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Ho-Hum to Hedge Fund
 

TheWizeNut's picture
CO
(Monkey, 41
 
Points)
 on 4/11/12 at 9:58pm
up down.jpg

For instance:

You're 25, have an Economics B.A. from a ho-hum state school, good math/stats/coding aptitude (but no formal training) and are working in NYC for a prop shop doing accounting and operations. No certifications/exams of any kind passed. You have no seed money right now/minimal connections.

You want to be the major partner in a hedge fund with a strategy of your design with $100 million+ (in today's dollars) AUM by 35. You would also settle for $5-$8 million liquid cash (once again in today's dollars) for yourself by 35 as well.

How do you do it?

If you haven't figured it out by now, "You" = "I".

Do your worst.

Tags:
swagon's picture

TheWizeNut wrote: "You" =

EN
(Neanderthal, 2,970
 
Points)
 on 4/11/12 at 5:13pm
TheWizeNut:

"You" = "I"

bro you totally M Night Shyamalaned me there

prospie's picture

"... am working in NYC for

(King Kong, 1,679
 
Points)
 on 4/11/12 at 5:21pm

"... am working in NYC for ...."
the correct conjugation here is "are."

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TheWizeNut's picture

Noted.

CO
(Monkey, 41
 
Points)
 on 4/11/12 at 5:28pm

Noted.

NewGuy's picture

Get high as fuarkkk, lie in

HF
 
Points)
 on 4/11/12 at 5:32pm

Get high as fuarkkk, lie in bed, and dream brother.

RagnarDanneskjold's picture

Seriously dude. If you're not

HF
(King Kong, 1,031
 
Points)
 on 4/11/12 at 5:35pm

Seriously dude. If you're not trolling, be more specific and realistic.

TheWizeNut's picture

I know it's shooting absurdly

CO
(Monkey, 41
 
Points)
 on 4/11/12 at 5:37pm

I know it's shooting absurdly high. But let's assume for a minute you think it's viable. Where should I start?

I know it's insane, believe me, I know.

xqtrack's picture

take your savings and start

HF
(Gorilla, 600
 
Points)
 on 4/11/12 at 6:08pm

take your savings and start playing.

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TheWizeNut's picture

xqtrack wrote: take your

CO
(Monkey, 41
 
Points)
 on 4/11/12 at 6:13pm
xqtrack:

take your savings and start playing.

I pulled 20-25% my first year trading 2010 (poor tracking/memory) my own measly account and 46% last year. I think I have the knack to trade, which is why the 5-8 million in liquid cash would make me damn near as happy. Trading my measly account size vs trading a million plus I would think is a whole different ballgame.

TheWizeNut's picture

What's even more insane is

CO
(Monkey, 41
 
Points)
 on 4/11/12 at 6:17pm

What's even more insane is that I would be fine with/think it's possible to get the 5-8 million by 30.

But, once again, let's assume it's reasonable.

justin88's picture

Next step would be quant

HF
(Gorilla, 578
 
Points)
 on 4/11/12 at 6:25pm

Next step would be quant developer at a quant fund/bank. Polish up your maths/stats/coding.

Cane0180's picture

I have no plan for you, but I

(Baboon, 106
 
Points)
 on 4/11/12 at 6:26pm

I have no plan for you, but I always tell people there are hundreds of very wealthy people that came from way lesser circumstances than you're in now. My favorite example is Bill Bartmanm, http://en.wikipedia.org/wiki/Bill_Bartmann , dude sounded like a total fuckup, but he got it done.

GoodBread's picture

That "Personal Life" section

AM
(Neanderthal, 3,602
 
Points)
 on 4/11/12 at 6:32pm

That "Personal Life" section on Bill Bartmann is out of this world.

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TheWizeNut's picture

Cane0180 wrote: I have no

CO
(Monkey, 41
 
Points)
 on 4/11/12 at 6:40pm
Cane0180:

I have no plan for you, but I always tell people there are hundreds of very wealthy people that came from way lesser circumstances than you're in now. My favorite example is Bill Bartmanm, http://en.wikipedia.org/wiki/Bill_Bartmann , dude sounded like a total fuckup, but he got it done.

Interesting that you mention him. I grew up in a broke ass house with bill collectors calling a lot, I also got septic hip when I was a kid and couldn't use my legs for a week.

Unfortunately, I never had the distinction of falling down the stairs drunk...YET.

PennTeller's picture

Let's start with the

HF
 
Points)
 on 4/11/12 at 6:53pm

Let's start with the basics.

1. Nothing is impossible.

2. Hope is not a strategy. At some point, the probability for a given event is low enough that you should consider it impossible. For example, I could tell you to go win the lottery which would give you the funds to start running an investment strategy.

Those are not the odds you're contending with, but given the fund raising/hiring environment for folks with solid credentials and applicable experience...they aren't far off.

Let me reiterate. If you were a third year analyst at Baupost with a Harvard degree, your odds of running a $100M hedge fund by age 35 would be pretty slim. Slim as in 1 in 100. Maybe. If you're lucky. Given your late start, the difficulty is magnified by a thousand fold.

