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An Academic Approach to Investing
Alumnus Minder Cheng takes PhD training to Wall Street

 

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A call from the New York Stock Exchange in 1993 turned out to be a defining moment that put Minder Cheng, MBA 89, PhD 94, on a new career path. After agreeing to help the NYSE on a project exploring how to gain a competitive edge over NASDAQ and Third Market Makers, Cheng chose a career in business instead of academia. Since then, Cheng has held leadership roles with BlackRock and Barclays Global Investors, Convergence Asset Management, Sumitomo Finance International, and Salomon Brothers. He serves as a director for Investment Technology Group, a strategic advisory board member at ParAccel, and a senior advisor to Executive Networks. Cheng credits the Berkeley-Haas PhD Program for teaching him the research methods that led to his successful career. His $1.2 million gift, augmented by a UC Berkeley matching program, will provide a stipend and cover tuition and fees for eligible PhD finance students.

 

What was the focus of your dissertation?

 

I researched market microstructure, upstairs trading, and term structure of interest rates. The market microstructure research led to a job helping the NYSE identify ways to increase order flow. My research in upstairs trading - helping investors make very large trades without causing too much disruption in the market - is still very relevant to my work.

 

Why do people invest based on emotion?

 

People think the Internet is providing accurate information, but often it’s just noise that triggers an emotional reaction. Designing an investment strategy based on quantitative research is the key to minimizing the impact of emotions and ensuring consistent investment performance.

 

What inspired you to invest in Haas PhD students?

 

I wanted to give back to the community that got me started professionally. I wanted to help PhD students stay focused on their research and avoid the distraction of looking for funding sources.

 

What inspired you to be a judge in the recent Berkeley MBA Investment Fund course student competition?

 

I think it helps students to have outside and practical perspectives when developing an investment strategy. Something may look great on paper, but that can change when you factor in tradable size, risk, trading costs, and regulatory environment.

 

What principles guide you most in life and business?

 

The first is integrity. Integrity is how you build trust with clients, colleagues, and friends. The second is curiosity. If my mind is open, I can notice outliers and use an academic approach to find interesting trading strategies or market phenomena.