Vice President – Research, Integrated Oil and Gas, Morgan Stanley
MBA – Finance, Rice University
Energy Finance is a niche sector in the Finance world and not many of us know about it, here at NSIT. Manav Gupta, an NSIT alumnus, gives us insights into this fascinating sector, the role of a Vice President (Research) at Morgan Stanley and an MBA from Rice University, among other things.
Why did you choose Rice University over IIMs in India or the NYU Sterns in the US? How would you rate these schools in terms of exposure/environment/internships/clubs (particularly in Finance)?
In the US, B-schools are highly specialized. One size does not fit all. Rice University specializes in Energy Finance. I picked a Texas-based school since I wanted to get in the oil business. Rice being based in Houston, helps a lot. All major energy firms Exxon, ConocoPhillips, Anadarko etc. are either headquartered in Houston or have significant presence and trading operation in Houston. There are few other schools that also focus on Energy Finance, including the prestigious McCombs and Texas A&M, but Rice gave me 85% scholarship on tuition, which made the decision easy. Here is my advice, if you want to specialize in IT products marketing or IT management (which a lot of NSIT students would care about), RICE is not the school for you. There are some very good schools in California and Boston, which you should target for anything related to Information and Technology. Any school in top 20 will not give a scholarship, just be aware of it. You don’t want to graduate with a big loan.
How is a typical day of work at Morgan Stanley?
I start working around 7:00 AM (2.5 hours before the markets open). We have a call with sales and trading around 7:30 AM to discuss last days development /news and positioning. Once the markets open, there are a lot of inbound calls from hedge funds as well as long only funds. I have to balance my client interaction with my research. Although I am a Vice President, I don’t have an associate or an analyst working for me. I build all my financial models and write all my research reports. During the day, I have to help sales as well as multiple high profile clients with positioning, so I do a lot of my analytical work once the market closes. During a normal work week with no major project deadline or earnings, I try and leave by 10:00 PM. I do work over the weekend as disturbance is minimum (no calls from sales, clients or my boss) and I can write long detailed research notes which are valued most by my clients. Some of my peers just write earnings notes and do check the box kind of research, which is no value add. I don’t see myself doing that. I am in this business to learn something new everyday and doing innovative stuff is always time consuming.
You’ve been working in the gas and oil sector for a good 3-4 years. Please tell us about your team and share a few insights about this fascinating sector.
Oil and Gas is a very volatile sector. Besides global supply and demand, a bunch of macro data as well as current effects move the price of oil. There is always an opportunity to make money in Integrated Oil business (that’s what I love about it) since Upstream (exploration & production) tends to follow oil prices and Downstream (Chemicals and Refining) benefits from lower commodity prices. You need to get your commodity call spot on, before you work on your equity call. I have to say getting commodity right is not a piece of cake. In the last 1 year, oil prices have been cut in half and there are still multiple supply driven risk on the horizon. US-Iran deal could push 1 million barrel per day of additional oil in the global market which is already 1.5 million oversupplied. In the middle of all this, is the US shale, which I focus on. US shale is low risk but still needs $50-$55/bbl break even. These are challenging times for US independent producers. On the other hand, refining and chemicals the other two sub-sectors I handle, are generating record earnings on lower price driven demand rebound. When I was at Goldman, I was covering commodity and specialty chemicals. Commodity chemicals (ethylene, propylene, PVC) are very interesting, specialty (fertilizers, industrial gas and paints) can be boring in my opinion. Again US commodity chemical upcycle is driven by shale drilling which links back to the energy sector. So although I was working on chemicals, I was still doing something related to energy.
You’ve been associate with two bulge bracket firms – Morgan Stanley and Goldman Sachs. How would you compare the two (exposure, performance criteria et. al.)?
Most banks on the Street are very similar in culture. I switched from Goldman to Morgan for personal reasons. I started my career in Energy in 2009 at a smaller bank called Canaccord Genuity. In 2010, when I applied to Goldman‘s Energy team, they had no vacancy. They liked me a lot, so they offered me a position with their chemicals team in Houston. To be honest, I really did not mind since I was getting to work for a very smart guy and got the GS brand name on my resume. But as time went on, I started missing energy. Although I enjoyed commodity chemicals, I was never into specialty chemicals and my heart was in Oil and Gas. So in mid-2012 when Morgan Stanley offered a job in Integrated Oil sector in NYC, I made the switch. My wife was already in NYC, so that made the decision easier. Both GS and MS are very result driven and both appreciate hardworking and honest employees. Both recognize and reward outperformance and compensate very well. GS is a little more conservative, MS is friendlier place to work. In terms of hours, I work a lot more at MS than I ever did at GS. I was working may be 5.5 days a week in GS (75-80 hours a week), here I work all 7 days (90-100 hours).
Are certifications such as CFA necessary to make a mark in finance? Besides, what is the significance of exams like Series 63 (86, 87)?
You need either an MBA or a CFA. You don’t need both. I did MBA with dual concentration of accounting and finance. It was more than enough to prep me for my current job, which is very intense on accounting and finance. If you only have a B. Tech, and don’t want to do an MBA, then you will need CFA to learn about accounting and finance. I would still recommend MBA, since it provides lot more networking opportunities. Series 7. 63. 86 and 87 and mandatory exams a research analyst needs to pass to earn a license. These are not optional, they are mandatory for you to be employed. Series 7 and 86 test your finance and accounting skills. Series 63 and 87 ensure you understand compliance and regulations. If you are doing investment banking vs. research, you do not need 86 and 87. This is not a one time thing, you will need to keep your licenses updated at all times by passing the refresher course every 3 years after you cleared 7,63,86 and 87. If you fail this exam, you lose your job.
Recently, there have been debates over long working hours in investment banking. Kindly comment on the burnout and survival at places like MS/GS in New York.
You do work a lot of hours on the Wall Street. However if you like what you do , you will enjoy the learning experience. If you are only doing it for the money, then at some point your mind and body will give up and you will burnout. I really enjoy what I do, and to keep my work interesting I have moved sectors within energy. I started with Exploration & Production, then Chemicals and now Integrated Oil. If I was working 100 hours a week, only doing Exploration and Production for past 7 years, I would have quit by now. It’s important to have passion for financial markets, otherwise this job can become treacherous. Both MS and GS are great places to work, if you are passionate about your work and good at what you are supposed to do. Smart people work at both the banks and every day you learn something new and get paid at the same time.