The reason why folks come into this business is not because they want to be a hedge fund manager, though that's the end goal for many of us.

You only survive and advance in this business because you love the day to day of your work. For me, that love is understanding how companies work, finding undervalued and underappreciated ones and investing in them. For others, it is understanding the structure of economies, spiderweb of currencies and macro events that create trading opportunities. For still others, it is understanding the order of operations on a workout and selecting a specific tier of debt security because it gives them the maximum payout under the largest range of outcomes.

In the real world, these are considered idiosyncracies and personality flaws. In our profession, they are the obsessions and fixations that create investment outperformance.

No one succeeds because they "desperately want to be a hedge fund manager." Very few succeed because they "have a knack" for it because the investment world is wide and there are a ton of specialists out there who pore over all the runty little areas of the financial markets you're dabbling in.

I'll give you the same advice I gave the last guy who came by asking for advice on how to be a hedge fund manager. Sit down and learn about the business first. Read a ton of books, ask a ton of intelligent questions. Figure out why you want to go into this business and figure out WHERE you want to play in this business.

Do you have a security in mind? A strategy? A philosophical bent? If so, then go apprentice yourself to someone who is managing money in the area that you want to learn. Work cheap if you need to.

The money and positions will come after, if you're good at what you do. If you're awesome and make your bosses money, they come faster.

But targeting an age and an accomplishment is a mistake in my mind. It obfuscates the really important goal, absorbing as much knowledge about your chosen area as you possibly can. My view is that's the only way to make money over the long term.

Ravenous's picture

PennTeller wrote: Let's start

HF
(King Kong, 1,347
 
Points)
 on 4/11/12 at 7:13pm
PennTeller:

Let's start with the basics.

1. Nothing is impossible.

2. Hope is not a strategy. At some point, the probability for a given event is low enough that you should consider it impossible. For example, I could tell you to go win the lottery which would give you the funds to start running an investment strategy.

Those are not the odds you're contending with, but given the fund raising/hiring environment for folks with solid credentials and applicable experience...they aren't far off.

Let me reiterate. If you were a third year analyst at Baupost with a Harvard degree, your odds of running a $100M hedge fund by age 35 would be pretty slim. Slim as in 1 in 100. Maybe. If you're lucky. Given your late start, the difficulty is magnified by a thousand fold.

The reason why folks come into this business is not because they want to be a hedge fund manager, though that's the end goal for many of us.

You only survive and advance in this business because you love the day to day of your work. For me, that love is understanding how companies work, finding undervalued and underappreciated ones and investing in them. For others, it is understanding the structure of economies, spiderweb of currencies and macro events that create trading opportunities. For still others, it is understanding the order of operations on a workout and selecting a specific tier of debt security because it gives them the maximum payout under the largest range of outcomes.

In the real world, these are considered idiosyncracies and personality flaws. In our profession, they are the obsessions and fixations that create investment outperformance.

No one succeeds because they "desperately want to be a hedge fund manager." Very few succeed because they "have a knack" for it because the investment world is wide and there are a ton of specialists out there who pore over all the runty little areas of the financial markets you're dabbling in.

I'll give you the same advice I gave the last guy who came by asking for advice on how to be a hedge fund manager. Sit down and learn about the business first. Read a ton of books, ask a ton of intelligent questions. Figure out why you want to go into this business and figure out WHERE you want to play in this business.

Do you have a security in mind? A strategy? A philosophical bent? If so, then go apprentice yourself to someone who is managing money in the area that you want to learn. Work cheap if you need to.

The money and positions will come after, if you're good at what you do. If you're awesome and make your bosses money, they come faster.

But targeting an age and an accomplishment is a mistake in my mind. It obfuscates the really important goal, absorbing as much knowledge about your chosen area as you possibly can. My view is that's the only way to make money over the long term.

This is a great post. What you want to do is not impossible, but you will need to be very entrepreneurial to make it happen and work EXTREMELY hard. Maybe harder than you have ever imagined working. I went to a state school (better than the one you went to but nothing to brag about) and didn't take any finance courses as an undergrad. I got interested in the market in my last semester in school and decided to drop my plan to go into engineering, talked my way into an entry level ER job at a shitty regional firm, passed the CFA 3/3 in 18 months, read another 20-30 books on the side about investing, and then (amazingly) landed a job at one of the premier small cap funds in the country. After two years of killing it seven days a week, I moved up to Director of Research.

Anything is possible, but you have to be willing to sacrifice pretty much everything. It's tough for people that have been on "the path" since a young age, and it's practically impossible for those not even close to the path such as yourself. The first thing you should do is drop your arbitrary time and financial goals and just get in somewhere. Nobody cares if it's millions by 35 or whatever -- just get in. There is no advice that anyone can give you on how to do that, but if you want it badly enough, you will make it happen eventually.

triplectz's picture

^Amazing post.

