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The BlackHat Interview: 2/4
 

BlackHat's picture
HF
 
Points)
 on 8/4/12 at 10:30am
blackhat.jpg

Mod (Andy) note: The much anticipated BlackHat interview is here (see part 1 here). Questions came from myself and members of writing and intern teams. BIG thanks to BH for his really in-depth/quality/quick responses. I promise all of you will have some great takeaways from this series.

If you don't know of BlackHat, he has been in the HF industry for 5 years (broke in straight from ugrad), has been one of the most active members on the site this year, and boasts a formidable 173:25 sb:ms ratio.

Here's how the four part series will go:

  1. Background / breaking into HF
  2. Working in HF, Money & Motivation
  3. Career advice for all you WSO Monkeys + how he advanced in his career
  4. General life tips

First question of Part 2: Who is best fit to work in HF?

(btw, try to keep your questions relevant to the current post as he may have likely already answered it in a previous or upcoming post.)

There’s so many different kinds of funds out there it’s impossible to speak to all of them, but as far as value funds go, the right person is somebody who take in a ton of information and truly learn about a business rather than jump in and out of a bunch of short-term ideas in plug-and-play fashion. I’d say the biggest qualities are autonomy, communication skills (including and particularly written), and a genuine thirst for knowledge. Most of the businesses I end up covering are ones I end up getting really interested in and learning everything about. I’ll call up academics, industry experts, and other people to try and get information that the companies won’t just hand out (else they may look bad) and learning all about the way the business works from these sources is not only what generates alpha, but what makes it so fun. Having an investigative personality and a high level of curiosity is a huge plus, since there’s usually a reason a stock is trading cheap and you have to play detective and find out if it’s legitimate or not. It’s not for everyone, but if you didn’t notice I absolutely love it.

What's a typical work day like for you?
Here’s a typical day without the morning workout, which would go down at 5am:
6:00am – Wake up, roll around and make loud noises to piss off fiancée

6:15am – Shower, get dressed and ready for work

6:45am – Catch up on news from overnight and if there’s any 7am earnings releases I’ll wait

around for those. Check WSO of course and basically dick around for a while

8:00am – Head to work, maybe grab food at a cart or wait until I get to the office

8:30am – Get to the office, check emails, read newspaper, get caught up on everything

9:30am – Watch the markets open, start doing research and pick up where I left off day before

12:15pm – Go get lunch, usually with co-workers, but usually bring food back to my desk

12:30pm – Possibly look into some phone calls I need to make to IR or some management

2:00pm – Start writing up a memo for my boss and other analysts that summarizes my research and upload it on the network we all share. Afterwards, keep doing research or maybe updating model for whatever company I learned new information about if needed.

4:00pm – Watch market close, wrap up research for the day and maybe host a quick daily debrief in my office with PM and a few senior analysts. We’ll discuss how our positions held up in the market and talk about what we’re working on currently.

5:00pm – Print out a 10-K and some quarterlies to take home for a new company I’m looking at

5:30pm – Head out if I don’t have motivation to keep working on whatever research I was on

6:00pm – Gym, then pick up food or groceries or whatever fiancée says we’re doing for dinner, then jack around on WSO or whatever to kill time until dinner.

7:30pm – Dinner, followed by maybe going out for a quick drink or something, sleep by 12am.

What do you do to relax or take your mind off work?
My favorite hobby is probably MMA and/or Brazilian Jiu Jitsu. It’s a very demanding sport physically, but also mentally. Sparring in Jiu Jitsu is really like a chess game, and there’s way more strategy and planning in MMA than people give it credit for. I love being able to work on certain finesse techniques and try to set people up in certain positions, so it actually compliments my job pretty well. And let’s not forget, when you want to blow off some steam there’s no better way to do it than by kicking someone/something in the head. Aside from that I also love a good glass of wine and am a big movie fanatic. I used to play a ton of poker online too but unfortunately we can’t do that anymore…

What keeps you motivated?
The only thing that really keeps me motivated is that every day in finance is a little different, so life doesn’t get too monotonous at work. And like I mentioned, I’m motivated to learn [somewhat] useless information, which you tend to gain a lot of when you’re becoming an expert in several different businesses and spending your entire day reading and talking to a variety of people associated with the business or industry.

