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One of the things I hate most about banking is the high pressure / stress that gets put on the analysts from the rest of the team. I honestly think I could deal much better with external stress (ie: from markets), but I have a suspicion that hedge funds may even be more stressful than banking since a series of bad ideas would easily get you laid off. Can anyone working in the industry comment on their typical levels of stress and perhaps compare it to banking?

Thank you.

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Comments (48)

  • jake_f's picture

    Yes, I'd say stress is lower on the hedge fund side of the industry, but it completely depends on the fund you're at. I think quant hedge funds and value hedge funds probably have the lowest stress. It can get bad. Management at hedge funds can scream at you just as bad as on the sell side.

  • kyleyboy's picture

    I was just talking about stress yesterday with a HF manager friend of mine and my dad happened to be there with me. My dad mentioned to me that his most stressful job ever was working at mcdonalds. He would be flipping a bunch of burgers at once, two of the burgers would have to have no onions, his boss was yelling at him and he got paid nothing. He ended up getting fired for screwing up the icecream maker. My father is now a surgeon and says that the stress is just not even the same. Obviously he worries about patients dying on him but it isn't the same as getting emotionally abused like you probably do when you are in banking. Hedge fund manager totally agreed, he worked in a very random field before he started his fund and said that the stress level was way higher before than it is now. He did say 2008 did really bust his balls pretty hard though.

    I think it all depends on what stresses you out and what position you are in. It's how you deal with it that matters

  • BlackHat's picture

    Let me give you a quick idea of how stressful it *can* be. We post a spreadsheet of our holdings, who has the "rights" to those holdings (aka who sourced it and has maintenance duties, unless it gets to be such a core holding that we're all well-versed on it) and list them in descending order of performance over the most recent billing period (quarterly typically). This makes for a strange dynamic since there's literally a scoreboard pinned to a bulletin board in the break room, but it's not meant to be that way, it's more to stimulate discussion and keep us all updated on who is dealing with what and what analyst you'd go to if you came across something that could help them with a name they own.

    And the analysts with more responsibility now that have the trust to push their ideas into the portfolio fairly easily, you do end up hearing from LPs that are really neurotic or will get shit for a call that blows up if you showed conviction with it. The stress is the same in my opinion (if not higher) but it's a very different type of stress... not about getting your work done but about having to deal with the crap that comes along with keeping everyone around you cool while not losing your own head if something starts moving against you. My boss always says that he knows a trade will move against him right after he gets into it, but what separates a good manager from a great one is who will stick to their thesis so long as it's still viable. As a value investor, there's nothing you can do about catching a falling knife - it's often inevitable - but what's important is being able to tell if it's falling from the 30th floor of the building or from the 2nd floor. Either way it'll hurt, but one is going to fuck you up way worse.

    I hate victims who respect their executioners

  • grosse's picture

    Banking stress, to me, was more of that panicked feeling after sending an e-mail and realizing you forgot to check something. I dreaded typos because the work was tedious and the last thing I wanted was an MD screaming at me about a bad comma placement, as if that had a real impact on the deal. It was like "ugh, this job sucks". But I never thought to myself "damn, I'm stupid, maybe I don't belong in this buisness".

    HF stress is much deeper and worse.
    You are testing your intelligence versus others/the market, and you will be wrong at times. And when things go against you, you can have a lot of self doubt.

    BlackHat is right that it's important to be able to remove that emotion and stick with your thesis. Feeling down on your abilities makes you second guess yourself and leads to more bad decisions.

    All that being said, if you don't lose sleep or don't feel the pressure, maybe you aren't taking things seriously enough.

    At a base level, you can get through a junior IB job by putting in the hours. At a HF, you have to be right and you have to make money, or you are out the door.

  • Gray Fox's picture

    Its all rainbows and flowers. You generally show up around 10AM after about 9.5 hours of sleep and start with a gentle bikram yoga class that lasts for 30 minutes. This is followed up an hour long massage from a Swedish supermodel. For lunch, you can choose between the Four Seasons, the Ritz, etc. After the lunch you casually glance at the portfolio for an hour and then think about stocks for an hour. This is followed up with a nap and riveting game of tennis before heading home around 4:30pm.

  • In reply to Gray Fox
    BlackHat's picture

    Gray Fox:
    Its all rainbows and flowers. You generally show up around 10AM after about 9.5 hours of sleep and start with a gentle bikram yoga class that lasts for 30 minutes. This is followed up an hour long massage from a Swedish supermodel. For lunch, you can choose between the Four Seasons, the Ritz, etc. After the lunch you casually glance at the portfolio for an hour and then think about stocks for an hour. This is followed up with a nap and riveting game of tennis before heading home around 4:30pm.

    Strongly disagree that any Bikram session can be 'gentle' unless we're working at pregnant women temperatures. I don't put on my hot yoga shorts for anything south of 105 degrees. Everything else here sounds pretty accurate though, but you failed to mention the black car service that takes you home from the country club after tennis, during which time you'll be blown by one of the city's finest escorts of your choice picked out of our very own "little black book," guaranteed to finish before you arrive home to your significant other.

