A week in the life

I often get asked about whether being the MFin director is a full time job. Well, sometimes it feels like it, but it’s supposed to be only a small part of my overall responsibilities. As the last week has been a particularly busy one, I thought I’d give some idea of what the rest of the day job entails.

Monday was a day spent teaching on an Executive Education course for the top management of a leading Chinese bank. I was course director and taught a session on balance sheet management, together with a leading practitioner from HSBC.

Tuesday was a research day for the finance group at Judge, a mini-conference. Several faculty members gave short papers, including two visiting professors from NYU Stern and Darden (Virginia) who are with us this term. I gave a paper on some research I’m doing around how the global investment banks calculate the equity risk premium, a central input to the cost of capital used in valuation in both the equity research (public side) business and in the (private side) M&A and advisory business.

Wednesday involved a range of activities. I hosted a summary session for the Chinese bankers and attended a farewell dinner for them in Jesus College. This was a wonderful evening, with our guest speaker the Master of Gonville and Caius College, Sir Christopher Hum, who used to be the British Ambassador to Beijing and who speaks excellent Mandarin. The Chinese delegates introduced me to their custom of clinking glasses with everybody in the room, a wonderful practice that makes for a very warm evening, though it does frustrate the waiters a bit.

I was also interviewed by BBC Radio 4 for a programme that was broadcast later, called “The Truth About Goldman Sachs” (which is still available in the UK on the BBC iPlayer). I was promised it wouldn’t be a hatchet job but they were definitely trying to get me to agree that Goldman is evil and our students are immoral for wanting to work there (two current MFin students have offers from Goldman as it happens).

Thursday was a day for catching up with admin, emails, buying new cat food and miscellaneous stuff that got neglected in the early part of the week. On Thursday evening we had one of our regular MFin City Speaker Series, with the head of UK M&A at Citigroup giving a brilliant talk, followed by dinner in Emmanuel College. I was then persuaded, against my better judgement, to go to a student “pub night” for MBAs and MFin students, on what was a lovely warm spring night, at a pub by the river.

Friday I spent most of the day in London, complete with mild hangover. First I took part in a workshop on the financing of long term decommissioning costs for the new fleet of nuclear power stations which the government would like to see built in the UK. This raises some interesting conceptual issues because of the very long time scale. Official UK policy is currently to build a deep waste depository to store the long term waste, which would not be filled up for about 200 years. So the funds that nuclear operators would need to create would need to have that as their investment horizon. To my knowledge there is no other category of finance that involves such a long term perspective.

That was followed by lunch with a specialist energy private equity investment firm, where one of the partners is a former colleague of mine. We compared notes on a range of topics about financial markets and the prospects for energy finance in particular.

Friday afternoon I was back in Cambridge to give another paper, this time on the subject of what discount rate to use for long term liabilities such as those in nuclear power. It was a surprisingly lively debate (given it was 5pm on a very sunny Friday afternoon). This is a seminar series organised by Cambridge Finance, which brings together people researching in finance across Cambridge University, including Judge Business School, the faculties of economics, maths, law and land economy. So we had accountants, lawyers, quantitative finance researchers and econometricians all arguing about how to treat 200 year time horizons.

Not exactly a typical week but then no week is really.

2 Responses to A week in the life

  1. Was there consensus reached regarding the 200 year time horizon discount factor debate? I would love to know the general thoughts around this as anything past 10 years in the South African interest rate market is viewed as foggy territory.

    • There is no consensus on this issue. It is at the heart of some highly complex but quite important arguments over the way to value climate change costs. The Stern report, set up by the UK government, argued for a very low discount rate. Distinguished economists such as William Nordhaus have argued for a much higher discount rate which reduces the present value of future climate change costs. (There is less disagreement on the need to take action soon). The questions go beyond pure economics into the realm of philosophy because of the profound question of our relation to future generations, something argued about by economists and others for many decades since, with no definite conclusion.

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