I'm a Hedge Fund Analyst - Ask Me Anything

I work as a long/short equity analyst at a large hedge fund. I've been lucky enough to be more than just a model monkey early on in my career, but have also been exposed to the stress of being measured on returns. I primarily cover consumer and TMT names. I went the typical path (target school --> IB --> HF), but have insight for those that have to follow more non-traditional paths.

ps I did one of these last year that you can see here: "Finishing 1st Year as HF Analyst - Ask Anything"

Comments (214)

May 17, 2013

What did you learn in your second year?

How do you assess a stock's risk?

Also thanks for doing this. It's fantastic for the community.

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May 17, 2013
job.resume:

What did you learn in your second year?

How do you assess a stock's risk?

Also thanks for doing this. It's fantastic for the community.

1) I continued becoming a being a better analyst. Hopefully that happens every year. I learned about new businesses. I became better at shorting (I'd argue that it's significantly harder than being a long). I learned how to better manage risk on a position. I learned how to pitch more effectively.

2) You try to break the business. What's the worst case scenario? How does the business look if that happens? What kind of valuation would I give it then? How likely is this to happen? What's a more reasonable scenario? You basically play around with these thoughts, figure out the appropriate assumptions, and see how your risk/reward looks. You WILL be wrong. You'll underestimate how likely something is to happen or how bad it can get, but you'll learn plenty from the experience.

You're welcome. I wouldn't even be here without the WSO community.

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May 17, 2013

What are you thoughts on Herbalife....j/k

Thanks for this--enjoy your posts.

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May 17, 2013

Thoughts on SBAC?

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May 17, 2013
stvr2013:

Thoughts on SBAC?

Haven't looked at it.

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May 17, 2013
DontMakeMeShortYou:

but have insight for those that have to follow more non-traditional paths.

Transitioning from back-office?

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May 17, 2013
yeahright:
DontMakeMeShortYou:

but have insight for those that have to follow more non-traditional paths.

Poor gpa, non-target, back office at BB... what would be your insight be in gaining experience related enough to get a similar position.

Get to a front-office role first (ER or IB). Hedge funds aren't a possibility for you at the moment.

May 17, 2013
DontMakeMeShortYou:
yeahright:

DontMakeMeShortYou:
but have insight for those that have to follow more non-traditional paths.

Poor gpa, non-target, back office at BB... what would be your insight be in gaining experience related enough to get a similar position.

Get to a front-office role first (ER or IB). Hedge funds aren't a possibility for you at the moment.

Where's the special insight? I already knew that!

Just messing, +1 for good thread, remember reading part 1.

May 17, 2013
yeahright:
DontMakeMeShortYou:

but have insight for those that have to follow more non-traditional paths.

Transitioning from back-office?

Need to network to an IB or ER role first, and only then can you network to a HF. It's a long climb. Might be helpful to take the CFA to help you stand out.

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May 17, 2013

How useful is publicly publishing a stock idea (SumZero, SeekingAlpha) in getting an interview?

What have you found to be the best method for sourcing new ideas?

May 17, 2013
floppity:

How useful is publicly publishing a stock idea (SumZero, SeekingAlpha) in getting an interview?

What have you found to be the best method for sourcing new ideas?

1) I find it very helpful to see examples of a candidate's work, but whether or not it had been published isn't important to me.

2) Screening, talking to other analysts, always reading, learning, and keeping an open mind. I like to understand what the market thinks about a stock and why... I then try to break it down. If I'm successful, I potentially have a good long or short, and I dig further.

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Best Response
May 17, 2013

How many models does it take to open a bottle?

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May 17, 2013
D M:

How many models does it take to open a bottle?

+1 for you-love it !

May 17, 2013
D M:

How many models does it take to open a bottle?

Bottles are such a plebeian concept. I prefer fountains of champagne.

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May 17, 2013
DontMakeMeShortYou:
D M:

How many models does it take to open a bottle?

Bottles are such a plebeian concept. I prefer fountains of champagne.

This was everything I could have ever hoped for and more, SB for you

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May 17, 2013

what is the future for the High Frequency or Algorithmic Trading in the HF industry?

May 17, 2013
figowxd:

what is the future for the High Frequency or Algorithmic Trading in the HF industry?

Unfortunately, I'm not that familiar with the execution side.

May 17, 2013

what time do you have to be at your desk by

May 17, 2013
captainkoolaid:

what time do you have to be at your desk by

730

May 17, 2013

I'm in ER, and ready to sell a kidney for a buyside research job. Headhunters aren't too receptive to ER guys, and my analyst has a stranglehold on client contact. I am in a satellite office. How would you go about recruiting?

At this point, I am just cold-mailing my resume/cover letter/stock pitches, and networking when possible. Alternatively, do you know any PMs in need of a kidney? Type O+ blood here, very marketable.