    I hate victims who respect their executioners

  • In reply to grosse
    slowdive's picture

    Some of the comments above are dead on accurate. Banking was stressful in a different way, perhaps more overt, but with undertones of dark comedy. If you take a step back, how could you not laugh about the idiocy of everything in banking? The fire drills, senior people going nuts about formatting, the imperative of getting books printed by "the drop dead time", etc.

    The stress at a hedge fund is intense because you have more responsibility. There is real money at stake and you are marked to market every single day. There are many factors outside of your control. Even if your thesis is dead right, you can be caught short in a bull market and get creamed. You can be dead right but get hit by a string of superficially negative news, only to have your PM puke out the position at the bottom. You can be dead right but be challenged by a cranky old man with a vendetta on CNBC (kidding). Sometimes you have a day where all of your positions go against you at the same time, and you go home feeling terrible. Sometimes one of your big positions is reporting earnings the next morning, and you lay awake all night going over their P&L in your head. There is a ton of uncertainty, and despite having made money consistently, a few or even just one big loser is all it takes. Particularly at platform shops with very tight drawdown limits. All this is a bit of a dramatization, you learn to deal with the stress, but I am trying to depict how stressful this job can be at its worst.

  • In reply to slowdive
    BlackHat's picture

    slowdive:
    Some of the comments above are dead on accurate. Banking was stressful in a different way, perhaps more overt, but with undertones of dark comedy. If you take a step back, how could you not laugh about the idiocy of everything in banking? The fire drills, senior people going nuts about formatting, the imperative of getting books printed by "the drop dead time", etc.

    The stress at a hedge fund is intense because you have more responsibility. There is real money at stake and you are marked to market every single day. There are many factors outside of your control. Even if your thesis is dead right, you can be caught short in a bull market and get creamed. You can be dead right but get hit by a string of superficially negative news, only to have your PM puke out the position at the bottom. You can be dead right but be challenged by a cranky old man with a vendetta on CNBC (kidding). Sometimes you have a day where all of your positions go against you at the same time, and you go home feeling terrible. Sometimes one of your big positions is reporting earnings the next morning, and you lay awake all night going over their P&L in your head. There is a ton of uncertainty, and despite having made money consistently, a few or even just one big loser is all it takes. Particularly at platform shops with very tight drawdown limits. All this is a bit of a dramatization, you learn to deal with the stress, but I am trying to depict how stressful this job can be at its worst.

    You learn to deal with the stress, exactly. But in the beginning I've heard some horror stories about guys fighting the good fight and having to stomach the down days to the point of vomiting in the office or having their home lives shot to shit. It's no different than many other jobs that have the same effects on a person, but not many other jobs have what's at stake as a money manager. Eventually though, it becomes like any other day job.

    I hate victims who respect their executioners

  • In reply to BlackHat
    Gray Fox's picture

    BlackHat:
    slowdive:
    Some of the comments above are dead on accurate. Banking was stressful in a different way, perhaps more overt, but with undertones of dark comedy. If you take a step back, how could you not laugh about the idiocy of everything in banking? The fire drills, senior people going nuts about formatting, the imperative of getting books printed by "the drop dead time", etc.

    The stress at a hedge fund is intense because you have more responsibility. There is real money at stake and you are marked to market every single day. There are many factors outside of your control. Even if your thesis is dead right, you can be caught short in a bull market and get creamed. You can be dead right but get hit by a string of superficially negative news, only to have your PM puke out the position at the bottom. You can be dead right but be challenged by a cranky old man with a vendetta on CNBC (kidding). Sometimes you have a day where all of your positions go against you at the same time, and you go home feeling terrible. Sometimes one of your big positions is reporting earnings the next morning, and you lay awake all night going over their P&L in your head. There is a ton of uncertainty, and despite having made money consistently, a few or even just one big loser is all it takes. Particularly at platform shops with very tight drawdown limits. All this is a bit of a dramatization, you learn to deal with the stress, but I am trying to depict how stressful this job can be at its worst.

    You learn to deal with the stress, exactly. But in the beginning I've heard some horror stories about guys fighting the good fight and having to stomach the down days to the point of vomiting in the office or having their home lives shot to shit. It's no different than many other jobs that have the same effects on a person, but not many other jobs have what's at stake as a money manager. Eventually though, it becomes like any other day job.

    In all reality, when you are a new analyst at a good shop, there will be a point where your boss, who is worth hundreds of millions or billions of dollars, will tell you to figure something out, you will get it wrong, and you will feel like a horse's ass. The daily P/L you can learn to live with, but being wrong is a horrible, horrible feeling

  • In reply to Gray Fox
    jake_f's picture

    Gray Fox:
    BlackHat:
    slowdive:
    Some of the comments above are dead on accurate. Banking was stressful in a different way, perhaps more overt, but with undertones of dark comedy. If you take a step back, how could you not laugh about the idiocy of everything in banking? The fire drills, senior people going nuts about formatting, the imperative of getting books printed by "the drop dead time", etc.

