Structured Finance Analyst: Day in the Life
By James A. Ambrosio
Sep 27 2006
Evan Tepper is a structured finance analyst in the monitoring group of Moody's Investors Service. The structured finance team rates collateralized debt obligations, or "CDOs," which are securities derived from a pool of underlying credit instruments. Structured finance is the fastest-growing segment of Moody's business.
Tell me about your background and how you came to Moody's?
I graduated from the University of Michigan in April 2002 with a degree in economics. I started out at the hedge fund Caxton Associates, where I was in a quantitative group that looked at outside trading systems. We analyzed the historical trading patterns of these systems to determine if they'd be useful to us in future trading. I was there two years, and I just wanted more opportunity for growth. I kind of stumbled upon structured finance and it really piqued my interest. I learned more about it and when I spotted an opportunity to join Moody's, I did.
What do you like about structured finance?
I like the variety. There are now over 1,000 different transactions that we are monitoring, and no two deals are alike. This is a constantly evolving market and it's on the cutting edge.
What is a typical day like for you?
I am part of the monitoring group, so I have a set routine every day, which is to review the deals I'm responsible for monitoring to see if anything has happened that could affect our rating. I'm also one of the more senior members of the team, so I'm constantly training new members. I also work on rating new deals and participate in the ratings committees. I'm constantly on the phone with trustees and bank contacts about deals in the market.
Can you tell us about how the process works?
Every new deal is assigned to a quantitative analyst and a legal analyst, since we're reviewing contracts. But the decision on how to rate a deal isn't made by just those two. They have to present their case to a rating committee, justify their analysis and prove it's correct. I might work on one or two new deals each month. I also might look at two or three deals a week that are already in the marketplace. If a deal is taken to a monitoring committee, it's because our analysts feel the deal needs to be updated and we either need to upgrade or downgrade our ratings.
Are some deals tougher to analyze than others?
Some deals are less complex. A big driver is the underlying collateral. If a deal is backed by a group of corporate bonds, then it's usually straightforward to analyze. But in cases where a CDO is backed by other CDOs, for example, it gets complex. The market is constantly evolving and the deals are getting more complex all the time. There's always going to be a need for more rigorous analysis, and we're constantly looking at new asset types.
How much time are you given to analyze a new deal?
We ask the bankers to give us 10 days' notice to review a deal. Sometimes they come to us with emergencies, but a typical deal takes two weeks to review. If we're asked to look at a totally new kind of deal, that deal will first have to go before the New Instrument Committee, where senior analysts determine what our rating policy will be going forward.
What skills are most important for a structured finance analyst?
It's certainly good to have a solid quantitative background, but it's equally important to be able to communicate with people. The most important thing is to come in motivated every day and be willing to learn. There is so much to learn that even people who have been part of the group for 10 years are learning new things.
You also need to be self-motivated, because no one is looking over your shoulder. The work is assigned, and everyone has deadlines. As long as you can meet your deadlines it's a very engaging place to work, with a lot of diversity.
Do people need to have graduate degrees?
It's all across the board. Some people have MBAs, and we have people with Ph.D.s in things like mathematics. But we also have people with just an undergraduate degree, like me, who have come in with a bachelor's degree and a thirst for knowledge.