On the investment front, how do you personally decide to sell a stock? Do you sell when you can say "I wouldn't buy it at this price," or do you wait until momentum breaks? I have a few stocks looking frothy right now - they are solid businesses, and could grow into their multiples, but they are well above their typical valuations.

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May 17, 2013
West Coast rainmaker:

I'm in ER, and ready to sell a kidney for a buyside research job. Headhunters aren't too receptive to ER guys, and my analyst has a stranglehold on client contact. I am in a satellite office. How would you go about recruiting?

At this point, I am just cold-mailing my resume/cover letter/stock pitches, and networking when possible. Alternatively, do you know any PMs in need of a kidney? Type O+ blood here, very marketable.

On the investment front, how do you personally decide to sell a stock? Do you sell when you can say "I wouldn't buy it at this price," or do you wait until momentum breaks? I have a few stocks looking frothy right now - they are solid businesses, and could grow into their multiples, but they are well above their typical valuations.

O+ may be marketable, but it's also the most common. We're looking for people with unique and rare traits. If you know someone who's AB-, tell him to give me a shout.

I don't see many ways outside of networking. Has the networking been ineffective for you? If yes, I would try bombarding them with less info off the bat, and instead try to get someone to sit down for a coffee or get a chat over the phone. I find that to be a much easier way to build a relationship with someone and ultimately get them to help you out.

On the last part: my fund typically likes to play momentum, so we'll get out when we feel it's either too frothy or the momentum is going to slip out from under us soon. Theoretically, you shouldn't own something unless you'd add to it at that price, but I don't always see that in practice.

May 17, 2013
DontMakeMeShortYou:
West Coast rainmaker:

I'm in ER, and ready to sell a kidney for a buyside research job. Headhunters aren't too receptive to ER guys, and my analyst has a stranglehold on client contact. I am in a satellite office. How would you go about recruiting?
At this point, I am just cold-mailing my resume/cover letter/stock pitches, and networking when possible. Alternatively, do you know any PMs in need of a kidney? Type O+ blood here, very marketable.
On the investment front, how do you personally decide to sell a stock? Do you sell when you can say "I wouldn't buy it at this price," or do you wait until momentum breaks? I have a few stocks looking frothy right now - they are solid businesses, and could grow into their multiples, but they are well above their typical valuations.

O+ may be marketable, but it's also the most common. We're looking for people with unique and rare traits. If you know someone who's AB-, tell him to give me a shout.

I don't see many ways outside of networking. Has the networking been ineffective for you? If yes, I would try bombarding them with less info off the bat, and instead try to get someone to sit down for a coffee or get a chat over the phone. I find that to be a much easier way to build a relationship with someone and ultimately get them to help you out.

On the last part: my fund typically likes to play momentum, so we'll get out when we feel it's either too frothy or the momentum is going to slip out from under us soon. Theoretically, you shouldn't own something unless you'd add to it at that price, but I don't always see that in practice.

Networking has been iffy. I got my current job through networking, so I know it works. I went to a LAC, so the alumni base at hedge funds is small. I'm also not in NYC, which makes it harder to build those relationships.

The people I have gotten in touch with have typically either been (a) not hiring, or (b) looking for somebody with more experience (I'm a year in). It's a numbers game, so I guess I will just keep trying.

May 18, 2013

I am AB-, let's chat.

Nicholas A. Kahn

May 17, 2013

How does it feel to get paid to ruin the economy and plunder the middle and lower class of America?

alpha currency trader wanna-be

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May 17, 2013
watersign:

How does it feel to get paid to ruin the economy and plunder the middle and lower class of America?

You should do a little more reading on hedge funds.

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May 17, 2013

Do you know of anyone who transitioned from a pre-MBA PE associate role into HF? And if so, how did they break in? I am curious how they would best explain why they went into PE after IB instead of going to straight to HF. I am about to start a 2 year PE associate stint and am interested in potentially transitioning to a HF afterwards.

May 18, 2013
DontMakeMeShortYou:
watersign:

How does it feel to get paid to ruin the economy and plunder the middle and lower class of America?

You should do a little more reading on hedge funds.

I know exactly what Hedge Funds do. But since you're long/short I guess it's not like a Credit/Macro/Activist fund so you aren't a total slime ball ;)

alpha currency trader wanna-be

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May 18, 2013

welcome to capitalism bitch

May 20, 2013

-If there was anything you could have done differently (reasonably within your control) from the time you hit the hedge fund, what would it be?

-Where do you see systematic strategies going? Any advice for people going into the area of trading on 2-week to 6 month time frames driven by behavioral models.

-How do you spot a value trap, as you alluded to in your last post? (Yes, I know this is hard to boil down into anything less than a year of experience, but any insight you can offer would be helpful.)

Thanks. I normally hate these threads (I don't know why), but I appreciate your advice.

Sep 16, 2013
IlliniProgrammer:

-If there was anything you could have done differently (reasonably within your control) from the time you hit the hedge fund, what would it be?