    The stress at a hedge fund is intense because you have more responsibility. There is real money at stake and you are marked to market every single day. There are many factors outside of your control. Even if your thesis is dead right, you can be caught short in a bull market and get creamed. You can be dead right but get hit by a string of superficially negative news, only to have your PM puke out the position at the bottom. You can be dead right but be challenged by a cranky old man with a vendetta on CNBC (kidding). Sometimes you have a day where all of your positions go against you at the same time, and you go home feeling terrible. Sometimes one of your big positions is reporting earnings the next morning, and you lay awake all night going over their P&L in your head. There is a ton of uncertainty, and despite having made money consistently, a few or even just one big loser is all it takes. Particularly at platform shops with very tight drawdown limits. All this is a bit of a dramatization, you learn to deal with the stress, but I am trying to depict how stressful this job can be at its worst.

    You learn to deal with the stress, exactly. But in the beginning I've heard some horror stories about guys fighting the good fight and having to stomach the down days to the point of vomiting in the office or having their home lives shot to shit. It's no different than many other jobs that have the same effects on a person, but not many other jobs have what's at stake as a money manager. Eventually though, it becomes like any other day job.

    In all reality, when you are a new analyst at a good shop, there will be a point where your boss, who is worth hundreds of millions or billions of dollars, will tell you to figure something out, you will get it wrong, and you will feel like a horse's ass. The daily P/L you can learn to live with, but being wrong is a horrible, horrible feeling

    True, it's a horrible feeling, but all hedge fund managers, on top or otherwise, know it well. Look at Paulson, Einhorn, Ackman, Loeb, they've all had to deal with it. I think being comfortable being wrong, and moving on, and growing the business anyway is key to success.

  • In reply to jake_f
    DontMakeMeShortYou's picture

    jake_f:
    Gray Fox:
    BlackHat:
    slowdive:
    Some of the comments above are dead on accurate. Banking was stressful in a different way, perhaps more overt, but with undertones of dark comedy. If you take a step back, how could you not laugh about the idiocy of everything in banking? The fire drills, senior people going nuts about formatting, the imperative of getting books printed by "the drop dead time", etc.

    The stress at a hedge fund is intense because you have more responsibility. There is real money at stake and you are marked to market every single day. There are many factors outside of your control. Even if your thesis is dead right, you can be caught short in a bull market and get creamed. You can be dead right but get hit by a string of superficially negative news, only to have your PM puke out the position at the bottom. You can be dead right but be challenged by a cranky old man with a vendetta on CNBC (kidding). Sometimes you have a day where all of your positions go against you at the same time, and you go home feeling terrible. Sometimes one of your big positions is reporting earnings the next morning, and you lay awake all night going over their P&L in your head. There is a ton of uncertainty, and despite having made money consistently, a few or even just one big loser is all it takes. Particularly at platform shops with very tight drawdown limits. All this is a bit of a dramatization, you learn to deal with the stress, but I am trying to depict how stressful this job can be at its worst.

    You learn to deal with the stress, exactly. But in the beginning I've heard some horror stories about guys fighting the good fight and having to stomach the down days to the point of vomiting in the office or having their home lives shot to shit. It's no different than many other jobs that have the same effects on a person, but not many other jobs have what's at stake as a money manager. Eventually though, it becomes like any other day job.

    In all reality, when you are a new analyst at a good shop, there will be a point where your boss, who is worth hundreds of millions or billions of dollars, will tell you to figure something out, you will get it wrong, and you will feel like a horse's ass. The daily P/L you can learn to live with, but being wrong is a horrible, horrible feeling

    True, it's a horrible feeling, but all hedge fund managers, on top or otherwise, know it well. Look at Paulson, Einhorn, Ackman, Loeb, they've all had to deal with it. I think being comfortable being wrong, and moving on, and growing the business anyway is key to success.

    I can't even begin to pretend that I know how these guys feel about mistakes. However, I'd argue that the stress is worse for some of the guys below them. Your PM can blow up a fund and STILL raise money for a new one. The reputational hit would suck. However, even though he has a significant % of his net worth invested in the fund, he'll be okay if things go south. He can go sail for the rest of his life and never worry about money. However, imagine being an analyst in his early/mid-30s with a young family still trying to establish yourself. You're well off, but you DO need to work. Imagine the thoughts going through your head as your PM berates you for 2, 3, 4, bad calls. You could be fired and you will have a tough time finding a new job because (1) you're expensive and (2) you fucked up badly enough that your PM isn't going to go to bat for you. So much for the life you imagined for your young family. Imagine THAT feeling.

  • ladubs111's picture

    If anyone's interested there's this book my buddy recommended to me over a year ago, and after reading it I learned how to compartmentalize stuff better so I don't feel as much stress. Really helped during earning seasons and back in November when I saw the company PnL move like a Six-Flags roller coaster. Books called The Practicing Mind by Thomas Sterner. http://www.amazon.com/Practicing-Mind-Developing-D...

  • In reply to ladubs111
    goldman in da house's picture

    ladubs111:
    If anyone's interested there's this book my buddy recommended to me over a year ago, and after reading it I learned how to compartmentalize stuff better so I don't feel as much stress. Really helped during earning seasons and back in November when I saw the company PnL move like a Six-Flags roller coaster. Books called The Practicing Mind by Thomas Sterner. http://www.amazon.com/Practicing-Mind-Developing-D...

