zaggiN · Post by **efiL4zaggiN** » Sat Mar 12, 2005 9:28 pm

IAmEric: funny thing is, i actually did get an invite! Big Smile

Anyway, this IS the careers part of the forum after all... it's not like I came into the academic part of the forum and started breaking up in-depth discussions.

Chiral/FDAX: Rookie question, but thanks for the help. I'll let him know what he's getting in to!

Edit: I actually DO know what the term portfolio management is! I just didn't know they actually had a desk on the trading floor...

chiral3 · Post by **chiral3** » Sat Mar 12, 2005 9:28 pm

Portfolio optimization at an IB usually occurs on the buyside, not the sellside (i.e, bond immunization, etc.)

Edit: again, I don't know where your friend is going

JabairuStork · Post by **JabairuStork** » Sun Mar 13, 2005 12:10 am

It's not exactly a desk on the trading floor in the way you are thinking of it. Portfolio management for a sell side bank is managing risk of a loan/debt portfolio, but he is not making a market. That is the crucial difference with the typical trading desk. Therefore, he is a price taker and not a price maker.

I think most of these guys sit back, collect a check, and just hope not to blow up. Some, however, are known to do some relatively sophisticated credit derivative trades in order to hedge the loan book.

Jam on it.