Written Interview
Instructions: Recently, at a CFA society meeting in Pittsburgh you met a senior portfolio manager who works at BlackRock. She tells you that she is looking for a junior partner to train and eventually take over her book of clients. You both exchange business cards, and later that day you send her a courtesy thank you e-mail. You do not expect a response, especially with today's current job market.
However, much to your surprise, she responds today with a brief note and the following list of questions in the form of a written interview. In her note she explains that a portfolio analyst at BlackRock is a highly coveted position. Due to the high number of applicants for the job, she informs you that this written interview will be used as a screening process to select the final three candidates for face-to-face interviews. Please answer the questions below honestly and to the best of your ability, providing a full answer that is about three sentences long (unless the question asks you to make a list), doing your own research (and providing sources), and proofreading and typing your answers. Answers may include your own opinion or those of advocates and/or critics of particular investing strategies.
1) What exactly does a portfolio manager do? What are the chief elements of an Investment Policy Statement and how does it relate to the responsibilities of a portfolio manager?
2) What qualifications (i.e. resume) would you expect to find in a qualified portfolio manager? (Please list & explain)
3) Compare and contrast the qualifications you currently have with those you plan to obtain within the next ten years. (even if you have no intention of becoming a portfolio manager, please list & explain the qualifications desired in a portfolio manager)
4) Please consider the concepts of "economic moats" and "durable competitive advantage"? How would it be applied to individual stocks? How about to industries? For example, suppose a client would like to know what industries you think will do well in the next year (short-term) and over the next ten or more years (long-term). What domestic and global securities within the client's portfolio would alleviate the client's concerns? (Please list & explain)
5) How do you decide what stocks to buy? What is your favorite investment strategy? Please provide examples or sources (i.e. research backup).
6) What is the "Fama French Three Factor Model?" What is "Jensen's Alpha?"
7) Please briefly describe equity "style analysis."
8) What does Altman's z-score signify?
9) Please explain diversification and beta. What would you say to a client that only wants to be invested in tech stocks? Domestic stocks? Bonds?
10) What would you say to a client that wants investments with the highest return and the lowest risk?
11) What is meant by ‘portfolio performance attribution"? Please comment on this topic as it pertains to different stocks, industries, and countries.
12) Please use www.morningstar.com to find two non-leveraged ETFs. Please locate, compare, and explain at least three measures of risk-adjusted portfolio performance. On the basis of these measures, which fund would you prefer to invest in, and why?
13) Please briefly describe "quantitative equity portfolio management" that uses simultaneous screening and z-scores.
14) Please briefly describe two strategies that use options to hedge the risk of holding a stock. What are the benefits and/or drawbacks of each strategy?
15) You are a portfolio manager managing a portfolio of $30 million that is benchmarked to the S&P 500 Index. The bets of your portfolio is 1.25. One-month S&P 500 futures are trading at 2,000 with a ‘tick size' of $250 per $1 move in the index.
a. Due to an upcoming economic report, you want to hedge all of your market risk for one month - how many futures should you sell?
b. Suppose that instead you only want to reduce your beta to 0.50 for the same time frame - how many futures should you sell in that case?