How much does money motivate you?
I can’t lie, money probably provides about 60% of my motivation to ‘succeed.’ The only way I can do everything in life that I want is by making enough money to be financially stable. Right now I’d say I’m most motivated by money because I knew I wanted to propose to my girlfriend and I didn’t want to do that until I was confident I’d be well-off enough to provide for her and a potential family. As I get older I don’t think money will be as much of a motivator, but I can’t just pretend like the almighty dollar isn’t at least a partial influence in why I work as hard as I do. First and foremost, however, is the fact that I enjoy what I do and would happily do it for 10% of the pay.

How much does someone in a role like yours make per year (base + bonus)?
Oh boy, of course this is one of the questions. Okay, well I’ll explain how I get paid and then go into how it generally works for more junior guys I guess. First off I feel like I need to start by saying I’m pretty fortunate at 26 years old to be given a lot of responsibility, whereas there’s guys under me who are older but still get trusted with less and push less ideas into the portfolio. My compensation is such that I get paid a decent base salary but am entitled to a certain percentage of our incentive fees for the year, in my case a little less than 1%. So someone in an agreement like this at a $2b fund might expect to see $300k salary and, let’s say the fund returns 20% (so $80M in fees), if the payout is 75bps, $600k as a year-end bonus. The downside of this is obviously that you can get killed if your fund loses money, but the upside is clearly very attractive. Don’t expect this until you’ve been working for long enough to have the trust of your PM and some sort of track record of good ideas and the ability to invest on your own. I’m in my 3rd year as an analyst and I’d still expect that’s way earlier than most places to get a chunk of fees worked into your contract. Luckily we run lean and my PM is pretty meritocratic, so I got an early opportunity.

Let’s take someone else at the fund who might work more on a discretionary bonus compensation plan, though. At the same seniority, it might be a similar base, but the bonus would just be “anywhere from 0-200% of base salary.” Typically that will also to a certain extent be based on fund performance, but we definitely know whose picks are whose, so if you’ve been repeatedly picking winners or losers, your bonus will reflect that. For 1st and 2nd years, base salaries are going to be decently lower and the bonus range might only go up to 100% or 150%.

I hate victims who respect their executioners Follow BH & Co. on Twitter: @DumbLuckCapital twitter.com/DumbLuckCapital

Comments

analyst1609's picture

Big Money! $$$

(Baboon, 156
 
Points)
 on 7/30/12 at 9:03pm

Big Money! $$$

No contract means I have all the power. They want me, but they can't have me. - Don Draper

Febreeze's picture

got a tip?

(King Kong, 1,158
 
Points)
 on 7/30/12 at 9:10pm

got a tip?

option1234's picture

Love this series thanks for

(Chimp, 14
 
Points)
 on 7/30/12 at 9:19pm

Love this series thanks for posting

BlackHat's picture

Thanks kids

HF
 
Points)
 on 7/30/12 at 9:25pm

Thanks kids

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

awqtfq's picture

Good read, but unfortunately

(Orangutan, 250
 
Points)
 on 7/30/12 at 9:28pm

Good read, but unfortunately now I have to wait for the next part to come out. Thanks for doing this BH.

txjustin's picture

+1, thanks for the write-up

O
(Neanderthal, 2,475
 
Points)
 on 7/30/12 at 9:54pm

+1, thanks for the write-up

Bearearns's picture

Blackhat/WSO, thanks for part

(Orangutan, 280
 
Points)
 on 7/30/12 at 10:05pm

Blackhat/WSO, thanks for part two. Blackhat, I got a question if you have time.

You mentioned earlier your fund is value oriented. How does your fund view other styles of investing? Whether it is growth oriented, technical, quant, etc. If frowned upon, how would it view a hybrid of say value oriented and one of the above methods? Thanks.

Everyone has their own style hence why I am trying to get information if suiting same investing style with fund is an absolute must or if one can use hybrid approach, one being the focused method of the fund. Thanks again and much appreciated.

In reply to JoshFi7
BlackHat's picture

JoshFi7: Blackhat/WSO, thanks

HF
 
Points)
 on 7/30/12 at 10:16pm
JoshFi7:

Blackhat/WSO, thanks for part two. Blackhat, I got a question if you have time.

You mentioned earlier your fund is value oriented. How does your fund view other styles of investing? Whether it is growth oriented, technical, quant, etc. If frowned upon, how would it view a hybrid of say value oriented and one of the above methods? Thanks.

Everyone has their own style hence why I am trying to get information if suiting same investing style with fund is an absolute must or if one can use hybrid approach, one being the focused method of the fund. Thanks again and much appreciated.