-Where do you see systematic strategies going? Any advice for people going into the area of trading on 2-week to 6 month time frames driven by behavioral models.

-How do you spot a value trap, as you alluded to in your last post? (Yes, I know this is hard to boil down into anything less than a year of experience, but any insight you can offer would be helpful.)

Thanks. I normally hate these threads (I don't know why), but I appreciate your advice.

1) Develop stronger relationships. The senior guys are in their seats for a reason: they know their shit and you have a ton to learn from them.

2) During the crisis, quant funds got hurt far more than traditional L/S shops. I'd be curious to see how successful they can be long-term, but I don't have any special insight for you. You probably know more about this than I do.

3) Sometimes you'll see cheap stocks with nice-looking dividends that for whatever reason can't get out of the dumps. They have some great assets, a real product, and there's maybe even a chance of a recovery. Or hell, maybe there's a business trading at below liquidation value. Sounds salivating on the surface.

First, the problem with crown jewel assets is that (1) companies are built around them - take them away and whole structure becomes less stable and (2) who's to say that the company is going to monetize it? There are companies out there with more cash than their market cap, but refuse to give it to investors.

This is going to sound crazy, but academics and PMs agree on at least one thing: momentum matters. I know a few PMs that buy on upswings and sell on downswings (mind you, this is a rash generalization, but generally true). If a stock starts moving downward, other owners panic and want to sell too. How do you find a bottom? Furthermore, in a declining business (say office products or computers), what's really the right multiple to pay? The business is slowly fading away. They can offset declines with market share gains, but only to an extent. You also can't predict what management will do with cash and assets (another stupid acquisition, higher salaries, nightly boozefests to numb the pain?) and can't guarantee they won't be able to climb out of their ever-deepening hole.

All this same stuff applies to a flat stock. You need to either be very comfortable with the risk/reward, understand company & industry dynamics better than others, and/or have specific catalysts in mind. Look at SWY as a great example. Core business in the shitter for the longest time, but they implement a loyalty program and sell their Canada assets and suddenly things are looking a lot better. The stock has basically doubled (I'm too lazy to check the exact price change).

Cheap is nice, but you need to have a reason as to why people will get on the train, so to speak. You don't need them to believe that it's going to be a huge company, just that it's one that's better than perceived. Same goes with shorting: you don't need to find a fraud - all you need to do is convince the longs to sell.

May 17, 2013

How can someone from a semi/non target differentiate themselves and go straight to HF? Pass CFA level 1 during undergrad? Cold call/email excessively?

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May 17, 2013

1) how many investment and trading ideas are you expected to generate each year?
2) what's the biggest negative return can your boss accept before going rage against you? or have you ever recommended a bad stock, what's the consequence? could you share some experience?
3) how long do you normally take to conclude your research and give your buy/hold/sell recommendation?

thank you :)

May 17, 2013
sage_of_java:

1) how many investment and trading ideas are you expected to generate each year?
2) what's the biggest negative return can your boss accept before going rage against you? or have you ever recommended a bad stock, what's the consequence? could you share some experience?
3) how long do you normally take to conclude your research and give your buy/hold/sell recommendation?

thank you :)

1) It's moreso about returns than # of ideas. 2-3 great ideas is all it takes for a blockbuster year... as long as you don't fuck up too badly on the ones you're wrong on.

2) Haha, the return doesn't even have to be negative for my boss to rage. I've been chewed out for my stock not going up ENOUGH. Typically, though, if a stock is down ~10% I'll start feeling some real heat (less heat if the whole market is crashing).

I have recommended plenty of losers. It really sucks sometimes and you just have to go in there, own up to your mistake, and provide a rational argument for what needs to be done going forward. I remember owning PCLN into a print where it was down ~20%. Probably one of the more stressful days of my career... I ended up talking the PM through the earnings, what went wrong, and what I thought we should do. We ended up adding to the position and made money in the long run. It's always a judgement call... do you take on more capital and reputation risk and defend your stance or fold your hand? Keep in mind that if you fold and the stock goes up, you will be yelled at yet again. If you don't fold and it keeps going down, you will continue to hurt your reputation and could be risking at your job at a certain point. In the end it comes down to how much you trust your thesis.

3) If I'm doing a deep dive, usually 1-3 weeks, though I'm usually doing other things in the meanwhile. I'll often look at a stock and decide not to do anything (those I'll usually stop working on sooner than the 1 week mark).

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May 17, 2013

Let's say you're looking at a company and discover it's undervalued vs. comps based on a metric you create; let's say market cap / access line for a telephone company.

My question is - if no one else knows to measure the company's performance based on its MC / access line (hence its undervaluation), how can an investor be confident that the company will eventually trade at a level in line with comps based on that metric?

Would it then be a matter of getting the story out there? Is it situation-dependent on the catalysts in the particular thesis?

