Carey Grad Shares Industry Insights from a Portfolio Management Professional

Zhengyang (Rosie) Yu
Zhengyang (Rosie) Yu

Zhengyang (Rosie) Yu recently graduated with an MS in Finance degree from the Johns Hopkins Carey Business School. Upon graduation, she created a platform named “Success4Career” by inviting professionals in the financial industry to share their experience and help students know more about the real business world and prepare for the job search. Success4Career is an extension of the Speaker Series introduced by the FinTech Club at the Carey Business School.

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On August 22nd, I had an interview with Michael B. Shaffer, Director of Portfolio Management at Houstoun Capital Management, Inc. Mr. Shaffer has over 20 years of professional investment experience as a portfolio manager, trader, and analyst. He is a specialist in Fixed Income and Macroeconomic analysis and has experience in trading equities, currencies, bonds, commodities and derivatives. Mr. Shaffer’s work experience includes positions in the investment department of the Howard Hughes Medical Institute and with prominent hedge funds. He has presented and moderated at industry conferences and is considered an expert in inflation-linked securities. Michael is a Chartered Financial Analyst and holds an M.B.A. and two undergraduate degrees from the University of Maryland.

He shared some insights on his experience in the asset management field and his investment strategies, as well as his suggestions for students.

Question: Please tell us more about your professional experience, especially those not mentioned on LinkedIn.

Answer: My career started at AEGON. I worked in the investment accounting department at an insurance company. So my job was to look at the portfolio investment income for each investment portfolio, and try to predict what it can be in the future using a number of historical projections. That led to me transitioning to the trading desk, so I started being a portfolio management assistant. I eventually became more familiar with the instruments, particularly in the fixed income markets, and I started managing portfolios. I got involved with inflation and protected securities, and I became one of the early players as traders in that market. So I worked on the institutional side for a while, and then I was recruited by a hedge fund, so I went to New York and started trading for the hedge fund. Then I started trading at different sides of markets, and now I am kind of moving on to the retail side working with individual portfolios and individual clients. It’s very different from an institution. Most of what I am doing right now is portfolio analysis. Trying to get as much information as I can to help us make better decisions is really what I want to do all the time. I want to examine how portfolios perform and why they perform that way; what security in the portfolios drove that performance. It is not about trying to optimize the performance, but trying to add return necessarily through this exercise. What I am really trying to do is identify the active expressions of our opinion, of our view, of our outlook, and how those are relative to others.

Question: Do you like your job?

Answer: I do. It’s interesting because the position I am in now is similar in many ways to the position I started my career with. I take one set of data, and I compare it to another set of data, and I try to explain the difference. It’s kind of similar to what I did when I was trading: I compared one security with another security, and tried to figure out why their valuations were different. When I was managing against portfolio risk benchmarks, I was trying to determine why the things I was buying and selling were different. My whole career is about trying to compare things, compare data sets, compare instruments, compare different types of securities, and try to explain why they are different. When I can fully explain it, then I can examine if it makes sense, whether I agree with that valuation differential or not, and learn why they are different.

Question: What kind of data do you choose to compare different securities?

Answer: For instance, if I am looking at a particular portfolio, I will start with what I think that portfolio should be like from a high-level perspective, from an asset class respective; what percentage of equities should be in the portfolio; what percentage of fixed income should be in the portfolio. Then I will see what is in the portfolio; we believe that for this client it’s appropriate to have a 60/40 equity fixed income split and the portfolio is 55/45. That 5% differential in each of those areas represents a difference that I want to be able to look at and I want to be able to explain. So that I drove down, in terms of the equities, what security we invest in; what’s the security distribution of the S&P 500; for instance, what percentages are in technology versus health care versus consumer cyclicals. There are 11 different sub sectors within the S&P 500. We’re five percent underweight equities at pressing primarily in overweight health care basic materials or underweight technology and consumer cyclicals, and so then I will say is that what we are intended to do because as the market changes, and as stocks go up and down, and as sec goes up and down, portfolio performance differential exists. The portfolio drifts and favors the things that perform better over things that perform worse, so over some period of time, it just depends on the volatility of market. We could say we intended to be 5% overweight in technology, but now they are 7% over because technology had a really good run. In this case, there would be a re-balancing discussion that we would need to have.

Question: What different investment strategies do you have in the bull market and in the bear market?

Answer: Our primary philosophy is that we want to protect our clients’ capital. We are always going to be more conservative, and we want to make sure the investors don’t have to sell their securities in the down market in order to pay their bills, so we are going to make sure that there is a pool in cash reserve. We are going to try to be clear with our clients’ liability profile, monthly expenditure rate, and income. We are always going to underperform when the market really goes up, and we are going to lose less when the market goes down. We really want to protect our clients against a catastrophe that nobody can accurately predict. So our principle is protecting assets our clients work really hard for years to build up, and helping them maintain their quality of life through their retirements. We don’t pretend to think that we know what the markets are going to do on a day-to-day basis, so our outlook is generally more internal over the long term. What are the major macroeconomic factors? What do we think the federal reserve is going to do on monitoring policy? What do we think is going to happen to inflation? What do we think in terms of economic growth? What types of physical policies are being enacted when supporting growth? We try to find if the portfolio fits the big picture rather than focusing on a single stock.

Question: What qualifications do you think students need to have in order to become portfolio analysts? What are your suggestion?


  • Getting real familiar with your own personal financing first. If you are thoughtful about budgeting on your own and investing on your own, you will be thoughtful about other people’s portfolios. It gives you practical experience.
  • Education is extremely important. When getting into portfolio analysis, I recommend CFA as a way to enhance knowledge and a career, because it has a lot of credibility particularly in the investment industry. There is a difference between learning to check off the box and learning because it’s fascinating to learn something.
  • Understand the difference between being lucky and being good, because you cannot do without both. You cannot win just by being really smart, and you shouldn’t depend on winning by being really lucky. What really will hurt you is if you get lucky and you claim it happened because you are smart.
  • There is a fine line between persistence and stubbornness and only you know which side you are on. If I hang on that stock and it goes up, I was persistent; if I hang on that stock and it goes down, I was just being stubborn. This is a tricky business and it can really put a lot of pressure. One thing that everybody has to always remember is about behavioral finance. Behavioral finance is very important: How do investors tend to think? What types of patterns do they follow? And so forth.

Mr. Shaffer’s comments on Success4Career: “I think it is very helpful for people. I am happy to be a part of it.”

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