We have certain portions of the fund that we'll kind of give the green light to in terms of breaking from the traditional 5+ year value target approach, and in our NYC office we do actually get away with making some short-term bets somewhat often. Most of those are based on our understanding of the company as we viewed it from a value perspective though, so I wouldn't say they stray away too much from our philosophy. It's not like we're doing quant-ish algorithmic trading on top of our value strategy or anything, but we do have a hybrid approach in that there's certain times when you know something is going to happen or you really understand a business better than the market and know you can make a good return on something event-driven or whatever, and our outlook on that is just like hey, why not do it, let's try it. So we do a decent amount of that stuff, which is why I like your description of it being a more hybrid approach in a lot of respects actually. Think Seth Klarman's event-driven strategies + Buffet's traditional long-term approach.

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

DonVon's picture

Wow BlackHat -- you are a

IB
(King Kong, 1,915
 
Points)
 on 7/30/12 at 10:23pm

Wow BlackHat -- you are a baller.

"An intellectual is a man who takes more words than necessary to tell more than he knows."
- Dwight D. Eisenhower

Check out my blog!

In reply to BlackHat
Bearearns's picture

Thanks for the in-depth

(Orangutan, 280
 
Points)
 on 7/30/12 at 10:49pm

Thanks for the in-depth response.

Firefox's picture

So you only make 2

HF
(Orangutan, 275
 
Points)
 on 7/31/12 at 12:48am

So you only make 2 Lamborghinis a year net of tax?

NGW's picture

Thanks for the insightful

 
Points)
 on 7/31/12 at 1:27am

Thanks for the insightful responses BlackHat.

Just curious, have you ever invited any finance acquaintances to the MMA gym? I enjoy boxing myself (pretty much for the same reasons you've mentioned above) and I've always liked introducing friends to the sport.

Domino's picture

You are 26 and making $300k

(Baboon, 135
 
Points)
 on 7/31/12 at 2:15am

You are 26 and making $300k base? Jesus Christ

In reply to NGW
BlackHat's picture

NGW: Thanks for the

HF
 
Points)
 on 7/31/12 at 6:26am
NGW:

Thanks for the insightful responses BlackHat.

Just curious, have you ever invited any finance acquaintances to the MMA gym? I enjoy boxing myself (pretty much for the same reasons you've mentioned above) and I've always liked introducing friends to the sport.

I think there's a certain stigma attached to MMA so it's pretty tough to just casually bring someone along to spar or something, but I do box sometimes with people who I've met from work that also box. Mostly though, it's pretty tough to just bring someone who's never trained MMA and have a friendly sparring session with them. The sport isn't really built for that the way it is for tennis or squash or something. I wish I knew more people interested in it though, I'd love to have some work buddies that were at least well-versed enough to roll with me or something.

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

philosophizingphilosoraptor's picture

Hey BlackHat, thanks for this

 
Points)
 on 7/31/12 at 11:04am

Hey BlackHat, thanks for this really insightful and useful thread.
My question is about social life. I've read/heard that one of the biggest positives of working as an analyst in IBD is the camaraderie you build with your fellow bankers. I have also heard that PE/HF do not provide many opportunities for friendships/camaraderie, due to their small size and age difference top to bottom. Can you comment on this? Do you have true friends from your HF that you go out with / have fun in a non-work related role? Who do you hang out with? People from college? Or do you have no time at all (engaged, after all)?
Thanks in advance for your response.

To the starving man, beans are caviar

Bobb's picture

You're only 26?! Shit, I am

AM
 
Points)
 on 7/31/12 at 11:39am
In reply to philosophizingphilosoraptor
BlackHat's picture

philosophizingphilosoraptor:

HF
 
Points)
 on 7/31/12 at 11:45am

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

kuyoungj's picture

Hi BlackHat, thanks for doing

 
Points)
 on 7/31/12 at 12:36pm
In reply to kuyoungj
BlackHat's picture

kuyoungj: Hi BlackHat, thanks

HF
 
Points)
 on 7/31/12 at 12:43pm

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

ChrisHansen's picture

pushing 1 million in comp at

(Gorilla, 544
 
Points)
 on 7/31/12 at 1:15pm

"I'm the luckiest guy in the world, and when I die I want to come back as me."
-Mark Cuban

In reply to ChrisHansen
BlackHat's picture

ChrisHansen: pushing 1

HF
 
Points)
 on 7/31/12 at 1:18pm

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

In reply to BlackHat
ChrisHansen's picture

BlackHat: ChrisHansen: push

(Gorilla, 544
 
Points)
 on 7/31/12 at 1:29pm

"I'm the luckiest guy in the world, and when I die I want to come back as me."
-Mark Cuban