    Fantastic, exactly the kind of stuff I was looking for. I purchased it without hesitation from amazon.

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  • Macro Arbitrage's picture

    Curious hear the perspective of someone on the macro side.

  • In reply to BlackHat
    M12345's picture

    BlackHat:
    slowdive:
    Some of the comments above are dead on accurate. Banking was stressful in a different way, perhaps more overt, but with undertones of dark comedy. If you take a step back, how could you not laugh about the idiocy of everything in banking? The fire drills, senior people going nuts about formatting, the imperative of getting books printed by "the drop dead time", etc.

    The stress at a hedge fund is intense because you have more responsibility. There is real money at stake and you are marked to market every single day. There are many factors outside of your control. Even if your thesis is dead right, you can be caught short in a bull market and get creamed. You can be dead right but get hit by a string of superficially negative news, only to have your PM puke out the position at the bottom. You can be dead right but be challenged by a cranky old man with a vendetta on CNBC (kidding). Sometimes you have a day where all of your positions go against you at the same time, and you go home feeling terrible. Sometimes one of your big positions is reporting earnings the next morning, and you lay awake all night going over their P&L in your head. There is a ton of uncertainty, and despite having made money consistently, a few or even just one big loser is all it takes. Particularly at platform shops with very tight drawdown limits. All this is a bit of a dramatization, you learn to deal with the stress, but I am trying to depict how stressful this job can be at its worst.

    You learn to deal with the stress, exactly. But in the beginning I've heard some horror stories about guys fighting the good fight and having to stomach the down days to the point of vomiting in the office or having their home lives shot to shit. It's no different than many other jobs that have the same effects on a person, but not many other jobs have what's at stake as a money manager. Eventually though, it becomes like any other day job.

    With trading obviously being one of those jobs, do you think that make traders more suited as PM's than IBers?

    The most valuable thing every trader has to learn to survive is to deal with large losses and to stay calm in the storm.

  • In reply to M12345
    jake_f's picture

    Morten123:
    BlackHat:
    slowdive:
    Some of the comments above are dead on accurate. Banking was stressful in a different way, perhaps more overt, but with undertones of dark comedy. If you take a step back, how could you not laugh about the idiocy of everything in banking? The fire drills, senior people going nuts about formatting, the imperative of getting books printed by "the drop dead time", etc.

    The stress at a hedge fund is intense because you have more responsibility. There is real money at stake and you are marked to market every single day. There are many factors outside of your control. Even if your thesis is dead right, you can be caught short in a bull market and get creamed. You can be dead right but get hit by a string of superficially negative news, only to have your PM puke out the position at the bottom. You can be dead right but be challenged by a cranky old man with a vendetta on CNBC (kidding). Sometimes you have a day where all of your positions go against you at the same time, and you go home feeling terrible. Sometimes one of your big positions is reporting earnings the next morning, and you lay awake all night going over their P&L in your head. There is a ton of uncertainty, and despite having made money consistently, a few or even just one big loser is all it takes. Particularly at platform shops with very tight drawdown limits. All this is a bit of a dramatization, you learn to deal with the stress, but I am trying to depict how stressful this job can be at its worst.

    You learn to deal with the stress, exactly. But in the beginning I've heard some horror stories about guys fighting the good fight and having to stomach the down days to the point of vomiting in the office or having their home lives shot to shit. It's no different than many other jobs that have the same effects on a person, but not many other jobs have what's at stake as a money manager. Eventually though, it becomes like any other day job.

    With trading obviously being one of those jobs, do you think that make traders more suited as PM's than IBers?

    The most valuable thing every trader has to learn to survive is to deal with large losses and to stay calm in the storm.

    Depends. Basically the answer is yes, but pure traders aren't worth that much. To be a good PM a trader needs to learn concepts of relative value, of broader strategy. That's what the bankers have to start. Bankers need to dive in and learn how markets work, that's what they lack.

  • In reply to jake_f
    M12345's picture

    jake_f:
    Morten123:
    BlackHat:
    slowdive:
    Some of the comments above are dead on accurate. Banking was stressful in a different way, perhaps more overt, but with undertones of dark comedy. If you take a step back, how could you not laugh about the idiocy of everything in banking? The fire drills, senior people going nuts about formatting, the imperative of getting books printed by "the drop dead time", etc.

    The stress at a hedge fund is intense because you have more responsibility. There is real money at stake and you are marked to market every single day. There are many factors outside of your control. Even if your thesis is dead right, you can be caught short in a bull market and get creamed. You can be dead right but get hit by a string of superficially negative news, only to have your PM puke out the position at the bottom. You can be dead right but be challenged by a cranky old man with a vendetta on CNBC (kidding). Sometimes you have a day where all of your positions go against you at the same time, and you go home feeling terrible. Sometimes one of your big positions is reporting earnings the next morning, and you lay awake all night going over their P&L in your head. There is a ton of uncertainty, and despite having made money consistently, a few or even just one big loser is all it takes. Particularly at platform shops with very tight drawdown limits. All this is a bit of a dramatization, you learn to deal with the stress, but I am trying to depict how stressful this job can be at its worst.