May 17, 2013
bonobochimp:

Let's say you're looking at a company and discover it's undervalued vs. comps based on a metric you create; let's say market cap / access line for a telephone company.

My question is - if no one else knows to measure the company's performance based on its MC / access line (hence its undervaluation), how can an investor be confident that the company will eventually trade at a level in line with comps based on that metric?

Would it then be a matter of getting the story out there? Is it situation-dependent on the catalysts in the particular thesis?

I can take a stab at the first question. I cover financials, so we have a lot of weird metrics. But, at the end of the day, every company trades on earnings (current / potential / future / etc.)

If your metric is sound, it should eventually translate to earnings. Even some of the more ridiculous metrics (mkt cap to users for FB) are supposed to eventually translate to earnings (they monetize the user base). As that relationship plays out, it should be reflected in the valuation.

The one exception might be asset plays - but then it is more a question of "will management ever liquidate these assets and return capital to shareholders?"/

May 17, 2013
West Coast rainmaker:
bonobochimp:

Let's say you're looking at a company and discover it's undervalued vs. comps based on a metric you create; let's say market cap / access line for a telephone company.
My question is - if no one else knows to measure the company's performance based on its MC / access line (hence its undervaluation), how can an investor be confident that the company will eventually trade at a level in line with comps based on that metric?
Would it then be a matter of getting the story out there? Is it situation-dependent on the catalysts in the particular thesis?

I can take a stab at the first question. I cover financials, so we have a lot of weird metrics. But, at the end of the day, every company trades on earnings (current / potential / future / etc.)

If your metric is sound, it should eventually translate to earnings. Even some of the more ridiculous metrics (mkt cap to users for FB) are supposed to eventually translate to earnings (they monetize the user base). As that relationship plays out, it should be reflected in the valuation.

The one exception might be asset plays - but then it is more a question of "will management ever liquidate these assets and return capital to shareholders?"/

I responded to the original post, but this is a good addendum.

May 17, 2013
bonobochimp:

Let's say you're looking at a company and discover it's undervalued vs. comps based on a metric you create; let's say market cap / access line for a telephone company.

My question is - if no one else knows to measure the company's performance based on its MC / access line (hence its undervaluation), how can an investor be confident that the company will eventually trade at a level in line with comps based on that metric?

Would it then be a matter of getting the story out there? Is it situation-dependent on the catalysts in the particular thesis?

That's a great question. Typically, unless you think you can convince the Street that this is the right metric to look at, it's a hard pitch to make. If you work at a promotional fund (very public with their ideas) like Pershing or Greenlight, it's more feasible. It's also possible to talk to IR and/or the management team and convince them to start talking about this metric publicly to help expedite the process.

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May 17, 2013

also, how important do you think CFA is in HF industry? or does your boss value CFA?

and last but not least, what was your first-year experience like?

massive thank you again....

May 17, 2013
sage_of_java:

also, how important do you think CFA is in HF industry? or does your boss value CFA?

and last but not least, what was your first-year experience like?

massive thank you again....

1) CFA: not important. That's moreso for long-onlies.

2) It was jarring initially. Coming from banking you're babied with everything. There's little to no thinking, no accountability for your work outside of its accuracy, and you're told what to do. Working at a HF required me to be much more independent and to put my thoughts and opinions to the scrutiny of both the senior guys at the firm and the market. My guidance amounted to: "go look at X stock and tell me what you think." It was tough initially (voice shaking the first few pitches), but eventually I got the hang of it.

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May 17, 2013

Re: shorting - how do you avoid/mitigate a TSLA? (if at all)

Re: momentum - does this mean your fund typically likes to short on the way down as well? I've had my share of fake breakdowns in this environment and wonder how others are managing.

May 17, 2013
tt1254:

Re: shorting - how do you avoid/mitigate a TSLA? (if at all)

Re: momentum - does this mean your fund typically likes to short on the way down as well? I've had my share of fake breakdowns in this environment and wonder how others are managing.

Make sure your shorts have plenty of liquidity (avoid high short interest names) and don't short names where valuation metrics used by investors are so esoteric and have such a broad range (can someone tell me what the RIGHT multiple for a business with TSLA's characteristics is? no, I didn't think so). Even then, you could still get fucked, but at least those things will minimize your risk.

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May 17, 2013

Care to share any data points around comp? More interested in structure vs. seniority/performance than actual numbers, but always good to benchmark against anything you can sufficiently anonymize.

Is your all-in comp an explicit function of your P&L, or is it more qualitative (good year = x% of P&L or good year = bigger bonus)? If the former, are you at the type of shop where you get fired if P&L goes negative? If the latter, how are you measured?

May 17, 2013
tempaccount:

Care to share any data points around comp? More interested in structure vs. seniority/performance than actual numbers, but always good to benchmark against anything you can sufficiently anonymize.

Is your all-in comp an explicit function of your P&L, or is it more qualitative (good year = x% of P&L or good year = bigger bonus)? If the former, are you at the type of shop where you get fired if P&L goes negative? If the latter, how are you measured?

