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Managing Director/Portfolio Manager: Day in the Life

Richard Cervone, managing director and portfolio manager at Putnam Investments: "It's essential to learn everything you can about businesses, even by simply walking around the city and looking at retailers and how they operate."

Richard Cervone is a managing director and portfolio manager on Putnam Investments' U.S. Core Equity team, which manages the firm's Core Equity and Core Concentrated Equity institutional portfolios. He is also on the management teams of Putnam's Investors, Capital Appreciation, and Tax Smart Equity funds. He joined Putnam in 1998, and has nearly eight years of investment experience. Previously, he was an equity analyst at Loomis, Sayles & Company L.P.

How did you get into fund management?

After college, I was working as an architect at Artec Consultants in New York. My father worked in real estate, so I was exposed to buildings, but I also had an interest in economics and business. I traveled a lot, to Singapore and Europe, and had friends on Wall Street. I began to learn about the global markets. As I traveled, I learned how the global economy works and became fascinated by financial markets.

I had an interest in research in school, and so as I learned more about finance and companies, I began studying companies. I decided to go to business school at Columbia and enter finance and investing. Afterward, I moved to Boston and worked at Loomis Sayles. A year and a half later I got a call about an analyst job at Putnam. I have been at Putnam for over eight years now. I've spent the last four and a half at Putnam Investors Fund, where we cover financial companies.

I've always been on the equity side, covering large to mid cap-companies, many of them in the service sector. The companies include banks, specialty finance companies and REITs.

What's a typical day like for you?

There are two kinds, but both are focused on taking information: qualitative and quantitative facts and a judgment about companies to assess their worth and determine if a stock is undervalued in the market. (Our fund buys undervalued businesses based on future cash flows that we look at and assess five years forward.)

The first is a day in the office. I'll read the current day's news and see which companies reported earnings. Then, I'll meet with analysts to discuss which stocks seem worth buying. Companies often come and visit us. I spend a lot of time looking at financial statements. I'll read annual reports, and talk to my partner on the fund, Jim Wiess. We'll talk about short-term events that are happening. For example, a company might report poor results. We'll listen to the earnings call with the analyst and try to get a handle on it.

The second type of day is one where we're traveling to different companies. We meet with a variety of them, talking to the CEO, COO and the heads of different business units. This can happen either at the company's headquarters or at an investor conference where we'll listen to companies speak and schedule meetings. We also visit the stores themselves, to get an idea as to what they are like and how they deal with customers, etc. It comes down to whether we like the quality of a company's products - their level of quality affects sales and the financial statement. I have to be able to understand the intangibles. Quality of the brand for example.

What advice would you suggest to junior staffers working their way up?

Make sure you truly love this work. It's very competitive and challenging. You must enjoy studying businesses on a daily basis, otherwise it'll be difficult to be successful in fund management.

Once you've decided to pursue this career, it's essential to learn everything you can about businesses, even by simply walking around the city and looking at retailers and how they operate. You should read annual reports and try to establish direct sources of information. Absorb all that you can about businesses: the quality of their products, how they operate, what makes them tick. It's important to accumulate knowledge. It helps you develop insights into how to value a company. This requires you to be able to connect the dots that others haven't connected.

Also, knowledge is cumulative. As you study business over time, you'll accumulate a sense of a particular company, how it reacted during bad times or performed in a recession. It's helpful because I'm able to have a context with which to assess a company's current situation.

A career at a mutual fund is a wonderful career. I enjoy the balance of working with people - my partner - or speaking directly to company management. It involves a lot of quantitative work - working with financial statements, numbers. But there's also a "street corner" aspect to the business. I enjoy going into retail stores and seeing how they do business and learning about their operations. It helps to connect all of the dots when assessing a company's business.

AUTHORScott Krady Insider Comment
  • Ph
    Phyllis Lovelock
    9 April 2007

    I have 10 years experience in verifying accounts for regulatory and compliance risks. Worked as a operations support. Assisted clients with the accounts with problems or questions. Resolved problems with equity accounts.

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