In reply to ChrisHansen
BlackHat's picture

ChrisHansen: BlackHat: Ch

HF
 
Points)
 on 7/31/12 at 1:55pm

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

mi10c's picture

Hi BlackHat, I appreciate you

(Chimp, 4
 
Points)
 on 7/31/12 at 2:16pm
In reply to mi10c
BlackHat's picture

mi10c: Hi BlackHat, I

HF
 
Points)
 on 7/31/12 at 3:09pm

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

In reply to BlackHat
ChrisHansen's picture

BlackHat: ChrisHansen: Bl

(Gorilla, 544
 
Points)
 on 7/31/12 at 3:35pm

"I'm the luckiest guy in the world, and when I die I want to come back as me."
-Mark Cuban

tempaccount's picture

So someone in an agreement

HF
(Baboon, 118
 
Points)
 on 7/31/12 at 4:56pm
In reply to tempaccount
BlackHat's picture

tempaccount: So someone in

HF
 
Points)
 on 7/31/12 at 5:09pm

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

In reply to BlackHat
SirTradesaLot's picture

BlackHat: Empirical evidence

 
Points)
 on 7/31/12 at 5:29pm

I'm a lover, not a fighter, but I'm also a fighter, so don't get any ideas.

My WSO Blog

In reply to Bobb
帝都大蜜's picture

Bobb: You're only 26?! Shit,

(Baboon, 104
 
Points)
 on 7/31/12 at 6:58pm

"I already know I'm going to Hell. So, at this point it's go big or go home"

In reply to 帝都大蜜
BlackHat's picture

帝都大蜜: Bobb: You're only

HF
 
Points)
 on 7/31/12 at 7:07pm

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

In reply to BlackHat
Ravenous's picture

BlackHat: 帝都大蜜: Bobb: You

HF
(King Kong, 1,347
 
Points)
 on 7/31/12 at 8:07pm
EuroStriker's picture

This has been really

(Monkey, 50
 
Points)
 on 7/31/12 at 8:43pm
illiniPride's picture

BH: Would you rather have 100

IB
(King Kong, 1,099
 
Points)
 on 7/31/12 at 9:14pm

Leadership can be defined in two words: "Follow Me"

In reply to EuroStriker
BlackHat's picture

EuroStriker: Workflow: -When

HF
 
Points)
 on 7/31/12 at 9:47pm

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

FutureWaller's picture

Einhorn? Did you read

O
 
Points)
 on 8/1/12 at 12:21am
In reply to BlackHat
labanker's picture

BlackHat: I think there's a

PE
(Orangutan, 333
 
Points)
 on 8/1/12 at 8:55am
In reply to labanker
BlackHat's picture

labanker: You're in NYC

HF
 
Points)
 on 8/1/12 at 9:46am

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

chimpout's picture

sweet 8.30 - 6 300k buyside

 
Points)
 on 8/1/12 at 4:44pm
pechamp's picture

BH, wanted to pick your brain

(Chimp, 6
 
Points)
 on 8/1/12 at 5:00pm
In reply to pechamp
BlackHat's picture

pechamp: BH, wanted to pick

HF
 
Points)
 on 8/1/12 at 5:10pm

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

soccerlife11's picture

Great post!

IB
(Monkey, 39
 
Points)
 on 8/1/12 at 5:33pm
hedgefund's picture

Awesome post! I have a career

(Monkey, 43
 
Points)
 on 8/1/12 at 8:12pm
In reply to hedgefund
BlackHat's picture

hedgefund: Awesome post! I

HF
 
Points)
 on 8/1/12 at 8:23pm

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

hedgefund's picture

thanks a lot! recruiting is

(Monkey, 43
 
Points)
 on 8/1/12 at 8:36pm
In reply to hedgefund
BlackHat's picture

hedgefund: thanks a lot!

HF
 
Points)
 on 8/1/12 at 11:40pm

I hate victims who respect their executioners

Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital

In reply to BlackHat
FutureWaller's picture

BlackHat: AM I think would

O
 
Points)
 on 8/2/12 at 12:28am
Rich_215's picture

Great post

(Chimp, 15
 
Points)
 on 8/2/12 at 5:18pm
jez248's picture

BlackHat: Typically that

HF
(Chimp, 8
 
Points)
 on 8/4/12 at 11:44am
Bonus's picture

Hey, excellent thread! And

 
Points)
 on 8/4/12 at 12:25pm

Colourful TV, colourless Life.

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