If you work at a very large fund, you'll typically get high 200s/low 300s for first year comp (this is after 2 years of banking). After the first year it can swing up a lot if you pitch some big winners (some big funds don't really risk much capital on 1st and 2nd year analysts, so you have limited upside). You get paid more 2nd year, all else equal, but I don't know what's standard. I know a 2nd year who got paid 650 because he absolutely crushed it, but then I also know guys who didn't break into the 300s despite being pretty good. It depends on (1) how senior guys think about junior comp (2) how well your fund is doing and (3) how well you are doing. Surprisingly, #3 isn't a huge driver of comp when you're young because other people will take credit for your great ideas or attribute your gains to luck.

To answer your question more succinctly: my comp is more qualitative and dependent on how the overall fund is doing rather than my own performance. This changes as you get older. If you're a PM of a side fund, I've heard that 1/10 is a common metric to get paid on (some more senior guys can correct me on this if I'm wrong). They also get paid on ideas that they get into the main book (not sure how this looks on a % basis).

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May 17, 2013

I know you said get IB or ER, is S&T a good path to get into long/short, or would that path focus you towards other types of hedge funds?

May 17, 2013
Goldenglobe:

I know you said get IB or ER, is S&T a good path to get into long/short, or would that path focus you towards other types of hedge funds?

S&T typically isn't a great path because you're just an execution guy. Most HFs want a guy who can do fundamental analysis and an S&T role doesn't teach you that. If you want to be a buyside execution trader, then S&T is the way to go.

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May 17, 2013

Why long/short over event driven (specifically merger arb)? How difficult is it to break into merger arb after 1 or 2 years of IB?

May 17, 2013
TheFix:

Why long/short over event driven (specifically merger arb)? How difficult is it to break into merger arb after 1 or 2 years of IB?

Personal preference. I prefer fundamental work over event driven (event driven does include fundamental work as well, but more of a focus on the catalyst). I don't like merger arb specifically because I think it's overcrowded from a capital standpoint and I don't like the idea of stepping in front of a metaphorical train to collect a few pennies. Some people excel at it and really enjoy it... I'm simply not one of them.

They like IB guys, with a particular preference for M&A specialists.

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May 17, 2013

Could you briefly explain why the CFA is less desired by a hedge fund compared to a long only fund?

May 17, 2013
Marty Wyndham:

Could you briefly explain why the CFA is less desired by a hedge fund compared to a long only fund?

We disagree with some of the material taught (we prefer practical applications over theory), think it's a huge time sink, and also most HF guys haven't taken it themselves, so they don't see the value in it. Long onlies, on the other hand, have a lot of senior guys who have taken the CFA, and they think it's helpful, so they make you take it. I don't argue that it doesn't teach you things, but there are more timely ways to learn the material and cut out all of the fluff they force down your throat.

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May 17, 2013
DontMakeMeShortYou:
Marty Wyndham:

Could you briefly explain why the CFA is less desired by a hedge fund compared to a long only fund?

We disagree with some of the material taught (we prefer practical applications over theory), think it's a huge time sink, and also most HF guys haven't taken it themselves, so they don't see the value in it. Long onlies, on the other hand, have a lot of senior guys who have taken the CFA, and they think it's helpful, so they make you take it. I don't argue that it doesn't teach you things, but there are more timely ways to learn the material and cut out all of the fluff they force down your throat.

so in your opinion what is the best way to learn?

May 17, 2013

1) are there any good resources for reading up on market history? what about getting to know a new industry?

2) how do ou filter noise from truly valuable information?

3) how do you double check your assumptions or your analysis? in the unique metric question earlier, how can you feel confident enough to go against the crowd and be sure your analysis is valid?

May 21, 2013
couchy:

1) are there any good resources for reading up on market history? what about getting to know a new industry?

2) how do ou filter noise from truly valuable information?

3) how do you double check your assumptions or your analysis? in the unique metric question earlier, how can you feel confident enough to go against the crowd and be sure your analysis is valid?

1) For new industries there will be primers put out by equity research shops. There are also informational books you can find online either through an organization representing that industry or just search on amazon.

2) Truly useful information has an impact on a company's future earnings & cash flows. I'll still read plenty of other stuff about businesses because it's helpful to develop a timeline in your head - it can be a great way to spot a pattern before anyone else does (for example, if a company starts mentioning a tiny business more frequently over the course of 2 years, it might mean that there's a big opportunity with it, or they're trying to distract investors from poorer performing large businesses).

3) I print out the completed document, talk it through by myself, make any necessary changes, and send it out. The model and other supporting analysis are typically the most important points of the pitch, so you have to be 100% sure that those are right.. The rest of the writing is to guide the reader through your thought process.

How can I be sure? It's like being a detective. You don't arrest a suspect (buy or short a stock) unless you have adequate evidence to support your thesis.