    You learn to deal with the stress, exactly. But in the beginning I've heard some horror stories about guys fighting the good fight and having to stomach the down days to the point of vomiting in the office or having their home lives shot to shit. It's no different than many other jobs that have the same effects on a person, but not many other jobs have what's at stake as a money manager. Eventually though, it becomes like any other day job.

    With trading obviously being one of those jobs, do you think that make traders more suited as PM's than IBers?

    The most valuable thing every trader has to learn to survive is to deal with large losses and to stay calm in the storm.

    Depends. Basically the answer is yes, but pure traders aren't worth that much. To be a good PM a trader needs to learn concepts of relative value, of broader strategy. That's what the bankers have to start. Bankers need to dive in and learn how markets work, that's what they lack.

    Not trying to be a douche or anything but I have yet to meet a junior banker that has much to contribute when it comes to finding mis-priced securities. Obviously they learn to model and run comp valuation etc but very few know how to pick a good deal from a bad one.
    I'm not saying that traders necassarily are better at valuation but we spend a good part of our days buying paper that we deem cheap. If your research and/or decisions are bad often you won't survive. At least for my book it's a considerable part of my P&L. So we understand risk better, we know how to act when the markets are going against us (at least we should), and we spend a good part of our days trying to find cheap paper. I'm not trying to say we are better analyst (bankers make a ton of sense in research positions) but I do think there is a good case for traders > IBers as PM's. Not sure if I'm missing something though.

  • goldman in da house's picture

    Not sure why Morten is trying to turn this into a traders vs bankers, but my short answer would be that you barely learn anything useful from both.

  • In reply to M12345
    CashCow's picture

    Morten123:
    jake_f:
    Morten123:
    BlackHat:
    slowdive:
    Some of the comments above are dead on accurate. Banking was stressful in a different way, perhaps more overt, but with undertones of dark comedy. If you take a step back, how could you not laugh about the idiocy of everything in banking? The fire drills, senior people going nuts about formatting, the imperative of getting books printed by "the drop dead time", etc.

    The stress at a hedge fund is intense because you have more responsibility. There is real money at stake and you are marked to market every single day. There are many factors outside of your control. Even if your thesis is dead right, you can be caught short in a bull market and get creamed. You can be dead right but get hit by a string of superficially negative news, only to have your PM puke out the position at the bottom. You can be dead right but be challenged by a cranky old man with a vendetta on CNBC (kidding). Sometimes you have a day where all of your positions go against you at the same time, and you go home feeling terrible. Sometimes one of your big positions is reporting earnings the next morning, and you lay awake all night going over their P&L in your head. There is a ton of uncertainty, and despite having made money consistently, a few or even just one big loser is all it takes. Particularly at platform shops with very tight drawdown limits. All this is a bit of a dramatization, you learn to deal with the stress, but I am trying to depict how stressful this job can be at its worst.

    You learn to deal with the stress, exactly. But in the beginning I've heard some horror stories about guys fighting the good fight and having to stomach the down days to the point of vomiting in the office or having their home lives shot to shit. It's no different than many other jobs that have the same effects on a person, but not many other jobs have what's at stake as a money manager. Eventually though, it becomes like any other day job.

    With trading obviously being one of those jobs, do you think that make traders more suited as PM's than IBers?

    The most valuable thing every trader has to learn to survive is to deal with large losses and to stay calm in the storm.

    Depends. Basically the answer is yes, but pure traders aren't worth that much. To be a good PM a trader needs to learn concepts of relative value, of broader strategy. That's what the bankers have to start. Bankers need to dive in and learn how markets work, that's what they lack.

    Not trying to be a douche or anything but I have yet to meet a junior banker that has much to contribute when it comes to finding mis-priced securities. Obviously they learn to model and run comp valuation etc but very few know how to pick a good deal from a bad one.
    I'm not saying that traders necassarily are better at valuation but we spend a good part of our days buying paper that we deem cheap. If your research and/or decisions are bad often you won't survive. At least for my book it's a considerable part of my P&L. So we understand risk better, we know how to act when the markets are going against us (at least we should), and we spend a good part of our days trying to find cheap paper. I'm not trying to say we are better analyst (bankers make a ton of sense in research positions) but I do think there is a good case for traders > IBers as PM's. Not sure if I'm missing something though.

    I think it depends a lot on what type of PM role you're referring to. If it's at a fund that turns positions over quickly, you're probably right that someone with a trading background may be better suited.

    But if it's a fund like Pershing Square, Third Point, Greenlight, etc. that has a relatively small number of very large positions with longer holding periods and where theses are based on very deep analyses of companies (rather than shorter term stock price fluctuations), someone with a banking/research background is probably better suited.

  • Bondarb's picture

    The stress is brutal at a hedge fund...anyone who says it isnt is just too young and stupid to actually know what is going on. The pressure to put a return on capital is there every day, month, year and it doesnt really end. I have spent many sleepless nights worrying about bad positions and events that I had no control over...the 25 year old who says he has no stress because he is working 9-7 instead of 18 hours a day in banking really doesnt get what the business is about...i gaurantee his boss feels the stress.

