Professor Alain Chinca Interview

Biography: Alain Chinca grew up in France where he earned his B.S. at Universite de Nice and his M.S. at Universite Paris Dauphine. He moved to the United States and earned his MBA at Babson F.W. Olin Graduate School of Business, and his CFA. Professor Chinca’s career includes Director at New England Financial (1991 – 2000), Project Manager at The Boston Company Asset Management (2000 – 2004), Assistant Vice-President at Wellington Management Company (2004 – 2005), Senior Quantitative Analyst - International Value Equities at The Boston Company Asset Management (2005 – 2014), Managing Director at Cabot Research LLC (2014 – 2016), and now is a Senior Lecturer of Finance at Bentley University (2000 – Present).

LinkedIn: https://www.linkedin.com/in/alain-chinca-cfa-309b434/

Interview Q&A:

What has your career been like and how has that led you to Bentley?

I started on a desk back in France in August 1987. I remember because two months later I thought the world was ending. Then I came to the United States to get married and at that point I couldn’t find a job within the industry. Therefore, I did what came naturally to me which was accounting and after doing that for three years, I got involved with dealing with problem real estate loans at an insurance company. In the early ‘90s, a lot of commercial buildings got into trouble, especially on the West Coast, because it was the end of the Cold War. The Defense Department’s budget got cut significantly and all the contractors didn’t realize there was a problem until it was too late. Some of the decisions I had to think through working on trouble loans were between foreclosure, restructuring the loan, extending the terms, etc. and determining which was the right approach based on the situation. After a few years of doing that, I had a chance to move into Fixed Income which I really enjoyed because it was more quantitative and that was always my calling. After the insurance company got bought out, I moved into the Equity world from a Quant side. It's not a very popular move and I’m not sure why because Equities are so much simpler than Fixed Income. I was back and forth between The Boston Company and Wellington, always on the Quant side. In 2014, I joined a startup and after about two years, I left because it was too stressful. Startups; don’t do them when you’re fifty years old. However, Bentley University was always in parallel because I got the opportunity to become an adjunct in 2000. So, in 2016, after being an adjunct for sixteen years, I joined as a lecturer and, as they say, the rest is history.

How/why the jump from Equities to Quantitative Finance?

Fixed Income is way more complex than Equity. In Equity, the only things you’re worried about are price, earnings, and growth. The earnings are going to reflect growth which reflects the price. In Fixed Income, you must juggle multiple dimensions in your portfolio, such as quality, duration, convexity, coupons, and so on. Quantitatively, it’s much more complex. In Equities, in a discounted cash flow projection, you’re making up numbers which you feel like are correct ones whereas in Fixed Income, those cash flows are known. An exception is when you deal with mortgage-backed securities, which is what I did for a little bit. You’re going to play around with the repayment rate which is a stress test for when/if interest rates goes up/down. In Equities, its purely assumption. In the early 2000s, the Quant approach was just getting started because technology wasn’t there before, and data started to become more accessible and that was a perfect fit for me. I thought the Equity data was simpler and I wanted to explore the new tools, which is how I was able to do the switch.

What was your favorite part about managing $14 million of assets under management for clients over 10 years? What was an interesting project you undertook?

The best part is positive performance and beating your benchmark. When you outperform, you gain confidence that your process is solid. If you outperform for a long period of time, when you underperform you don’t say, “man, I’m an idiot.” You know that you have invested a lot of time into your process and know that it is sound and works in the long term. My favorite part of the job itself was having the freedom to build it from scratch. I was given a lot of leeway partly because they wanted to do something with Quant, but didn’t know what it had meant. I wasn’t even sure myself what it really meant, so being able to explore and try things to develop some processes were really cool. FactSet got more powerful and having the flexibility to dig into the app was great as well. I had spent a lot of time working my screen, refining it, one line of code at a time. I am finally very happy with it now, and no, I will not share it. I felt good because all the experience that I had in my life had been applied it to manage my own money. Seeing the result and knowing that I am helping my clients was the most satisfying parts of it all. People not firing you is also one of the best parts too.

When you had times of underperformance, what are some things that you would do?

I had two very tough years in 2020 and 2021 because the market was so disrupted. The one thing I have learned is to resist the temptation to rethink everything. Try to figure out why suddenly your model is pointing to stocks that are underperforming. You realize that what the current market darlings are not what you think will be long-term contributors to outperformance. The way to make money in 2020 was anything tied to COVID-19, regardless of the valuation, the cash flow, the leverage. If you don’t think that extreme valuations will last, you need to wait for the reversal to the mean and you need to accept the temporary underperformance rather than chase the performance. At that point, you are switching your process (value to growth/growth to value) and the second you do that, you are not able to pick up the shifts in the market. You will always be in the red. Stick with your process and add adjustments if needed, because you are not betraying your process, you are just realizing that some parts of your model have become stale. Don’t panic. That is why your relationship with people and your team is so important because not only will they see that you are headstrong and have a thesis, but they will trust your judgement. Good will outperforms when the going gets tough.

What do you think are some of the personality traits that helped you in your Quant role(s)?