May 17, 2013

1. How common is it for people from asset management (not private banking, but asset allocations/portfolio management guys) in banks to move to hedge funds?

2. I am a summer analyst at a $20b+ hedge fund. I know this is very hard to answer but how common is it for an SA to convert such a position to FT? Have BB M&A background, and considering research/AM at a BB if I don't convert/find other opportunities on the buy-side.

The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.

May 17, 2013
SonnyZH:

1. How common is it for people from asset management (not private banking, but asset allocations/portfolio management guys) in banks to move to hedge funds?

2. I am a summer analyst at a $20b+ hedge fund. I know this is very hard to answer but how common is it for an SA to convert such a position to FT? Have BB M&A background, and considering research/AM at a BB if I don't convert/find other opportunities on the buy-side.

1) I'm unfortunately not sure - wish I could give you a better answer.

2) Conversion rates vary from fund to fund. Most I've seen have sub-50% rates, but please don't let that freak you out as I'm basing this on a very limited data-set. Furthermore, given that you have an internship at a top fund and a BB M&A background, you should be able to get interviews at other HFs come full-time recruiting.

May 17, 2013

Could you talk a bit about how your role evolved throughout your time at the fund, from the first few months through the first year and now second? At what point were you pitching and researching ideas pretty independently vs having ideas given to you to look at and discuss with a senior analyst?

May 20, 2013
jez248:

Could you talk a bit about how your role evolved throughout your time at the fund, from the first few months through the first year and now second? At what point were you pitching and researching ideas pretty independently vs having ideas given to you to look at and discuss with a senior analyst?

I always did my work & research independently as no one will hold your hand at a hedge fund - even on day one. Initially, all the ideas I looked at came from a senior guy, but approx 9-12 months in I was doing mostly my own ideas.

The major changes from most of year1 vs. year2

More independence, freedom, responsibility, and stress as I'm now responsible for names vs. before I could hide behind the senior guy. Better understanding of the best way to think about building or unwinding a position. Better at risk management. Much more efficient in getting straight to the point when looking at businesses. Better at spotting a value trap. Better understanding of how the market thinks about and reacts to different businesses.

May 17, 2013

What are the best books to read to get a good knowledge of investing

"Hold on a sec...you mean they made all this money without doing IB --> PE --> HBS --> PE --> God?
How is this possible?!?!?!!??" - TheKing

May 19, 2013
dickenscharles741:

What are the best books to read to get a good knowledge of investing

I've seen WSO threads with more comprehensive lists so you'll have to look around. When I was younger, I read much of the blue ridge reading list (http://www.marketfolly.com/2009/05/blue-ridge-capi...)

    • 1
May 19, 2013
DontMakeMeShortYou:
dickenscharles741:

What are the best books to read to get a good knowledge of investing

I've seen WSO threads with more comprehensive lists so you'll have to look around. When I was younger, I read much of the blue ridge reading list (http://www.marketfolly.com/2009/05/blue-ridge-capi...)

I'll look into those, thanks. & wonderful post

"Hold on a sec...you mean they made all this money without doing IB --> PE --> HBS --> PE --> God?
How is this possible?!?!?!!??" - TheKing

May 21, 2013
dickenscharles741:

What are the best books to read to get a good knowledge of investing

Here's a list a bunch of hedge fund managers recommend.

Edit: link http://www.frankvoisin.com/books/book-recommendati...

May 17, 2013

1. How are post-MBA Lev Fin Associates viewed by credit HFs?

2. Have you heard of anyone make this type of jump with no pre-MBA buy-side experience?

3. Assuming a top Lev Fin group (BAML/JPM), do Lev Fin Associates get looks from HHs?

May 20, 2013
riceygts:

1. How are post-MBA Lev Fin Associates viewed by credit HFs?

2. Have you heard of anyone make this type of jump with no pre-MBA buy-side experience?

3. Assuming a top Lev Fin group (BAML/JPM), do Lev Fin Associates get looks from HHs?

1) You're not going to be top of the pile, but it's possible to break in. It will take some time and effort, though.

2) I've seen M&A people move to equity roles, so I don't see why a lev fin associate wouldn't be able to do a credit job.

3) Not sure how HHs would treat you guys. I'm not very privy to the thinkings of HHs other than the fact that most that I've worked with tend to be a bit (or very) slimy

May 17, 2013

1. Style of investing (GARP, value)? Favorite screens to run?

2. Not quite in ER - BB strategy research. Advice on making it to the buy-side? Plenty of experience in bottom-up research in high-yield and value equity.

3. Biggest surprise thus far on the HF side?

May 19, 2013
Finance_Eh:

1. Style of investing (GARP, value)? Favorite screens to run?

2. Not quite in ER - BB strategy research. Advice on making it to the buy-side? Plenty of experience in bottom-up research in high-yield and value equity.