  • Bondarb's picture

    ...on banking vs trading for PMs...i definitely think in macro world it is better to have come from trading. Bankers to me start their career where i work at a huge disadvantage b/c they dont know hoe to even speak the language of markets....they generally get type-cast as career research people.

  • In reply to Bondarb
    NewGuy's picture

    Bondarb:
    ...on banking vs trading for PMs...i definitely think in macro world it is better to have come from trading. Bankers to me start their career where i work at a huge disadvantage b/c they dont know hoe to even speak the language of markets....they generally get type-cast as career research people.

    From one preftigious bro to another, I welcome your comments in these topics and several others like this but your perspective is crafted from working at a macro fund which is not what most people on wso are chasing.
  • In reply to Bondarb
    Macro Arbitrage's picture

    Bondarb:
    The stress is brutal at a hedge fund...anyone who says it isnt is just too young and stupid to actually know what is going on. The pressure to put a return on capital is there every day, month, year and it doesnt really end. I have spent many sleepless nights worrying about bad positions and events that I had no control over...the 25 year old who says he has no stress because he is working 9-7 instead of 18 hours a day in banking really doesnt get what the business is about...i gaurantee his boss feels the stress.

    This is an answer that I'd bet my money on.

    @ NewGuy: The pain/ fear of losing money ought to be universal, regardless of whether one spends their day bankrupting the bank of mexico or hijacking conference calls with a mid-cap CFOs.

  • In reply to Macro Arbitrage
    NewGuy's picture

    Macro Arbitrage:
    Bondarb:
    The stress is brutal at a hedge fund...anyone who says it isnt is just too young and stupid to actually know what is going on. The pressure to put a return on capital is there every day, month, year and it doesnt really end. I have spent many sleepless nights worrying about bad positions and events that I had no control over...the 25 year old who says he has no stress because he is working 9-7 instead of 18 hours a day in banking really doesnt get what the business is about...i gaurantee his boss feels the stress.

    This is an answer that I'd bet my money on.

    @ NewGuy: The pain/ fear of losing money ought to be universal, regardless of whether one spends their day bankrupting the bank of mexico or hijacking conference calls with a mid-cap CFOs.


    Touche, brother
  • leveredarb's picture

    the traders vs bankers argument is kind of retarded because traders ---> macro fund, bankers ---> equity l/s, merger arb, distressed

  • In reply to leveredarb
    theworks9's picture

    leveredarb:
    the traders vs bankers argument is kind of retarded because traders ---> macro fund, bankers ---> equity l/s, merger arb, distressed

    Even this is a bit incorrect. Not all traders are fit for macro funds. Normally Rates/FX & commods traders are useful for macro (top-down) HF seats. The equity and credit guys usually fill in execution roles.
    Bankers are useful because they spend time understanding businesses (to an extent)/understanding valuation. While PMs are paid to manage risk, the fundamental role is to find high returns on capital investments. Which which requires a deep fundamental understanding of businesses/markets

  • whatwhatwhat's picture

    today was one of those days

  • In reply to Gray Fox
    BlackHat's picture

    Gray Fox:
    whatwhatwhat:
    today was one of those days

    Was somebody long MHP???

    I've been predicting a JANA blowup for a while now.

    I hate victims who respect their executioners

  • In reply to theworks9
    SirTradesaLot's picture

    theworks9:
    leveredarb:
    the traders vs bankers argument is kind of retarded because traders ---> macro fund, bankers ---> equity l/s, merger arb, distressed

    Even this is a bit incorrect. Not all traders are fit for macro funds. Normally Rates/FX & commods traders are useful for macro (top-down) HF seats. The equity and credit guys usually fill in execution roles.
    Bankers are useful because they spend time understanding businesses (to an extent)/understanding valuation. While PMs are paid to manage risk, the fundamental role is to find high returns on capital investments. Which which requires a deep fundamental understanding of businesses/markets


    Let's be honest....bankers aren't useful for any type of hedge fund. They're just seen as people who have been pre-screened for potential who know how to use excel and have an understanding of financial statements already.

    There are a lot of types of hedge funds besides macro out there that do use traders as more than execution guys. I think you're misinformed.

    adapt or die:
    What would P.T. Barnum say about you?

    MY BLOG

  • In reply to SirTradesaLot
    theworks9's picture

    SirTradesaLot:
    theworks9:
    leveredarb:
    the traders vs bankers argument is kind of retarded because traders ---> macro fund, bankers ---> equity l/s, merger arb, distressed

    Even this is a bit incorrect. Not all traders are fit for macro funds. Normally Rates/FX & commods traders are useful for macro (top-down) HF seats. The equity and credit guys usually fill in execution roles.
    Bankers are useful because they spend time understanding businesses (to an extent)/understanding valuation. While PMs are paid to manage risk, the fundamental role is to find high returns on capital investments. Which which requires a deep fundamental understanding of businesses/markets


    Let's be honest....bankers aren't useful for any type of hedge fund. They're just seen as people who have been pre-screened for potential who know how to use excel and have an understanding of financial statements already.

