Build a Better Process

What is Your Best Interview Question for a Portfolio Manager Job?

The questions you ask at interview time can turn the table and put you in charge.
  1. Portfolio Manager Jobs - Cover aspects of this coveted job.
  2. Perspective - Review the level of the firm's processes and the required qualifications.
  3. The Question - Break the question down into its components and how you need to prepare.
  4. Why? - See why the question will differentiate you from the crowd.
  5. Learn more - Learn how to learn quantitative skills faster.
face pic by Paul Alan Davis, CFA
Updated: February 16, 2021
Here we focus on institutional processes because portfolio management jobs require quantitative skills.

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Do You Want a Career in Portfolio Management?


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Your best interview question to land a Portfolio Manager job (10:04)

Video Script

Introduction and Outline

Welcome, I'm Paul, this is Career Talk and today's topic is:

What is the best question to ask in an interview if you want to land that lucrative Portfolio Management job?

Here is how I'll tackle this one. First, I'll cover aspects of the job, then the perspective of institutional investment shops. Third, I reveal the best question and show you how to prepare for it. Fourth, are the reasons why this question should differentiate you from the crowd and finally, I'll show you where you can learn more.

Okay, let's have some fun.

1. A Portfolio Manager's Career

First off, let's talk about what makes a career as a portfolio manager so appealing.

Personally rewarding

In my experience, I found the role to be personally rewarding. It is perfectly suited for those keen on the dynamic interconnections between organizations and economies around the world. On top of that, to shepherd a portfolio for the benefit of investors makes you feel relevant.


The role is forward-looking, so those interested in current events, forecasting future events and having data to back up the forecasts makes going to work every day exciting and something you look forward to.


Yes, getting a PM job is very difficult but for those with a competitive streak it can be very motivating to test your wits against other portfolio managers from around the world.


Aside from that, a portfolio management career can be lucrative. Using CFA Institute surveys as a guide it isn't uncommon for portfolio managers to make 150 thousand US dollars per year. For those with equity in the business or success in raising funds, this number can quickly approach 250 or a half a million dollars, especially if performance bonuses are offered.


And last, a PM career tends to be long-lasting because firms spend a great deal of time and money communicating to clients about the portfolio management team, including in regulatory filings. So they have a vested interest in keeping the team together.

2. Industry Perspective

Now let's get an industry perspective, at least from my vantage point.

With a background in Finance, specifically equity portfolio management and Tech topics like web publishing and data analysis, I typically categorize content along two scales and try to help Subscribers climb learning curves faster. So content is geared for those with the following educational backgrounds, job titles, skills and designations.

The orange circle zeroes in on where I feel this topic fits.

3. What is the Best Question?

Okay, now that you know my perspective, what is the best question? Here goes.

 "Is your firm providing risk-adjusted alpha, and if so what tools help you quantify it and for how long do you expect it to last?"  

Yes, that's a doozy, so let's break it down.

Given our short time together today, I'll borrow visuals from another presentation and point you to it at the end.


First, institutional firms should require that all of their products have a suitable benchmark and know the constituents, metrics and how it is rebalanced and weighted. It provides the bogey against which risk-adjusted returns are measured.

You can get ahead of this before the first interview by using the SEC Advisor Search website or by accessing company promotional material.

Peer group

Second, comparisions against a peer group, with data from firms like Morningstar for public mutual funds in the US, or a handful of for-cost databases covering separately managed accounts and hedge funds help investors gauge performance for similar managers.

Here you often see box and whisker plots that in about two-seconds allow you to get a good feel for performance against peers over different time periods.


Third, my rule of thumb is, managers always look good when they show you a mountain chart, or they wouldn't show it to you, right? Compounding any early outperformance always looks impressive to the novice.

A prospective portfolio manager should ask to see shorter sub-period returns instead, and use rolling-period measures to evaluate consistency and periods of material outperformance that are hidden in the mountain chart.


Fourth, this question implies you know how to analyze risk using a linear regression, and are comfortable with rolling regressions that paint a better picture of what happened over time.

Portfolio management software tools used to measure risk-adjusted alpha and decompose returns into factors such as style, size, sector and market timing can be mathematically complex and expensive.

