Ali’s blog

Mostly quant stuff with occasional digressions

For MFE students

Posted by alifinmath on February 3, 2008

This article was pointed out to me today by an acquaintance of mine who is still in the U of M’s MFM program (and would probably prefer to remain anonymous). I highly recommend it for its sober appraisal of the job market for MFE graduates.

MFE programs have sprouted up all over the place. Many of these do not have knowledgeable and competent staff available (let alone with star reputations). The courses themselves tend to be threadbare. Caveat Emptor: let the buyer beware. Graduates of these programs (I use the term loosely) will not get the jobs they may have been led to believe would be theirs for the asking.

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5 Responses to “For MFE students”

  1. Chris Prouty said

    Well, as usual, I’ll take the sunnier side of the argument. The article you posted is interesting, but I think it is overly pessimistic. I’ll preface my post by saying that any comments I make are intended in the context of a typical job market, so the results of recent graduates may differ as investment banks and financial companies of various stripes buckle down for an ugly few years, at least.

    First, the Twin Cities is, per capita, one of the biggest financial centers in the country, believe it or not. I can name ten banks/funds/companies off the top of my head who would entertain our graduates.

    Second, comparing an MFM program to an MBA program is not fair. I suspect that a minority of MBA graduates are looking to go into finance. MBA programs funnel graduates into various management, HR, marketing, sales, etc. positions as well as finance. It is not a specialized training like an MFM program. Furthermore, I suspect many financial firms will adjust their hiring practices to recruit specifically from MFM programs as opposed to MBA as the MFM programs become better known. MBA degrees were a default – now that something better has come along, why would employers not entertain candidates with specific training?

    Third, although the U of M doesn’t (yet) have the rep of a top-tier school, that fact will not preclude good students who really know the material from getting interviews and jobs. To say that anyone who doesn’t graduate from a top MFM program is doomed is like saying someone who doesn’t finish undergrad at an Ivy-League school is doomed. School, like life, is what you make it and clever students with a passion for the topic will learn, experiment, network, and succeed.

    P.S. Securian just created two new quantitative roles with the MFM program in mind. Even in this economy, and even in little ol’ St. Paul, we are seeing growth and opportunity.

  2. alifinmath said

    I envy you your optimistic outlook. We’ve spoken about these things often enough, and I don’t want to reiterate points I’ve made before.

    Speaking in general terms, I don’t think one year (or even 18 months) is enough to learn quant finance properly — even at a reputable program. Indeed, practitioners often complain that even students of established programs come woefully unprepared. The MFE programs are of relatively recent provenance and their future remains uncertain: as the world of finance continues to change, so also may the nature of the people entering it (and by implication the knowledge and credentials they bring). For what it’s worth, my feeling is that the financial industry will be in the throes of reorganisation and retrenchment for the indefinite future. In this uncertain climate I think it’s likely that what hiring is done will be biased towards Ph.D.s (versus hiring MFEs who have but a superficial acquaintance with stochastic analysis, PDEs, numerical analysis, etc.).

    This is one reason to go for a Ph.D. in applied math (stochastic/probability/PDEs/numerical analysis/simulation). Another reason is simply to hedge one’s bets. Even if the world of finance crashes into oblivion, the areas of stochastic processes, PDEs, and numerical analysis will remain, as will their applications to fields such biology and physics. In other words, a math Ph.D. affords more employment flexibility, versus an MFE with his or her narrow and superficial training.

    If I had to advise someone with a bachelor’s degree in mathematics who was undecided about whether to go for an MFE or Ph.D., I’d steer him or her towards the latter, even though it might take several years. During those years, he or she should take all the courses in probability, stochastic processes, PDEs, numerical analysis, Monte Carlo simulation, and programming as possible.

  3. alifinmath said

    Chris, your arguments simply aren’t convincing.The U of M’s MFM program, as it is presently constituted, simply doesn’t provide the finance background that a good finance grad degree or finance-based MBA do. Unless a student takes additional courses, there’s nothing on financial accounting, management accounting, managerial economics, financial management or portfolio theory (the last only if a student takes some of the optional courses offered by Carlson). The U of M’s MFM is supposed to teach the rudiments of quant finance (and I don’t want to discuss what kind of job is being done in that regard), not to give a thorough grounding in finance. In other words, a grad of the U of M’s MFM program won’t be competing — shouldn’t be competing — for the kind of jobs a finance MBA would.

    An MFM graduate will probably be competing for specialist quant jobs. And these jobs are hard to come by, with intense competition coming from graduates of established programs with lots of C++, stochastic theory, time series analysis, PDEs, etc. under their belt.

    But you may have a point with regard to the Twin Cities, and maybe employers just aren’t as particular here (of course the salaries and prospects aren’t that stellar either….) In the recent past, graduates of schools like Haas and Carnegie-Mellon have been starting at $150,000; do Twin Cities employers pay this for starters?

    Final point: with the current situation in the financial world, all bets are off.

  4. Chris Prouty said

    Unfortunately you did not do your homework before making your post. Reference the following link for Mellon salary statistics:

    http://www.tepper.cmu.edu/corporations-and-recruiters/recruiters/salary-statistics/ms-in-computational-finance-statistics/statistics-mscf-december-2006-compensation/index.aspx

    The *high* was $120k. The mean was $95,833.22. On their website, Mellon says that their graduates almost exclusively go to work in NYC or other major financial centers. You already know this, but $95,833.22 doesn’t go very far in Manhattan. Neither does $120k. I’m not counting signing bonus in these figures, but bonuses come and go with the wind.

    I think it’s reasonable to expect that a competent MFM student could start around $70k in the Twin Cities upon graduation with no prior experience in finance. There is no question that the standard of living on $70k in MSP is better than even $120k in Manhattan.

    As for your C++ point, the simple fact is that C++ is not used as widely as people think that it is. I’ve spoken to folks from the majority of finance firms in the Twin Cities and the prevailing languages are C#, Java, and VB. This is true even among hedge funds.

  5. alifinmath said

    Right you are. I made the assumption that Carnegie-Mellon would be in the same range as Haas, for which figures are available:

    http://mfe.berkeley.edu/employ_2007.html

    Full-Time Statistics

    Total Offers: 100
    Total Students with Offers: 59
    % of Students with Offers: 100% (59/59)
    Total Students Placed: 59
    % of Students Placed: 100% (59/59)

    Average First Year Compensation: $153,934
    Median First Year Compensation: $148,500

    Average First Year Bonus**: $54,829
    Median First Year Bonus**: $51,000

    Average First Year Base Salary: $98,447
    Median First Year Base Salary: $95,000

    **Bonus includes sign-on, UnG, G, and Relocation

    (As you point out, however, this includes bonus — the *real* first year salary is $98,447.So CM is $3,000 less than Haas)

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