    There are a lot of types of hedge funds besides macro out there that do use traders as more than execution guys. I think you're misinformed.

    Inform me. From what ive seen, equity trading desks (Swaps,Vol, Derivs, Cash) fit in primarily in execution roles, seldom do I see these guys take principal risk. Credit alike (IG, HY) not including converts/ABS, maybe FI hedge funds?
    I dont think im misinformed, im sure there are places where these guys find seats in an investing role, just not common. Again, FX,Mortgages, Commods, Rates ive seen take principal risk.

    Disagree on the banking comment. While coming from M&A wont make you a great investor..fundamental guys dominate share/landscape and they place a ton of value on being able to do the FS analysis/understanding the core drivers of value, traders dont get that.

  • In reply to theworks9
    SirTradesaLot's picture

    theworks9:
    SirTradesaLot:
    theworks9:
    leveredarb:
    the traders vs bankers argument is kind of retarded because traders ---> macro fund, bankers ---> equity l/s, merger arb, distressed

    Even this is a bit incorrect. Not all traders are fit for macro funds. Normally Rates/FX & commods traders are useful for macro (top-down) HF seats. The equity and credit guys usually fill in execution roles.
    Bankers are useful because they spend time understanding businesses (to an extent)/understanding valuation. While PMs are paid to manage risk, the fundamental role is to find high returns on capital investments. Which which requires a deep fundamental understanding of businesses/markets


    Let's be honest....bankers aren't useful for any type of hedge fund. They're just seen as people who have been pre-screened for potential who know how to use excel and have an understanding of financial statements already.

    There are a lot of types of hedge funds besides macro out there that do use traders as more than execution guys. I think you're misinformed.

    Inform me. From what ive seen, equity trading desks (Swaps,Vol, Derivs, Cash) fit in primarily in execution roles, seldom do I see these guys take principal risk. Credit alike (IG, HY) not including converts/ABS, maybe FI hedge funds?
    I dont think im misinformed, im sure there are places where these guys find seats in an investing role, just not common. Again, FX,Mortgages, Commods, Rates ive seen take principal risk.

    Disagree on the banking comment. While coming from M&A wont make you a great investor..fundamental guys dominate share/landscape and they place a ton of value on being able to do the FS analysis/understanding the core drivers of value, traders dont get that.


    I've seen people go from muni derivatives trading to running a muni arb fund, as one example of stuff you don't think of everyday. Anything highly structured like asset backed have plenty of people with trading backgrounds running the funds, which you're now including on your list. If you mean flow equities or high grade, then you're right that there aren't many that make the move. If it will be replaced by a computer soon, it's not the best to make the transition, if there's no in danger of being replaced by a computer, I think there are plenty of opportunities. There are also plenty of quants that design systematic strategies and plenty of those guys start on a trading desk.

    I agree fundamental is a much larger space. I'm also going to guess that you come from banking and that the opportunities that require a trading background aren't the ones you're seeing. I think most people here would agree that a banker isn't going to hit the ground running on the investment side. That probably wouldn't be a very good fund if they could. But I would let guys like BlackHat, NewGuy, DontMakeMeShortYou or Gray Fox tell me if I'm right or wrong on that.

    adapt or die:
    What would P.T. Barnum say about you?

    MY BLOG

  • In reply to SirTradesaLot
    leveredarb's picture

    SirTradesaLot:
    theworks9:
    SirTradesaLot:
    theworks9:
    leveredarb:
    the traders vs bankers argument is kind of retarded because traders ---> macro fund, bankers ---> equity l/s, merger arb, distressed

    Even this is a bit incorrect. Not all traders are fit for macro funds. Normally Rates/FX & commods traders are useful for macro (top-down) HF seats. The equity and credit guys usually fill in execution roles.
    Bankers are useful because they spend time understanding businesses (to an extent)/understanding valuation. While PMs are paid to manage risk, the fundamental role is to find high returns on capital investments. Which which requires a deep fundamental understanding of businesses/markets


    Let's be honest....bankers aren't useful for any type of hedge fund. They're just seen as people who have been pre-screened for potential who know how to use excel and have an understanding of financial statements already.

    There are a lot of types of hedge funds besides macro out there that do use traders as more than execution guys. I think you're misinformed.

    Inform me. From what ive seen, equity trading desks (Swaps,Vol, Derivs, Cash) fit in primarily in execution roles, seldom do I see these guys take principal risk. Credit alike (IG, HY) not including converts/ABS, maybe FI hedge funds?
    I dont think im misinformed, im sure there are places where these guys find seats in an investing role, just not common. Again, FX,Mortgages, Commods, Rates ive seen take principal risk.

    Disagree on the banking comment. While coming from M&A wont make you a great investor..fundamental guys dominate share/landscape and they place a ton of value on being able to do the FS analysis/understanding the core drivers of value, traders dont get that.


