CFA-STL News The Newsletter of CFA Society of St. Louis

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1 1 CFA-STL News The Newsletter of CFA Society of St. Louis In This Issue 2011 Regional Global InvestmentResearch Challenge a Success Member Spotlight Past Event Abstract Upcoming CFA-STL Member Events Job Postings Quick Links CFA-STL Website Event Calendar Career Opportunities Networking Join CFA-STL Linkedin Group! CFA-STL is on Linkedin companies list now. President's Message Greetings, April 2011 Welcome to the inaugural edition of the CFA Society of St. Louis' member newsletter! The main goal of this newsletter is to provide another method of communication with our members. It is a work in progress and may take several issues to perfect. Please feel free to make suggestions on future topics and/or improvements. One of the features we plan to include in our newsletters is an interview with one of our members. This first issue features an interview with James Jones, CFA. James is a CFA-STL member and currently serves on the CFA Institute's Board of Governors. Our Society has grown to more than 600 members. And, as with most large organizations, not all members have regular interactions with us. For these members we plan to include a brief summary of our past and future events as well as important announcements. We hope you enjoy the newsletter and find it worthwhile. And, again, we welcome any comments you may have. James Ellis, CFA President, CFA Society of St. Louis A Call for Volunteers! The STL-CFA's Board of Directors is comprised of volunteers. As such, we are always looking for fresh faces to help us lead the organization in various capacities. If you have an interest in giving back to the Society, we're currently seeking volunteers for roles in communications, programming, advocacy, and our Global Investment Research Challenge.

2 2 For additional information, please contact Joan Hecker at 2011 Regional Global Investment Research Challenge a Success In February, CFA-STL hosted the 2011 CFA Institute Global Investment Research Challenge (GIRC) competition for the St. Louis region. This is the first year CFA-STL participated in the realworld competition which offers college students the opportunity to learn from leading industry experts and their peers from the world's top business schools. The GIRC is an annual event, designed to 1st Place Winner, Washington University Team promote best practices in equity research among the next generation of analysts through hands-on mentoring and intensive training in company analysis and presentation skills. It also helps fulfill the CFA-STL's mission to facilitate professional development and promote adherence to the CFA Institute Code of Ethics and Standards of Professional Conduct. This year, more than 100 CFA Institute member societies hosted local competitions with more than 2,500 students from over 500 universities participating worldwide. Washington University in St. Louis won the local competition and advances to the Americas regional challenge held on April 6-7 in Omaha, Nebraska, where they will compete against student teams from Canada, the United States, and South America. The winners of the four regional challenges (Americas, New York, Europe, and Asia Pacific) will advance to compete in the global finale on April 8, also in Omaha. The universities that competed in the St. Louis region contest included Fontbonne University, St. Louis University, University of Missouri-St. Louis, and Washington University. The teams, comprised of three-to-five students, presented their analysis and buy/sell/hold recommendations on ESCO Technologies, Inc., a diversified manufacturer of highly engineered products and services that focus on utilities, filtration/fluid flow, and radio frequency shielding/testing. The presentations were the culmination of four months of research, interviews with company management, competitors, and clients, presentation training, and evaluation.

3 3 Approximately 30 volunteers from STL-CFA helped make this event possible. For the 2012 competition, volunteer judges, graders, mentors, faculty advisors and planning committee members are needed. The contest begins again in September, and the local champion will be determined in February, Additional information on the contest can be found at GIRC Organizing Committee Please consider volunteering! If interested, contact Mike Cody, CFA at (314) or Member Spotlight: James G. Jones, CFA President, Sterling Investment Advisors, LLC Bolivar, MO Jim is the founder and president of Sterling Investment Advisors, a fee-based private client investment management firm serving middle and upper-middle class investors. The firm was founded in 1995, with current assets over $65 million. Jim was elected to the CFA Board of Governors in May, 2010 and will serve a three year term. How did you become involved in the CFA Institute? In 1995, I was teaching at Southwest Baptist University and was asked to grade the CFA exam. Two years later I received another invitation to serve on the Council of Examiners which develops the CFA exams. I was on the Council of Examiners for 11 years, the last three of which I served as Chairman. How has the CFA exam process evolved over time?