IB
(Gorilla, 550
 
Points)
 on 4/11/12 at 7:13pm
TheWizeNut's picture

Ravenous, I didn't figure out

CO
(Monkey, 41
 
Points)
 on 4/11/12 at 7:28pm
Ravenous's picture

I got in a couple of months

HF
(King Kong, 1,347
 
Points)
 on 4/11/12 at 7:48pm
sayandarula's picture

swagon wrote: TheWizeNut

O
(King Kong, 1,812
 
Points)
 on 4/11/12 at 9:40pm

Money Never Sleeps? More like Money Never SUCKS amirite?!?!?!?

Macro Arbitrage's picture

Ravenous and PennTeller, you

HF
(King Kong, 1,369
 
Points)
 on 4/11/12 at 10:13pm

"I swear, by my life and my love of it, that I will never live for the sake of another man, nor ask another man to live for mine."

Bowser's picture

PennTeller wrote: Let's start

IB
 
Points)
 on 4/11/12 at 10:13pm
syntheticshit's picture

+1, could not have said it

 
Points)
 on 4/11/12 at 10:29pm
Marked to Market's picture

PennTeller wrote: ....In the

 
Points)
 on 4/11/12 at 10:34pm
wotingyu's picture

"Hope is not a

O
 
Points)
 on 4/11/12 at 10:57pm
Determined's picture

PennTeller and Ravenous, this

 
Points)
 on 4/11/12 at 11:06pm

Talent is hitting a target no one can hit.
Genius is hitting a target no one can see.

Highway Robbery's picture

Do what excites you. Work as

 
Points)
 on 4/11/12 at 11:38pm
sk8247365's picture

Everyone aspires to do

PE
(Gorilla, 524
 
Points)
 on 4/11/12 at 11:53pm
DrPeterVenkman's picture

PennTeller wrote: Let's start

O
(Gorilla, 706
 
Points)
 on 4/12/12 at 12:16am

See my WSO blog

Jerome Marrow's picture

Why would your goal to be

O
(Gorilla, 737
 
Points)
 on 4/12/12 at 12:58am
No BS Banker's picture

I have a close friend that is

IB
(Chimp, 13
 
Points)
 on 4/12/12 at 1:24am
swagon's picture

No BS Banker wrote: I have a

EN
(Neanderthal, 2,970
 
Points)
 on 4/12/12 at 1:32am
Xepa's picture

I had to SB the OP for mind

CO
 
Points)
 on 4/12/12 at 4:04am
englandwales's picture

No BS Banker wrote: I have a

 
Points)
 on 4/12/12 at 4:23am
TheWizeNut's picture

sk8247365 wrote: You would

CO
(Monkey, 41
 
Points)
 on 4/12/12 at 8:26am
TheWizeNut's picture

I've thought of trying to

CO
(Monkey, 41
 
Points)
 on 4/12/12 at 10:10am
PennTeller's picture

Uh, wow. 12 SBs and a

HF
 
Points)
 on 4/12/12 at 11:24am
NewGuy's picture

If you're at a preftigious

HF
 
Points)
 on 4/12/12 at 11:38am
TheWizeNut's picture

PennTeller wrote: EDIT: Wow,

CO
(Monkey, 41
 
Points)
 on 4/12/12 at 11:47am
Ravenous's picture

PennTeller wrote: Uh, wow.

HF
(King Kong, 1,347
 
Points)
 on 4/12/12 at 12:33pm
JimmyDormandy's picture

Ravenous wrote: PennTeller

VC
 
Points)
 on 4/12/12 at 1:17pm

"Jesus, he's like a gremlin; comes with instructions and shit"

NewGuy's picture

Ravenous wrote: To me it has

HF
 
Points)
 on 4/12/12 at 2:02pm
Ravenous's picture

Why would we pay more? I gave

HF
(King Kong, 1,347
 
Points)
 on 4/12/12 at 2:13pm
leveredarb's picture

these posts are the most

(King Kong, 1,231
 
Points)
 on 4/12/12 at 2:56pm
TheWizeNut's picture

The opinions really have been

CO
(Monkey, 41
 
Points)
 on 4/12/12 at 3:19pm
JMu's picture

Cane0180 wrote: I have no

IB
(Baboon, 123
 
Points)
 on 4/12/12 at 7:00pm
JMu's picture

And incredible posts by the

IB
(Baboon, 123
 
Points)
 on 4/12/12 at 7:41pm
ieatbananaforlunch's picture

Wow great post, Ravenous and

O
 
Points)
 on 4/12/12 at 10:00pm
Gray Fox's picture

As usual on the hedge fund

HF
 
Points)
 on 4/12/12 at 11:02pm
aempirei's picture

Awesome thread. In for

IB
(Gorilla, 726
 
Points)
 on 4/13/12 at 12:21am

My name is Nicky, but you can call me Dre.

NewGuy's picture

Ravenous wrote: Why would we

HF
 
Points)
 on 4/13/12 at 4:03am

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