3. Biggest surprise thus far on the HF side?

1) GARP and value are where I tend to focus, mostly by virtue of my fund's leanings. Screens? Gets a bit complex... On the long side, businesses that are below peak ROIC & margins and approaching an inflection point, improving and relatively stable sales growth (ideally below historical peaks bc of a recovery), attractive FCF yield, positive WC trends (inventory in control and receivable days down and payable days up), under levered (potential for accretive debt offering and buyback), and capital allocation policy.

Some of the other things you'd look at after the screen are competitive dynamics (share gainer or share loser and how high or low can it go?), industry concentration (is it an oligopoly or are there hundreds of competitors in a fragmented market)? Quality of management team. Secular tailwinds and headwinds.

I'm missing a lot of things there, but this post would be too long if I listed them all. Hopefully this provides a rough gist.

2) Get in front of people (coffee/lunch/drinks) and build relationships. You need to stick out in people's heads as someone who's smart, intellectually curious, hardworking, and passionate about the markets. Keep the intro emails short (offer to take them for coffee whenever they have a few minutes so that you can learn more about their background and thoughts on working at a HF. Have a good long and short ready, as well as more general views on the market. It could take a long time before you're being referred to other funds by your contacts, but that's perfectly normal.

3) Just how difficult and taxing the job is. It's easy to be an armchair investor and claim x stock is a screaming long without risking any capital or much of your reputation either. When on the job, trying to outsmart the market is far more perilous (plenty of unseen/unknowable factors, as well as the fact that the market IS very smart and relatively efficient), because if you're wrong too often, you get fired. Furthermore, you're faced with many scenarios where your long-term thesis is right, but the path to getting there is messy, meaning you're being yelled at by superiors and doubting yourself... and then on top of that you have to put yourself even further out there to defend the thesis.

    • 3
May 17, 2013

1. What types of IB groups do hedge funds normally recruit from? Is there any downside to being in a LatAm group?

2. Does school still matter even if you broke into bulge bracket IB?

3. A little more on the personal side, what made you want to work as a HF analyst?

    • 1
May 19, 2013
JHernandezUM:

1. What types of IB groups do hedge funds normally recruit from? Is there any downside to being in a LatAm group?

2. Does school still matter even if you broke into bulge bracket IB?

3. A little more on the personal side, what made you want to work as a HF analyst?

1) Product groups (M&A, lev fin) and then top groups from top banks are most commonly sought after. There's a big prestige element to it all. I'd guess that being latam will be a disadvantage because you have little domestic exposure and the laws & best practices there are probably different from here in the U.S. Should be surmountable though.

2) To an extent, yes. In my group, the Wharton kids got the best looks, even though both of them were relatively average vs. the rest of the 1st years. The person who came from the worst school had the most difficulty, even though they were one of the best analysts. Everyone turned out okay though. Your performance on the job is more important and where you work is more important to getting HH interviews.

3) I couldn't imagine doing anything else. I started learning about investing early in high school and as I aged and learned more, the more excited I was about the job. I like that the job promotes intellectual curiosity & competition, is relatively meritocratic and not too bureaucratic, and allows me to pursue my passion for the markets.

    • 1
May 20, 2013
DontMakeMeShortYou:
JHernandezUM:

1. What types of IB groups do hedge funds normally recruit from? Is there any downside to being in a LatAm group?
2. Does school still matter even if you broke into bulge bracket IB?
3. A little more on the personal side, what made you want to work as a HF analyst?

1) Product groups (M&A, lev fin) and then top groups from top banks are most commonly sought after. There's a big prestige element to it all. I'd guess that being latam will be a disadvantage because you have little domestic exposure and the laws & best practices there are probably different from here in the U.S. Should be surmountable though.

2) To an extent, yes. In my group, the Wharton kids got the best looks, even though both of them were relatively average vs. the rest of the 1st years. The person who came from the worst school had the most difficulty, even though they were one of the best analysts. Everyone turned out okay though. Your performance on the job is more important and where you work is more important to getting HH interviews.

3) I couldn't imagine doing anything else. I started learning about investing early in high school and as I aged and learned more, the more excited I was about the job. I like that the job promotes intellectual curiosity & competition, is relatively meritocratic and not too bureaucratic, and allows me to pursue my passion for the markets.

just wanted to stop in and say thank you for all these awesome answers...interesting peek into the inside of a HF...

May 18, 2013

How many bottles does it take to open a model? (hope no one beats me to it)

How big is yours?

May 18, 2013
Outsider:

How many bottles does it take to open a model? (hope no one beats me to it)

You're late:

D M:

How many models does it take to open a bottle?

Snootchie Bootchies

May 18, 2013
zee4:
Outsider:

How many bottles does it take to open a model? (hope no one beats me to it)

You're late:

D M:

How many models does it take to open a bottle?

Totally different question

May 21, 2013
zee4:
Outsider:

How many bottles does it take to open a model? (hope no one beats me to it)

You're late:

D M:

How many models does it take to open a bottle?

read the difference dude.

