NEO TENG HWEE

COULD YOU TELL US ABOUT YOUR BACKGROUND?

I have spent the last 18 years of my career principally in investment management. For the first eight years, I was a portfolio manager with an institutional asset management firm. In 2003, I made the switch over to investment management within the private wealth industry. A decade ago, client mandates within institutional asset management were typically quite narrowly defined and the investment objective was more about delivering relative return alpha. Private clients, on the other hand, typically seek absolute return over relative return and are more willing to give managers the freedom in terms of scope or strategies. In my current position, I head up a team managing assets mostly invested in Asia and Emerging Markets. Overall, we run Asia-centric portfolios as our Asian clients still have a strong home bias.

As regards academia, I completed a Master’s in Financial Engineering at the National University of Singapore, which stood me in good stead for the PhD in Finance programme.

IT SEEMS YOU WERE DOING FINE. WHY DID YOU UNDERTAKE A PHD, ESPECIALLY SINCE YOU WORK IN PRIVATE WEALTH MANAGEMENT – AN AREA THAT IS NOT ALWAYS ASSOCIATED WITH STATE-OF-THE-ART TECHNIQUES?

I have actually had a different experience with institutional clients generally being more conservative in their approaches to equity or bond management, while the private wealth industry is more willing to experiment with new ideas. For example, exotic derivatives, alternative investments and systematic strategies are fairly common in the high net worth industry. In Asia, some clients deploy leverage to enhance returns or to pursue a variety of carry trades. As I come across more ideas, it naturally raises deeper questions about financial markets, modelling possibilities, as well as risk management. To me, some of these questions can be pursued through rigorous research.

I had always been drawn towards academia as I enjoy thinking and reading about new frontiers in finance even though many of these ideas may not be immediately applicable in a commercial sense. I had always considered taking a career break to pursue a PhD early on. However, as one goes through the lifecycle of starting a career, building a family, the option has become progressively difficult. In 2008, a friend of mine who shared my keen interest for finance forwarded the EDHEC-Risk Institute newsletter to me and I found out about the programme. The format, which offers core courses conducted in block weeks is indeed innovative, but I wanted to be assured of the quality. This was important factor for me as doing this programme was more about true learning rather than getting another piece of paper. I ran some checks on the school and found that the assembled core and affiliate faculty comprises individuals who are the very best in their respective fields, collectively leading frontier research in finance. I have checked with some friends working as academics and they also attested to the quality of the faculty and the curriculum.

SO WHAT HAS BEEN YOUR EXPERIENCE OVER THE LAST THREE YEARS?

The initial part of the programme was not easy as the core courses follow the curriculum of a PhD in finance programme and the pace was relatively quick. Participants who are professionals were expected to go through the theoretical foundation, which involves a fair amount of mathematical detail. Like most US PhD programmes, passing the comprehensive exam is a requirement to continue in the programme. Hence, even though your area of research may not be related to majority of the early coursework, the exposure equips one with a comprehensive foundation in finance.

As a finance practitioner, I like the balance in terms of technical rigour and the applications. I have attended many elective seminars which cater to a wide range of interests. In addition, these seminars are delivered by the top scholars in their fields. For example, I am working on research that uses volatility models and the elective given by Professor Tim Bollerslev of Duke University was very helpful for my dissertation. The small class size permits in-depth discussion and interaction. The online platform which is available through mobile devices means you do not have to take that many days off nor fly to different locations to attend the electives.

The dissertation was not easy – particularly finding a topic that is original, something you enjoyed and something that was yet achievable within the time frame and also within one’s abilities. My advisor, René Garcia, sets high standards for the final work we produce. He is committed and takes my progress seriously. Despite his heavy involvement with the programme, as well as his active and extensive research and publication activities, he still finds the time to offer a lot of advice and we have held meetings each time he has come to Singapore.

SPEAKING OF THE DISSERTATION, HOW DID YOU CHOOSE YOUR TOPIC AND WHAT DID YOU LEARN FROM THE EXPERIENCE?

I have always been interested in cross-asset class dynamics, particularly between bonds and equities. However, it was a challenge to frame the research question precisely so that it would qualify as an original contribution to the field. Quite unusually, it was a research workshop that helped to set the direction. The research workshop was given by Professor Peter Christoffersen of the University of Toronto, who presented a paper on whether the potential for international diversification was disappearing using a novel dynamic asymmetric copula correlation model. After that I kind of fashioned my paper along those lines, looking at Asian bonds and equities and I extended the work to explore other issues.

During another elective seminar on behavioural finance held in Singapore, Professor Harrison Hong of Princeton University, gave a piece of advice on writing a paper for beginner researchers like myself. He said that we could model our dissertation on the approach of a good paper we admire. This has also been echoed by René Garcia from time to time. I have recently discovered that coming up with the model and doing the programming is one extensive part of the research process; writing takes almost as much or even more time.

So in the end, my first paper was on volatility transmission and dynamic correlation between bonds and equities – this is the paper I will be presenting at the EDHEC-Risk Days Asia in May. The second is on extreme risk and asymmetric dependence, which is something the literature has largely ignored, but for which there appears to be some evidence in emerging markets. Working on these topics allows me to learn and use some of the latest advances in econometric modelling.

Understanding cross-asset dynamics helps me in my role as a professional investor in these markets. However, more than the insights derived from my paper, the point of going through the entire research process is to help a person develop as an independent researcher. When I started with the dissertation, I knew very little about dynamic correlation models, copulas, tail dependence, etc. I had to understand these models, read the relevant literature, frame the question and modelling strategy, develop the program, estimate the models, interpret the results and finally communicate the results and why it matters in a publishable paper. This process does give me the confidence to tackle and understand new areas in the future and I do have a few projects in mind after my PhD. The elective seminars are also helpful to give you a quick overview of the body of research that has been done in a certain area.

WHO DO YOU THINK THIS PROGRAMME IS FOR?

This programme is unique in a sense that it is not a PhD programme just for fresh graduates pursuing an academic career. To me, the fundamental belief is that it is beneficial for professionals to undergo doctoral level training in the scientific research methods which would yield insights that would have an impact on the industry. Professionals who are immersed in the inner workings of the industry do bring their own set of perspectives to the problem and discussion. There is much that can be learned from the academic community which originates the theoretical framework which we understand about markets and valuing assets. Going through a PhD is, in a way, like learning the language in which these ideas are deliberated in academia. Hence, the programme is ideal for anyone who would like to learn about finance deeply, be trained to be an independent researcher and hopefully be part of the wider research community.

However, it is worth highlighting that successful completion of the programme requires commitment, time and an adequate background. Some amount of passion is needed to persevere through the process. Brushing up on maths, statistics and computer programming before starting the programme would be good as the pace is relatively quick. While the pitch may be made to a professional audience, one cannot avoid working through the technical details, which is not your typical MBA experience.