I think I am number oriented person. I was always very good at math, and it had come easily for me. In high school back in France, as a junior you could select your major and be specific in what you want out of your career. I was supposed to go to one of the best engineering schools, but I had decided that I wanted to major in Finance. Quant was always there because of numbers. Also, I always had a passion for Finance and back in the day, they would print in newspapers the previous day close with the highs, lows, and all the relevant information of the market. I remember I was about ten years old, and I saw my father was reading the five to six pages of this in the newspaper. I had asked my father what the little numbers meant, and he said, “don’t worry about it, it’s for rich people and we don’t do that here.” I had thought “but I want to do that.” So, when I was fourteen or fifteen years old, I sat down and hypothetically had a million francs and picked five to ten stocks, equally weighted, and I tracked their performance. That was my first paper portfolio. However, up until the tools and the data, I didn’t think that math and Finance could be connected but that’s what the Quant does. One lesson I learned is that when you are successful, be humble. That’s because you are not always successful, and you get periods of headwinds. If you are humble during your success, and you do experience headwinds, people will root for you to recover. If you are very obnoxious and pretentious when you are on top of the world, everyone loves you and sucks up to you but wishes you would downfall. Some of the smartest investors are always humbled for this reason.

Being from France, how do you think your background has given you a more well-rounded view of the market?

It hurt me in the beginning because I couldn’t leverage my education or my experience. That’s why I ended up getting an MBA and recognition through accounting. I don’t think being French really helped me or hurt me when I entered the industry. When it had really helped me, I was at The Boston Company. I became an asset to the team running international and emerging money because when dealing with French companies and talking about companies in Europe, I could provide a different perspective, not being from the United States. I remember in 2006; the World Cup was in Germany and there was one stock that was really going to benefit. People did not understand why and it’s because outside the United States, the World Cup is the biggest event that a lot of money and time are spent towards. That ended up being the right pitch. The biggest problem in the investment world is groupthink because when we all develop the same conclusion, we can easily miss the obvious and be blind-sided. It’s good to have people who disagree.

What is your favorite thing about working at Bentley?

The students, without a doubt. If it weren’t for the student interaction, I don’t think it would be that fulfilling. I like the student interaction outside of the classroom and that’s why I also adore BIG (Bentley Investment Group). I have great relationships with students who have never even took my classes. A lot of the time, I will get to know students in BIG and then they will take one of my classes. That exchange of ideas and seeing students grow in terms of skills and knowledge is priceless. 

Some students may describe you as “intimidating” due to the investment group. What would you want to say to those students?

I think that I should be intimidating because we are dealing with real money. This is not a joke and not just a club. The fiduciary responsibility of the group is immense, and we are not just there to have fun. If I ask a question and I am tough about it, it’s because this is real money. If it were fake money, I would be more relaxed. If they think I am intimidating, they need to develop thicker skin because I am nothing compared to some of the people in the industry.

What are some of the steps you have taken to make BIG as successful as it is today?

One thing that has been on my mind since I started is diversity. Too many dudes. I try to constantly change that, sometimes it works and sometimes it doesn’t. I work with Dr. Mateo Cruz. the DEI professor to improve our member mix because I think what diversity gives you is a difference in opinions and that’s really valuable. In terms of the process itself, I started to setup some guidelines with a universal structure. This is because then you start to get crazy things like a two hundred-fifty-million-dollar companies, a company that will not make money ever, a company that just got IPOed, etc. That is all junk, and we don’t want that because students don’t have the skill to evaluate that. That does not mean they can’t make money altogether, but you know so little and the chances of blowing up are higher, so I want to stick with the basics first. The next thing is we are working on the analytics and have a portfolio in FactSet that we can get information from. I think the biggest difference from five or six years ago is the quality of the pitches. The valuations are stronger, we added the comps; component to do multiple, industry analysis, and others. I also think people have become more professional and the culture has completely changed. People take more pride in the group and their work. If they take steps back and do not try, they know I will be merciless. If you expect me to dedicate an hour and twenty minutes of my time every week to see your work, respect my time. Be conscious of these things and I think the students are.

What is your pitch to get students involved in the investment group and the trading room?

Make yourself different. You are a part of a massive population who goes to school, studies Finance, and then wants a job. You are one of the same. You need hands-on experience and one way to do that is to put yourself in a position to gain that experience as early as you can, with whatever you can. Being a part of the investment group will give you material, like a pitch deck, to show. Being a part of the trading room may enhance your skills in excel, FactSet, or Bloomberg. Therefore, if you were to be asked some questions and know the answers, you did more than just academia. That will show that you are motivated and that you did something to differentiate yourself. The other reason you should be involved is because if you are passionate about something, you should want to know the most you can. If you are passionate about the markets and I were to ask you what the top five biggest companies are by market cap and you don’t know it, or at least know a few, it does not show your passion and your will to learn about it. You learn this through being involved. You build a lot of skill that you can transfer to the workplace.

Out of the students that have succeeded in your classes, what are the character traits that they have?

Intellectual curiosity. What I teach tends to be more complex, what I ask them to do tends to be more demanding, and the people that have done well have tried to understand how to meet that. They also are interested and want to learn. They have understood that if they want to learn, they must work.

What’s some advice that you have for students that are graduating from Bentley?

Stay in touch with me. One of my favorite things to see is the career that my students have because it makes me feel so proud. Especially when they’re students that I had a relationship with and I knew they would do great because when I see that they are in fact doing great and I had nothing to do with it, it makes me feel good. Secondly, to never stop learning. Always stay intellectually curious because the more you learn, the more you can extend your understanding and the better your decision-making is going to be. A day where you don’t learn anything is a wasted day. Thirdly, if you are successful early in your career, stay on ball and never let that go to your head. At some points you will face hard times because that is the nature of life and if you stay grounded, it makes everything easier. When you end up successful, you are not as smart as you think you are, and when you are not successful, you’re not as dumb as you think you are.