hedge fund compliance....no individual stocks. is this normal?
Hi guys...was recently offered a position at a decently large value fund, won't name for privacy reasons (and it's a small shop, so you'd be able to find me on linkedin easily haha), but i just got my offer and was told there were compliance papers to sign since they are a registered investment advisor, yada, yada. Well, the next part caught me a bit off guard. I was told that I nor any close family (only if they live with me) are allowed to hold individual stocks.
I can understand not being able to trade or buy stocks that are in the fund's portfolio, but why no individual stocks at all?? How are we supposed to grow our own money for the future?? haha...
He did say that I'm allowed to hold mutual funds/ETF's though....guess I'll have to pick up some options trading on ETF's or something to make up for lack of gains (yes, might be a dangerous path to start on hahah oh well) from not being allowed to hold individual stocks.
Is this normal? (referring to the ban on owning ALL individual stocks, not just ones that the fund holds or is planning on trading)
we are not allowed to own any individual names but no restriction on close family's holdings
I also can't own individual stocks (and that goes for immediate family too).
1) less of a compliance headache 2) we are a well diversified fund, so at some point, our holdings and my PA holdings could cross which may create a conflict
More broadly, if you agree that you shouldn't own the stocks in your fund for compliance reasons, then the universe of stocks for your PA should be filled with either 'bad' stocks (that you've looked at and decided to pass on) or stocks you don't know. You shouldn't be investing in either, right?
Yes, this is normal or, at least, not too unusual....
Immediate family being people who live with you is strict though. Generally its anyone who you co-file taxes with or claim as a dependent on your tax return. I mean pretty much rules out sales girls as dating prospects. Also, if my roommate told me I was restricted I'd be like wtf.
There is also the best ideas should be in the fund thing.
I can see the "best ideas should be in the fund" argument, but if the fund doesn't decided to buy into your idea, that shouldn't be your problem, right? haha. Oh well. Guess I just gotta live with it lol.
Also, this fund takes very concentrated positions and portfolio turnover is very low. So, even if we were throwing ideas at Mr. CEO all the time, they are not acted upon very often from what I can tell.
But yeah....well shit. Looks like it's time to get better at options trading on ETF's lol.
I can't own individual stocks either.
I understand the reasoning but doesn't that suck for anybody who isn't a PM? I mean the whole thesis of value investing is predicated on the idea that indexing leads to worse investment returns than investing in strong individual names. Then you are forced to only be able to index with your own money. What do all the employees who's money isn't actually invested in the fund do? Do you just dollar-cost-average into ETFs and hope for the best?
...my money is invested in our funds.
But that's beside the point. My #1 obligation is to my employer, and I couldn't imagine even having the free time to do the required work on a name to the point I'd be comfortable investing. I would be very happy to take the work out of it and earn market returns on my hard-earned cash.
At what point do you have the ability to be invested in your own fund? I'm assuming the low level analysts just get their bonuses as cash. How far up the food chain do you have to be before your compensation can/is invested in the firm?
a little draconian, but normal.
unless you're already rich, it's unlikely that any potential excess return from investing in your PA is a better place to put your energy than your work.
Many funds actively encourage juniors to invest in their funds. Some even require it (I believe Baupost requires it).
lol at dollar cost averaging :D
this is pretty standard across the industry
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