How to get a FIG Hedge Fund Role at Tiger Cub / Grand Cub?
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What are they looking for in candidates?
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Insight on typical process?
Think 12-18 month long, 12 month short style strategy. Focus on banks, insurance, etc.
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Why not work for a pod?
Most of them don’t cover the space, so the short answer is “you probably don’t”
Viking and Maverick I think are the only cubs that do or have invested in balance sheet financials, and now maybe a couple of the “grand cubs”
You have it upside down. Citadel, MLP and Baly all report around 10% of their deployed capital is in financials, including large banks, insurance companies etc.
Tiger cubs are mostly looking for growthy stories: within financials they are going to be more focused on fintech, payments and so on. Good luck persuading them to buy WFC or whatever because it's cheap on P/B.
Not sure why “upside down” when we’re saying the same thing?
Tiger cubs tend to be fundamental momentum shops and story-driven investors. Financials are a mature cyclical sector where few businesses have shiny idiosyncratic stories to hype or chase and few have durable fundamental momentum or secular growth.
FIG is dead in the HF model unless you’re in a mkt neutral/MM seat. Directional bets in BS heavy FIG are just levered macro calls.
Steady state, these companies appreciate 8-10% a year. Every 7-10 years they all completely go to shit and blow up and the downside protection people thought they had bc they were asset-heavy and regulated actually meant nothing.
Not sure if this is true, but I heard the net equity value creation by banks over the last 100 years is close to zero due to occasional crashes
The key to making $$$ in FIG is piling 100% of capital into GS, knowing Government Sachs will get bailed out even when blowing up. #downsideprotection
I agree with some of this but you're leaving out an important caveat. While most FIG companies' earnings are explicitly tied to balance sheet (float drives investment income for carriers, loans / deposits drive NIM for banks, etc.) there are companies whose earnings are not as tied to their balance sheets (brokers, exchanges, originate-to-distribute "asset lite" lenders, etc.) that can both have meaningful outperformance over short periods relative to the herd as well as secular growth stories. Generally, these are the higher multiple names within financial services. If a bank or carrier has a PB >2, essentially the market is saying the franchise value of the company is greater than its salvage value (i.e. its book value) therefore you can analyze that franchise similarly to how you'd analyze any other company. Think SLM today or COF in the 20 aughts. Some of these companies can earn ROE well in excess of the commodity rate of ~8-10% so you can think of it as they're worth their book value if they earn 8-10% and then I'm paying for the excess return by paying more than book value. I'm an analyst at a concentrated long only that mostly invests in companies without significant balance sheets (software, fintech, healthcare services, business services) but we'd look at the above business models as well.
That's why the person above said "BS heavy" FIG. I think most businesses that are able to generate outsized ROEs either have a larger service mix (not tied to balance sheet) or are taking more risk (and might blow up eventually). I feel like it's difficult for a FIG company to get big enough to go public while also doing something that has not become commoditized.
A bank priced at 2x > BV may be a good investment for LO (Fidelity/Capital), but given the shorter time frames, particularly pod shops have, I am doubtful of how good a sell it'd be? These banks might have low dividend yields but more predictable earnings relative to banks trading much cheaper (say half of BV) and I'd rather invest in a stable bank even if it is trading at 1.5x PBV rather than a bank that is trading at 0.5 to 0.7. Usually if a bank is trading at that less there is usually a clear reason and banks cant just be turned around overnight, so much of their fate depends upon the macro economy that I'd rather not take a risk with a poorly trading bank
The unemployment line is a start
bump---can anyone speak to FIG activities in SMs today? I would imagine financials probably works best in a neutral pod format, curious how trades are constructed at SMs
Bump
As others have said, if you are set on BS financials you are probably going to be better off looking at the pods (they are actually a great subsector for the market neutral model). Can't speak to the tigers but broadly speaking if you are looking for roles in SM land, you'll prob need to be willing to broaden your lens to cover the a bigger chunk of the sector. There's a few fins / banks focused funds out there but not going to have the name recognition of the tiger complex
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