Gary van Vuuren, the most interesting risk manager in the city

15 April 2015 view all posts

Gary is one of the best and certainly the most passionate teacher I have ever had the pleasure to learn from. We met during my MSc and ever since he has been a supporter of Shard Fund and has taught and provided us with priceless advice (especially in regards to our models). Read below and find out more about him and his endeavours.
Thank you for this interview, Gary.
/Stelian


Where did you grow up?

Bulawayo, Zimbabwe till I was 18, then I moved to South Africa for university.

When growing up, what was your dream job?

An astrophysicist working for NASA. I was good at physics and I enjoy astronomy, so it seemed like a good idea. I did do a PhD in physics to start with, with a Masters in astronomy (stellar variation in nearby galactic clusters in case you're wondering), so I sort of got it right.

Were you a good student?

Not until I met my first girlfriend – who was a workaholic and I was trying to impress her, so I started to work hard (academically) as well (I was about 15). Until then, I was a lazy student, but then I started working, my marks improved and before I knew it, my marks were better than the geniuses of the class. Then it became enjoyable, but I think that's a positive proof that I'm not smart – I have to work at stuff, but I enjoy it, so it's not "hard".

What sparked your interest in financial markets and risk management?

I hate to say it but it's true: money. The amount of money in finance (and more and more – in risk management) is orders of magnitude more than I could earn as an academic or as a scientist at a research facility. 

How did you get your foot in the door?

In the past, South Africans could come to the UK for a "2 year working holiday" and I did this to be closer to the Alps (I'm a keen mountaineer and the Alps are far – and expensive – from South Africa). Whilst in the UK, I got a temporary job at Goldman Sachs as a data analyst and I quickly learned that my mathematics background (from physics) helped enormously. Even a mediocre physicist's mathematics is much better than the average finance person's mathematics (sorry, but that's true in general). So when I saw what I could earn, I returned to South Arica, began to study again (a new Masters in market risk and a new PhD in credit risk) and started working for banks and asset managers.

Could you give us an example of a big mistake you have made and what you learnt from it?

I worked for an investment bank in the pre-crisis period! I won't say which one, and it wasn't Goldman Sachs (that was fun). It might have been a dysfunctional team with a maniacal boss, but I believe the entire bank culture – certainly more or less everyone I had to deal with – was toxic and obsessed with making money. The backstabbing I could deal with, it was the stabbing in the front that was hard to take! Worst decision and worst 6 working months of my entire career – I won't work for an investment bank again.

Tell us a not so well-known factor that contributed to the global financial crisis in 2007-2008. 

Even if we could have seen it coming, we couldn't have prevented it. 

Many people say banks and analysts were stupid because they "didn't see it coming", but the opposite is true. Of course they saw it coming – there's no way the entire global population of quants and smart analysts didn't see "it" coming. The problem was that people made money off it for YEARS – this wasn't a short term bubble. So if one avoided – say – investments in subprime property back in 2003-7, one did the wise thing by avoiding inevitable catastrophe but one also didn't make the spectacular profits that others were making. Banks that shunned risky securities and strategies were indeed risk-averse, but other banks made unbelievable profits which didn't only feed into the banks' pockets, but investors as well. These investors shunned the "sensible" banks because they weren't making the same profits. The question shouldn't be "why didn't we see it coming?" but "why didn't we see when it would burst?" but that involves seeing into the future…

Do you think the measures taken in the aftermath of the crisis are enough to prevent another systemic shock, given that the 5 largest US banks have actually grown substantially bigger than 6-7 years ago?

No. I believe the seeds of another crisis – a different crisis – are germinating as I type. This is the nature of finance and the greed which characterises it. The incentives are conflicted in most of finance – long term rewards for short term profits (for example) which regulators have and are implementing, but someone will figure out a way around this and that will quickly spread and the entire cycle will start again.

Also, some of the measures taken may be contributing to the very shock they aim to prevent. Some examples might be: the long period of low interest rates may be creating unknown bubbles, the huge and onerous (but necessary) fines on banks may be creating incentives to do business elsewhere, the reduction of bonuses might be encouraging bankers to migrate to friendlier climates, the regulatory burden may be creating artificial, illiquid movements of capital.

If you were a policy maker, what measures would you implement, which are so far not taken into account?

I would simplify regulations – try to introduce more of a "spirit of the law, not the letter of the law" type of culture. I think the current rules (whether accounting or financial institution capital regulation) are hugely complex, little understood and thus ripe for misinterpretation and manipulation (unintentional or otherwise).

Could you give us a more long-term view on an African country/sector?

Remember, I'm extremely biased because I'm a Zimbabwean – a country whose current "president" is a brutal, thuggish dictator who has destroyed the country and wrecked a previously-thriving economy. South Africa – in turn – did absolutely nothing to stop him (and they could have). Instead the current South African president endorsed the sham elections back in 2001 and stated on record that there was nothing unfair or unfree about them. THAT is why I emigrated and came to the UK, because I abandoned hope in those countries.

If any countries are going to get it right/are getting it right, it's Botswana and Kenya. Democracy is young, but it's taken hold.

Sector? The tourism industry is vast and (still) virtually untapped. When last did you speak to someone that was going on holiday to Nigeria? Or the Central African Republic? Or Ghana? 

Finance industry or academia?

Finance industry PURELY for money, but academia blows my hair back.

Many MBA students move away from IB and more towards IT. If you were one of them, what would you choose?

Given my experience in IB, I would choose IT! Also, I think the IB landscape is changing – IB isn't as "sexy" as it was pre-crisis and the rules are getting more and more onerous. Being in IB limits the future options nowadays (and it's getting worse for banks and bankers). Being in IT allows you the flexibility to change jobs and even professions – adapting and evolving as you go along.

What’s the best piece of advice that she has given you?

I don't know who "she" is, but the best advice a woman ever gave to me, was to never forget your roots. It keeps one grounded.

Interviewers: Stelian Nenkov, Georgi Stanoev

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Gary van Vuuren

Job title: Head of Model Validation, Aviva Investors
Date: 26th Oct 2014
Age: 45
Born: Bulawayo, Zimbabwe
Degree: PhD Nuclear Physics & PhD Credit Risk
University: Natal University, North West University both SA
Location: London, UK

Gary van Vuuren

Job title: Head of Model Validation, Aviva Investors
Date: 26th Oct 2014
Age: 45
Born: Bulawayo, Zimbabwe
Degree: PhD Nuclear Physics & PhD Credit Risk
University: Natal University, North West University both SA
Location: London, UK