Have your ears open and write down the tools so you can do research before the second interview.

An Investment Truism

The last part of the question refers to a truism with investing, and that is humility. Active portfolio management is difficult. Most active managers don't beat their benchmarks especially after fees and on a risk-adjusted basis.

What you are looking for is a concrete answer on how the firm attributes its differential advantage. Listen for when their approach works and when it doesn't. Be on the lookout for more salesy answers.

The truism says that this net, after-fee and risk-adjusted performance is inversely correlated with how aggressively a firm must market their business to raise assets.

Outperformance sells itself. Underperformance must be sold.

Tying it all together

So tying all of this together, do you want to work at a firm with a time-tested approach that performs? Or at a firm where salespeople drive Mercedes, wear Brooks Brothers and have million dollar views from plush downtown offices?

The two might not be correlated.

The adoption of computers in the 1990s ushered in a scientific approach to investing thereby allowing institutions to care less about image and more about performance.

Many novice investors don't know what questions to ask, and how to evaluate performance, so instead they are more inclined to buy trust and image.

If you pick up a touch of cynicism, that's probably well-placed. I hate to see people getting taken advantage of. This was my main motivation for building this educational platform FactorPad several years ago.

4. What Does it Say About You?

Now what does this question say about you? And why will it increase your chance of getting hired?

It shows you are prepared

First, it shows you are prepared and adept at performing research, which is what a PM job is about in the first place, right?

I'll show you a checklist of topics you can research in a moment.

It shows you are selective

Second, it shows you are selective.

Remember, these jobs are in high demand, so everybody wants a piece of the hiring manager's time. Imagine how many people are scouring LinkedIn for that person's name.

The fact that you are as selective as they are sends a positive message that you are looking for a good fit, not just a paycheck.

It shows you are qualified

Third, it shows you are qualified. What more can a hiring manager ask for than someone who will be productive the first day they walk in the door?

To them this makes you a less risky hire and one that won't take as much time to get up and going. Nobody wants a high maintenance employee.

It shows you are technically savvy

Fourth, it shows you are technically savvy.

Really, at the institutional level there are only a handful of big data providers like Bloomberg, FactSet, Thomson Reuters and S&P CapIQ. Risk model providers as well, with names like Barra, Northfield, Wilshire and Axioma.

You can brush up on these online, read whitepapers and prepare yourself for a second interview depending on how much the hiring manager wants to share.

It shows you are not overconfident

And fifth, overconfidence is likely the number one enemy of successful portfolio managers. With accurate forecasts only 55% of the time you can build a great track record, but that equates to a 45% failure rate, right?

Having the humility to know how difficult it is to outperform the benchmark might be just that one element the hiring manager is looking for. No manager wants someone with a runaway ego managing money. That's when gambling behaviors like doubling down start to show up.

Demonstrating that you understand this point will give the hiring manager one less thing to worry about.

Try to answer the following beforehand

As I mentioned, here's a checklist of avenues of research.

5. Where Can You Learn More?

Okay, so where can you learn more about the scientific approach?

First, I'm a huge advocate for building your technical resume, so adding skills with Statistics, programming and even Excel can take you a long way.

At the FactorPad website and YouTube Channel I do all of my own publishing so most of the time I'm creating tutorials on where I host my website, in Linux, and my preferred text editor, Vim. I also started an open-ended Data Science course focusing on what is, in my view, the best all-purpose programming language to learn, Python.

Currently, about 1,000 times a day visitors review some 330 web pages and 250 videos, and here you can see the demographics.

How I'm trying to differentiate myself is through maintaining a consistent look and feel and part of that is providing a transcript for every video. The first link in the description will take you to the one for this video.

On the Finance side, slides you saw earlier were from a tutorial called The 10 Steps to Writing a Pitch Book for Institutional Investors if you want to learn about that.

If you have time, likely the best resource to try out is Quant 101, a series of 30 tutorials I use to teach a college course on financial modeling of portfolio risk in Excel. The total runtime is 8 hours and you can start now with no sign-up.

There you have it. If you have any questions or feedback please leave a comment and subscribe for more of the scientific approach, in Career Talk.

Best of luck with your interview and have a nice day.

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