4 4 Initially, the CFA Institute would select existing academic textbooks to support the candidate curriculum. However, no single textbook adequately covered an entire subject, so we had to select multiple textbooks. Unfortunately, there was no consistency in the rigor of the analysis or in the definitions of terms used. To address this issue and enhance the candidate preparation process, CFA Institute began commissioning books to be written and produced in-house. Now many of our books are being adopted by professors. What challenges and opportunities exist for the CFA Institute today? Certainly, the scope of investment knowledge has grown considerably over the past two decades. The creation of financial products, including many derivatives, has produced new opportunities and new risks. In addition, advances in technology connect us globally and give very fast access to volumes of information which facilitates more analysis. These changes pose a challenge for charterholders. At the CFA Institute, we must constantly address how to effectively distribute educational content and support member networking in ways that are most meaningful to our varied membership base. In terms of opportunities, the financial crisis has created a real need for leaders in the areas of ethics and market transparency. The CFA Institute has been a primary advocate of ethical behavior for decades. Today, more and more institutions and regulators are looking to us for help in defining what ethical markets should look like. At the same time, a growing number of individuals want to join our organization because it combines the highest level of investment knowledge and skill with a code of ethical conduct. They want to be CFA charterholders because it can help distinguish them from their competitors. How does the work of the CFA Institute Board impact local CFA societies and members? The board develops a strategic direction for the organization. By working with the President's Council Representatives (PCRs), CFA Institute management and listening to society leaders, the board is able to craft a long-range plan. This plan includes initiatives related to societies, the CFA program, continuing education, and advocacy and is reviewed on an on-going basis. It is the board's responsibility to create an environment where all stakeholders can contribute as we try to maximize the return on the CFA Institute's mission: "To lead the investment profession globally by setting the highest standards of ethics, education, and professional excellence." The board is also very mindful of core competencies and the one we cannot replicate is creating local forums. However, by working with societies to better and more flexibly address their ability to serve their members, we can together create an enhanced membership experience. In my short time on the board I have been encouraged by the good working relationship between the individual societies and the Institute, because only with mutual respect and cooperation can we achieve our mission.

5 5 Past Event Abstract In case you missed it, here's a summary of a recent CFA-STL member event: "Alternative Beta - A New Approach to Diversification" Frank Nielsen, CFA- Executive Director at MSCI Barra On Wednesday, March 9, 2011, we held our second event dedicated to increasing our knowledge of hedge funds. Steven Jones, CFA, provided the following as a prelude to Mr. Nielsen's presentation: Beta is the return of a broad-based, benchmark index. Alpha is the manager's return over and above the benchmark. Does investing in assets outside of the index add a second Beta to the portfolio? Example: Large cap equity manager investing in small cap stocks. Should investing in assets outside of the index be counted towards Alpha before the 2nd Beta has been accounted for in the benchmark? Beta is a commodity and therefore cheap to deliver. Alpha is skill-based and expensive to deliver. Hedge funds claim they generate Alpha and charge commensurate fees. (i.e., 2% annual fees + 20% share of profits) Hypothesis: What if hedge funds are primarily delivering Beta while claiming it is Alpha and charging high fees along the way? If true, then: Are there less expensive ways to deliver a similar risk/return profile? Are there more liquid ways to deliver a similar risk/return profile? Frank Nielsen of MSCI began his discussion by positing that a traditional 60% stock, 40% bond portfolio is volatile and dominated by equity risk. As we saw in the recent financial crisis, this type of portfolio can underperform investor expectations. In contrast, a portfolio including a variety of alternative beta strategies (merger arbitrage, convertible arbitrage, FX carry and others) has the potential for higher returns and lower risk than a traditional 60/40 mix. Frank discussed how adding liquid, low-cost alternative beta can improve the efficiency of client portfolios and provide high returns with low volatility. Such "stylebeta" can be created synthetically through long/short combinations of existing indices. For example, the style beta risk premium of value can be captured by establishing a long position in the MSCI World Value Index along with a corresponding short position in the MSCI World Growth index. Risk premia can be captured in a host of style and strategy betas such as size, momentum, carry trade, merger arbitrage and others. The correlations amongst the various risk premia are generally below.25, providing diversification to a portfolio while reducing the level of portfolio draw-downs when compared to a traditional 60/40 mix. Submitted by: Nick Fafoglia, CFA

6 6 Upcoming CFA-STL Member Events Thursday, April 14 - "Strategies for Managing Your Career and Job Search: Wall Street Survival Tips" at 4:00 p.m. at the Sheraton Clayton Plaza Hotel Roy Cohen, author of the recently released "The Wall Street Professional's Survival Guide", will offer career advice on what you need to do to maximize your time in job search and on-the-job. This program is intended for finance professionals who are employed and for those who are in transition; for individuals at all levels of their careers; and for those who are wanting to cross over, from outside the industry or from within, but not currently in finance positions. Wednesday, May 18 - A Talk with Dennis Hammond, founder of Hammond Associates at Noon at the St. Louis Club Job Postings Don't forget to check our web site for a current listing of open positions in the financial services industry throughout our region. Visit Forward This was sent to nong.lin@commercebank.com by joan_hecker@sbcglobal.net Instant removal with SafeUnsubscribe Privacy Policy. Association Offices 330 Wenneker Drive Saint Louis MO 63124