Harvard Business School - Investment Club

Co-president, Alma Donohoe tells us whether the financial crisis will repeat itself

Alma Donohoe has previously worked for UBS and a hedge fund, and hoped to learn about all aspects of business by doing an MBA at Harvard Business School. As co-president of the Investment Club, Alma talks about the necessary work ethic of an investment banker and her thoughts on whether the financial crisis will repeat itself.

What is the main aim of your club?
The main aim of the club is to provide a community for MBA students wanting to find out more about investment management. We host an annual conference, we have speakers from the industry that come in weekly to talk about investing, we organize learning groups for those not familiar with stock pitching, and we are integral to the investment management recruiting process at HBS, as many of the recruiters come directly to us to reach out to the students in the club.

Who was the most exciting speaker you had this year?
Seth Klarman. He was one of our keynote speakers at the 2012 HBS Investment Conference. He not only talked about investing but also about macroeconomics, politics, work culture and how to build a successful business.

What proportion of students at HBS are members of your club?
The club has 400 members and there are roughly 1,800 MBA students at HBS so 22%.

Why did you decide to do an MBA?
Before HBS I spent 2 years in banking at UBS, then 4 years at a hedge fund, both in London. I had always thought about doing an MBA, as I wanted to build business acumen and understand difficult aspects of business not just the investing side. For example, I wanted to learn about entrepreneurship, leadership, strategy, corporate ethics, marketing etc. Hence I decided to take a career break to do this. I still love investing and I may go back but for now I am just enjoying the HBS experience.

Is it essential to be a gambler at heart in order to be a successful investment banker?
This is absolutely not the case. To be a successful investment banker you need a strong work ethic, a good understanding of finance, a sensible methodology to assess risks, and you need to be somewhat pragmatic about deals or trades you are working on. Or course you need to be prepared to take some risks but you are not supposed to be “gambling” people’s money or taking short-term bets. A handful of bankers are no doubt like this and subsequently played a part in the financial crisis in 2008, but these characteristics make you a bad investment banker not a successful one.

Have the financiers learnt the lessons of the financial crisis of the last four years?
Yes I believe some have - many lost their jobs, a number of proprietary trading desks at banks were culled and new regulation has changed the way financiers participate in the industry forever. But financial crises happen in cycles hence another crisis is sure to come along in the future. This is because the downturns are forgotten when the markets start to do well, plus new market participants, who have not experienced the emotional turmoil of the recent crisis, do not realize how bad it can get and therefore make poor decisions on the belief that the markets will always rise.

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