    I've seen people go from muni derivatives trading to running a muni arb fund, as one example of stuff you don't think of everyday. Anything highly structured like asset backed have plenty of people with trading backgrounds running the funds, which you're now including on your list. If you mean flow equities or high grade, then you're right that there aren't many that make the move. If it will be replaced by a computer soon, it's not the best to make the transition, if there's no in danger of being replaced by a computer, I think there are plenty of opportunities. There are also plenty of quants that design systematic strategies and plenty of those guys start on a trading desk.

    I agree fundamental is a much larger space. I'm also going to guess that you come from banking and that the opportunities that require a trading background aren't the ones you're seeing. I think most people here would agree that a banker isn't going to hit the ground running on the investment side. That probably wouldn't be a very good fund if they could. But I would let guys like BlackHat, NewGuy, DontMakeMeShortYou or Gray Fox tell me if I'm right or wrong on that.


    Depends how you define hit the ground running.

    Equity l/s is full of bankers (and ER), distressed is full of ex restructuring guys. Look at Loeb's ackmans einhorns analysts einhorn was at dlj. But if you think those are not good funds then please do feel free to disagree. At my equity l/s fund its all bankers and a few ER.

  • Booger45's picture

    Yes, clearly hedge funds don't hire bankers because the skill set isn't relevant. /sarcasm

  • In reply to BlackHat
    sonibubu's picture

    BlackHat:
    Gray Fox:
    whatwhatwhat:
    today was one of those days

    Was somebody long MHP???

    I've been predicting a JANA blowup for a while now.

    They're making a killing on AGU. My fund is riding the tidal wave Jana has created there.

  • In reply to leveredarb
    SirTradesaLot's picture

    leveredarb:
    SirTradesaLot:
    theworks9:
    SirTradesaLot:
    theworks9:
    leveredarb:
    the traders vs bankers argument is kind of retarded because traders ---> macro fund, bankers ---> equity l/s, merger arb, distressed

    Even this is a bit incorrect. Not all traders are fit for macro funds. Normally Rates/FX & commods traders are useful for macro (top-down) HF seats. The equity and credit guys usually fill in execution roles.
    Bankers are useful because they spend time understanding businesses (to an extent)/understanding valuation. While PMs are paid to manage risk, the fundamental role is to find high returns on capital investments. Which which requires a deep fundamental understanding of businesses/markets


    Let's be honest....bankers aren't useful for any type of hedge fund. They're just seen as people who have been pre-screened for potential who know how to use excel and have an understanding of financial statements already.

    There are a lot of types of hedge funds besides macro out there that do use traders as more than execution guys. I think you're misinformed.

    Inform me. From what ive seen, equity trading desks (Swaps,Vol, Derivs, Cash) fit in primarily in execution roles, seldom do I see these guys take principal risk. Credit alike (IG, HY) not including converts/ABS, maybe FI hedge funds?
    I dont think im misinformed, im sure there are places where these guys find seats in an investing role, just not common. Again, FX,Mortgages, Commods, Rates ive seen take principal risk.

    Disagree on the banking comment. While coming from M&A wont make you a great investor..fundamental guys dominate share/landscape and they place a ton of value on being able to do the FS analysis/understanding the core drivers of value, traders dont get that.


    I've seen people go from muni derivatives trading to running a muni arb fund, as one example of stuff you don't think of everyday. Anything highly structured like asset backed have plenty of people with trading backgrounds running the funds, which you're now including on your list. If you mean flow equities or high grade, then you're right that there aren't many that make the move. If it will be replaced by a computer soon, it's not the best to make the transition, if there's no in danger of being replaced by a computer, I think there are plenty of opportunities. There are also plenty of quants that design systematic strategies and plenty of those guys start on a trading desk.

    I agree fundamental is a much larger space. I'm also going to guess that you come from banking and that the opportunities that require a trading background aren't the ones you're seeing. I think most people here would agree that a banker isn't going to hit the ground running on the investment side. That probably wouldn't be a very good fund if they could. But I would let guys like BlackHat, NewGuy, DontMakeMeShortYou or Gray Fox tell me if I'm right or wrong on that.


    Depends how you define hit the ground running.

    Equity l/s is full of bankers (and ER), distressed is full of ex restructuring guys. Look at Loeb's ackmans einhorns analysts einhorn was at dlj. But if you think those are not good funds then please do feel free to disagree. At my equity l/s fund its all bankers and a few ER.


    What I'm saying is that it is likely that people who are hiring bankers are doing so because of their potential and less because people think they can pick winning investments right away. I would think most people would learn the more important parts of the job while at the fund. But, maybe I'm wrong.

    adapt or die:
    What would P.T. Barnum say about you?

    MY BLOG

  • leveredarb's picture

    That's pretty much correct people hire bankers to have a blank slate that they can mould, and that has undergone pretty standardized training.

    On an unrelated note, how many guys that did 1-2years on a trading floor can pick winning investments and would be given pnl at a hf? I'm just curious it must be some but how many?

  • In reply to sonibubu
    BlackHat's picture

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    I hate victims who respect their executioners

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  • In reply to Bondarb
    leveredarb's picture
  • xqtrack's picture
  • In reply to xqtrack
    BlackHat's picture

    I hate victims who respect their executioners