Stress / pressure at hedge funds
(Senior Orangutan, 489
Points)
on 1/30/13 at 5:30am
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.
Yes, I'd say stress is lower
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.
I was just talking about
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
I help people with the tough situation of not knowing how to respond to emails.
Let me give you a quick idea
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
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Banking stress, to me, was
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.
Its all rainbows and flowers.
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.
Gray Fox: Its all rainbows
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
Follow BH & Co. on Twitter: @DumbLuckCapital
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Some of the comments above
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.
slowdive: Some of the
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
Follow BH & Co. on Twitter: @DumbLuckCapital
twitter.com/DumbLuckCapital
BlackHat: slowdive: Some of
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
Gray
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.
jake_f: Gray
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.
See my WSO Blog
If anyone's interested
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...
ladubs111: If anyone's
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.
Curious hear the perspective
Curious hear the perspective of someone on the macro side.
"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."
BlackHat: slowdive: Some of
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.
Morten123: BlackHat: slow
jake_f: Morten123: BlackH
Not sure why Morten is trying
Morten123: jake_f: Morten
The stress is brutal at a
...on banking vs trading for
Bondarb: ...on banking vs
Bondarb: The stress is brutal
"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."
Macro
the traders vs bankers
leveredarb: the traders vs
today was one of those days
whatwhatwhat: today was one
Gray
I hate victims who respect their executioners
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theworks9: leveredarb: the
Turbo leverage for capital explosion -- BD Capital
My WSO Blog
SirTradesaLot: theworks9:
theworks9: SirTradesaLot:
Turbo leverage for capital explosion -- BD Capital
My WSO Blog
All I know is David Einhorn
SirTradesaLot: theworks9:
Yes, clearly hedge funds
BlackHat: Gray
leveredarb: SirTradesaLot:
Turbo leverage for capital explosion -- BD Capital
My WSO Blog
That's pretty much correct
sonibubu: BlackHat: Gray
I hate victims who respect their executioners
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BlackHat: We post a
It's very stressful,
meabric: BlackHat: We post
and BTW i will also repeat
Bondarb: and BTW i will also
it's all fun and games until
Financial Modeling Training
Guide to Finance Interviews
xqtrack: it's all fun and
I hate victims who respect their executioners
Follow BH & Co. on Twitter: @DumbLuckCapital
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leveredarb: Bondarb: and
"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."
Read the book ages ago, great
"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."