Interview with a Portfolio Manager

Dear Monkeys,

Christmas is coming and I would like to give you guys a gift. As I am extremely cheap and there are so many of you, the traditional shiny box just won't do. Therefore, I have something else in mind.

I have recently been in contact with Mr. Eric Lasky over at USA Mutuals and he has indicated that Jeff Middleswart, the Portfolio Manager of the Vice Fund, would be happy to sit down for an interview with Wall Street Oasis.

I would like to make this experience as educational and entertaining for you guys as possible, so here's your chance to ask a real portfolio manager all of the things you ever wanted to know about running a fund. Anything from operations, to strategies, to how to climb the ladder. Just please... no resumes .

Feel free to peruse the company's website (linked above) and post whatever questions you'd like answered in the comments to this post.

Hopefully, we can help to demystify the portfolio management world a bit and get those of you with hopes of running your own fund someday, on the right track.

Enjoy the rest of your day,

Midas

 

This is a great present Midas, I look forward to seeing what he has to say!

"You stop being an asshole when it sucks to be you." -IlliniProgrammer "Your grammar made me wish I'd been aborted." -happypantsmcgee
 
marauders4:
Thoughts on TIAA-CREF's Social Choice Equity Fund (Opposite of Vice)?

Why do investors seek a sin fund vs. average fund that exists? (Excluding obvious performance reasons)

Sin funds are counter cyclical and they also tend to do well in emerging economies (like giving a poor person a million bucks - the first thing they buy into is sin). In China especially there has been a huge spike in beer sales and spending on the armed forces that have grown faster than GDP I believe (have to check on this - don't quote me).

 

I would have preferred a donation in my name to the Human Fund...

Anyway, ask him what his thoughts are on market efficiency and beating the total market or comparable market fund. I'm extraordinarily skeptical about this and see most portfolio managers as people who make money off of a concept that has been proven false, i.e. obtaining risk-adjusted returns in excess of the market after netting out management fees on a mathematically provable and consistent basis. And even if he could do it, what gives the investor any kind of security in the event of his death, injury or retirement?

Array
 

Why start this fund when there is guaranteed to be ZERO institutional interest? Public AUM is $75 million. I'm also taking note of the 2% expense ratio, which is high compared to peers. Does he manage another portfolio on the side?

 

I'm actually curious on how's he's taking his positions in foreign companies. Is he buying into their ADR equivolents or his he trading them in local markets? Additionally, are his positions solely limited to the equity markets or is he using Fixed Income products and "approved" derivatives (I'm unfamilliar with all of the rules on what a mutual fund can and can't do) in order to help generate real returns for the fund.

How does he account for the production risks, particuarly within commodities with respect to increased costs of grains, potatos, and other basic ingrediates for alcohol, in selecting what beverage companies to invest in.

Of the small universe of alcohol companies, how does he view InBEV with respect to other companies involved. Additionally, and this is more out of personal interest, what does he think of the smaller publicly traded beer brewers in the US, namely SAM, The Boston Brewing Company, and HOOK, Craft Brewers Alliance, and whether or not we will see the further emergence of other publicly traded small breweries.

I'm also going to be the first to ask something completely unrelated to the fund that would be interesting to know about a guy managing a fund for Vice... 1) Wine, Liquor or Beer? 2) Favorite Beer? 3) Favorite Liquor? 4) Favorite Personal Vice? 5) Favorite Brand of Vice Product Sold?

 
  • What type of education would you personally say is desirable within the portfolio management field? MSF, CFA, Engineering/Math degree, MBA in Finance etc.

  • How much of the research is done in house and hands on?

  • Nowadays, in portfolio management, it seems that it is more desirable for a stiff PhD's that would make Ben Stein look like Bluto from Animal House, rather than the former stereotypical 'Gordon Gekko cuthroat go getter' (personal observation/opinion of course). How would you stereotype the typical portfolio manager? And what do you think will change in the future?

  • Obviously we are very happy here at Wallstreetoasis.com to have the opportunity to ask you questions but are there any sites/bloggs/newsletters that you personally enjoy?

Great initiative Midas, and a very big thank you to Mr.Middleswart who is kind enough to answer the questions.

/D

 

You should get him to come up with something like a progression. LIke how does one go from analyst/junior guy/whatever to becoming a PM. How can someone set themselves up best to take this route etc.

If I had asked people what they wanted, they would have said faster horses - Henry Ford
 

taking a few steps back, and parlaying it with his background/education/creds, when/why did he decided to get into running a fund. Says he took over in Feb 2010, but did he know back in Undergrad this was his goal? Or was is developed via his professional experience/further education/other opportunities?

"Stay Hungry, Stay Foolish"
 

Sounds like they covered just about everything. They apparently really like you for you to go this far, I'd be prepared for just about anything. Could just be a time to shoot the shit with the pm, who knows.

