Our third year economics Ph.D student Michael Ashby was econometrically challenged at leading Investment Management and Financial services company Black Rock, learning new skills and growing his career prospects stock:
I chose to work with Black Rock because the project sounded interesting and made use of knowledge and skills I already have but in a different way. In that sense, it broadened these skills through exposure to new applications and literature. As I approach the final stretch of my PhD, I am giving careful consideration to my future career. My research in empirical finance is of an applied nature, so the private sector is a natural and viable path. The BlackRock fellowship therefore gave me the opportunity to “try before I buy”. BlackRock is a highly respected name within the finance industry, being the largest asset management firm in the world by assets under management. Moreover, the post was in a central research function, rather than a trading desk. This made it arguably the closest role available to what I do as a PhD student and allowed me to focus on research. Knowing that I enjoy research (as a PhD student), it made the role a very natural starting point for a foray into the private sector.
The overarching aim of the fellowship was to provide specialist econometric input to the workstreams involved in updating BlackRock Investment Institute’s (BII, the central research team at BlackRock) forecasting models. The main area of focus was to provide a model linking financial risk factors to macroeconomic variables in a stable, robust way. Two other workstreams were to complete a review and an update of both the exchange rate forecasting model and the style factor return forecasting model.
The fellowship broadly met my aims, and I was able to produce an extremely robust model linking equity risk factors to macroeconomic variables. This proved econometrically challenging, although this was expected given that it is well known that difficult equities are to forecast. There was no time to move onto fixed income risk factors, however I packaged and tidied up my code to ensure it had the flexibility for the dependent and independent variables to be changed. Another BlackRock employee will therefore be able to pick this up at a later date.
The exchange rate project was a success. I was able to complete a proper econometric evaluation of the existing model and compare it to the model it replaced, as well as to standard industry benchmarks. I was also able to update the methodology in the model estimation to bring it inline with the latest academic work. In addition, I reviewed alternative approaches to modelling exchange rates, and produced a summary of why these are not appropriate in this case. I have left some suggested further model enhancements for testing. Again, my code was left in a future-user-friendly manner, along with a readme document.
The exchange rate project took longer than anticipated due to unexpected data issues. To resolve this, I had to recreate a lot of crucial data myself. As a result, I could not finish testing all the enhancements I had in mind. Nor did I have much time to become deeply involved in the style factor workstream. However, I was able to complete a literature review for the project and joined several meetings to give my opinion on how to complete the work. I also completed some exploratory work off the back of my literature review, which should inform further research at BlackRock on this matter.
The fellowship has brought me the opportunity to sample working in a private sector research job. Since my research is on the applied end of the spectrum, the private sector is an obvious career option. However, not having worked in a private sector research role before, this has been a valuable opportunity to gain an understanding of the sort of work that such a role actually involves, and how it is conducted. For example, project turnaround times are much faster, but reviews are less nit-picking. There is also far more working in teams, which is less common in academic economics. Moreover, I have had a chance to build a network of colleagues in BlackRock who have told me that they have been pleased with my work. My line manager has asked me to keep in touch with my PhD progress and contact him once I complete my “intention to submit” about potential job openings. Even if the team I have worked with during my fellowship has no open positions, I am hopeful that he could recommend me to other teams within BlackRock that his team works with, or his wider network. Separately, I had contact from two headhunters, who have made clear that a combination of my industry experience and my research record and qualifications make me a strong candidate for positions they are recruiting for. Off the back of this, I have had a first-stage interview with another financial firm regarding job openings once my PhD is finished. The fellowship has been very valuable in terms of career prospects.
The skills I gained and enhanced during this project were:
Teamwork. As mentioned earlier, it seems there is far more team work in the private sector. Not only are all projects assigned to teams of people, but the teams are also larger than the typical number of co-authors on an academic paper with more than one author. Therefore, I have become used to working with multiple people and keeping a range of people in regular touch with my progress, even with preliminary work which may later be superseded or even shown to be based on a mistake. Moreover, it is expected that I keep the wider team briefed on my progress. Part of these skills has been becoming comfortable with the fact that my conclusions may change and that the research I present on consecutive weeks may be contradictory. This is part of the research process and the team has been accommodating of that.
Research communication. As I am working in a wider team and for a limited time, it is vital that my work (coding and techniques I have used) are well documented and easy for others to follow. Since I have been brought in due having expertise that the team currently lacks, it has been doubly important to make the techniques I have used and rationale for them clear in the documentation. This is quite a different mindset to academia, where documentation is aimed at experts. This has further developed skills in communicating ideas to a non-expert audience that I previously developed in supervising undergraduates.
Computing. I have been able to further develop my computing skills in R and Python by implementing techniques in them that I have not previously coded. I have also learned about version control and Git, which allows other users access to code without them changing the master code (unless you approve the changes). I have not needed to use this before as I have always had sole responsibility for coding in my previous projects, but this is clearly a valuable skill in a collaborative environment.
Learning opportunities. I have attended investor meetings, which has given me a clearer picture of how tactical (as opposed to strategic) positions are taken and how investors think about current macroeconomic and market issues. Moreover, I attended a course on profitable signal identification. There is an enormous academic literature on this material which was referenced, so it was interesting to see how this informs practice.
As the fellowship ran parallel to my research project and my research is already very focussed on practicalities, it will make little difference to my PhD research. However, I think it has made a significant impact career-wise. As a result of this fellowship , I would say I am now 90% certain I would like to go into the private sector, as it banished many mis-conceptions that I had about it (that the work would lack rigour and that work’s demands on my time would be excessive). This was more 50/50 before the fellowship . Moreover, I now have a network within BlackRock and a one-step removed network in the industry, as well as the beginnings of a network of recruiters.
I think those considering careers in the private sector should look for fellowship opportunities in that sector, perhaps even trying speculative applications. Having a PhD in a relevant field opens up career paths not available for fresh-from-university bachelors and masters graduates, so it is certainly worth getting industry experience during your PhD, even if you have prior industry experience. Relevant industry experience, alongside a relevant research record, adds substantially to a CV and the ability to make industry contacts is very valuable.