If you don't mind sharing, what was the modeling test like? Was it just the basis for creating a pitch or did they want to see if you could create a 3 statement model? Also curious about some of the technical questions. I'm guessing a good number of accounting questions and different investment scenarios?

 

I'm interested in this as well. I once had to complete a modeling test as well and come up with an investment recommendation for a company. The guys then told me that everything was great, but that they had expected me to call up the management team of the company I was looking at. Now, please keep in mind that the exercise was done for a $1bn market cap NYSE company (not amazing, I agree), but how are you supposed to get the management team on the line?? "Hi, I have this interview and I need to do a case study on your company. You got 15 minutes to answer a few questions?"

I'm talking about liquid. Rich enough to have your own jet. Rich enough not to waste time. Fifty, a hundred million dollars, buddy. A player. Or nothing. See my Blog & AMA
 

Modeling test was standard 3 statement model with DCF. Technical questions consisted of explaining the link in every standard accounting item. Other technicals were industry specific questions. I generally go into things with my own pitch back pocket.

 

it is an Informational Interview, treat it like any other interview, be prepared, the questions that you need to ask them will be the same as in your previous post http://www.wallstreetoasis.com/forums/phone-conversation-with-pms

read the material in the links in your previous post, also signup onto www.sumzero.com it is primarily for the buy-side you can sign up onto the basic option they have, do check http://equity-research.com/ there are some buy-side notes on that site

bring a resume, ask him to provide feedback, make a lit of questions print 2 or 3 copies, if you can turn it into a questionnaire which lets them tick their responses that would not be a bad idea, ask them to fill it so that you can actually remember what they say

do ask for his business card and if you are going to make models/reports ask them if you may give those to him for feedback

 
Best Response

This had better be a joke. Alternative opinion: don't go into a PM's office and give him a homemade questionnaire you made with boxes to tick and copies of your resume to review.

Just go there dressed nicely, if it's fidelity they have a pretty relaxed dress code but definitely wear a collar. carry a portfolio and a couple of copies of your resume, don't hand him one unless he asks for it specifically. Do get his card at the end and send him a thank-you note for meeting with you: he's doing you a big favor.

The point of these meetings is to ask questions to people in the industry that can't really be answered by Google, and to build a network of people you stay in touch with and can rely on in the future for advice or even job placements. Talk to him about stuff other than finance as well - his hobbies, sports, etc. Just let the conversation flow naturally, and don't try and stress anything other than the fact that you're a good guy and willing to learn.

 

Definitely don't mention IB or ER... AM is way different. You want to sound like you know AM is what you want to do and you will be interning at an AM firm whether its theirs or not.

MM IB -> Corporate Development -> Strategic Finance
 

Yeah, that makes sense. I'll definitely focus on expressing my interests in AM specifically.

I'm wondering more about how I can put myself into a position that will give me good experience that I will be able to leverage for future job apps/interviews. Assuming the internship is unstructured (the group may not have taken interns in the past), they may be open to a variety of things based on my interests, so I'm really just looking for a way to make the most of it.

To frame my question in a more straightforward way -- if you were put in an AM internship and told "you can make this into anything you want it to be; tell me what you want to do this summer", what's the best thing to say?

 

Outside of idea generation and talking about some of their big investments if they have a 13F filing, try to connect on a personal level. Know what your SPECIFIC ask is before going to the meeting (you have a varied background, help him help you) - if you want two names in xyz to continue the networking, you get him to give/send them to you then and there. And yes, you can hand him a list of companies you are interested in, chances are if he's been in the biz 25 years he knows someone there. g/l

"Bulls take the stairs, bears take the elevator" "Sell a teenie, lose your weenie"
 

showcase your knowledge about markets and also, while chatting give your reasoning subtly as to why you think a particular decision might be than the other one ! ! show your passion for the industry .. if he is interested, in 90% of the cases, he will ask you some technical questions to test your knowledge.. Also, many times they might ask for a resume but its all dicey after that .. ! ! can go either ways !

 

Well, what actual questions do you have?

Assuming you're interviewing for a buy-side analyst role, whether or not you're successful and/or make money in this job is going to be hugely dependent on both how good an investor your PM is, and how good your relationship with him/her is. I'd recommend asking questions that will help you figure out how he/she thinks, so you can figure out whether you're a good fit and whether you have confidence in him/her.

 

he'll talk about his strategy really quickly with a few broad catchphrases most likely and it's not usually the most enlightening thing

ask him about his worst ever trade and what he learned from it, and what really makes a position for his portfolio a conviction pick esp. if it's event-driven. you pick up lots of neat stuff along the way because that is a style that requires a heavy information premium

 

worst and best trade idea questions are good but it certainly wont make you seem memorable since you wont be providing any insight or opinion prior to asking a question.

I would say something such as the following: "given the projected increase in M&A activity over the course of the next year, as strategics seek to utilize their balance sheets to acquire growth and financial sponsors are forced to put capital to work or return it to investors, what areas will you be focusing on and where do you believe there is the most opportunity."

 

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