How big is yours?

May 18, 2013

Fund of funds to hedge fund? Possible? how?

thanks!

May 21, 2013
GoodElevators:

Fund of funds to hedge fund? Possible? how?

thanks!

Never heard of one becoming a HF analyst after a FoF stint. You'd have to transfer to ER, IB, or somewhere else similar to make it work because you need to understand how to think about and value a business.

May 18, 2013

How would ECM at a non-GS/MS/JPM bulge bracket set one up for HF recruiting?

May 21, 2013
PaulAllenIsInLondon:

How would ECM at a non-GS/MS/JPM bulge bracket set one up for HF recruiting?

Might be a tough seat as the stereotype is that ECM folks don't model or do any "rigorous" analysis (not that any IB analysts are doing truly rigorous analysis) and those are seen as requirements for junior HF guys.

May 18, 2013

Great thread DontMakeMeShortYou

I've seen jumping from IB/PE to HF has been covered, but what about MBB -> HF?

What would you say are the skills/characteristics that MBBers have/lack for HFs and what's the view of HFs on MBBers?

Thanks!

May 21, 2013
El_Matador:

Great thread DontMakeMeShortYou

I've seen jumping from IB/PE to HF has been covered, but what about MBB -> HF?

What would you say are the skills/characteristics that MBBers have/lack for HFs and what's the view of HFs on MBBers?

Thanks!

I haven't seen anyone do it myself, but I've only seen a small pool of junior guys, so I don't have a very robust data set to work off of. I probably wouldn't hire you because you don't have financial modeling capabilities, nor have you spent time familiarizing yourself with financial statements. If you COULD do that, as well as prove that you're passionate about the markets, then there'd be no major impediment to your hiring. MBBs are well-respected.

May 18, 2013

I'm a buy side equity analyst in South Africa, coming up on two years experience. Would hedge funds in the US ever typically look to hire internationally? Just from the stand point that someone with relevant experience in an emerging market would likely bring a completely different perspective to the table.

May 21, 2013
Mat:

I'm a buy side equity analyst in South Africa, coming up on two years experience. Would hedge funds in the US ever typically look to hire internationally? Just from the stand point that someone with relevant experience in an emerging market would likely bring a completely different perspective to the table.

The major obstacles you'd face are:

(1) Lack of domestic experience - you'd have to learn an entirely new coverage landscape.

(2) They'd have to sponsor you for a Visa.

(3) It's difficult to make connections halfway around the world. It would be helpful if you at least sat down with HFers every time you made it to the states.

Sure, you'll have to overcome these, but if you work at it, it's possible.

May 23, 2013
DontMakeMeShortYou:

The major obstacles you'd face are:

(1) Lack of domestic experience - you'd have to learn an entirely new coverage landscape.

(2) They'd have to sponsor you for a Visa.

(3) It's difficult to make connections halfway around the world. It would be helpful if you at least sat down with HFers every time you made it to the states.

Sure, you'll have to overcome these, but if you work at it, it's possible.

Thanks for doing this. Just curious, do you know of any HF analysts who attended US undergrad but required visa sponsorships? How open are funds to this generally?

May 18, 2013

Awesome thread, thank you DontMakeMeShortYou.

My question is, what's your advice for an MBA student (top 10 school) who is a CFA charterholder and wants to break into a long-short HF? I'm planning to do a bunch of cold calling and really work my network, but if I can't get a role directly out of school (which I realize is likely), what is my next best route? Equity Research, M&A?

FYI my background is management consulting and auditing (audited HF's), and I'm been actively managing my PA for 7-8 years.

-Spalding

May 21, 2013
Spalding Get Your Foot Off the Boat:

Awesome thread, thank you DontMakeMeShortYou.

My question is, what's your advice for an MBA student (top 10 school) who is a CFA charterholder and wants to break into a long-short HF? I'm planning to do a bunch of cold calling and really work my network, but if I can't get a role directly out of school (which I realize is likely), what is my next best route? Equity Research, M&A?

FYI my background is management consulting and auditing (audited HF's), and I'm been actively managing my PA for 7-8 years.

-Spalding

Lack of modeling experience is the one red flag, so if you can't get in immediately after school, I think I'd suggest ER at your seniority level. An M&A role would be more prestigious, but associates in those groups don't get many recruiting consults. However, as you get older in ER you spend more time speaking with clients and would therefore better be able to foster relationships that can lead to jobs. Of course, I'm just speculating, so take my words with a grain of salt.

It's great that you've shown a passion for investing and have passed all the CFA exams - it shows that you know the material despite what we would consider a softer background (we stereotype consultants as more qualitative than quantitative). Good luck with your search1

    • 1
May 18, 2013

Thanks for doing this Q&A. I am a chemist trying to get a job at a hedge fund. Do any of your colleagues have science backgrounds? If so, in what ways (if any) has their background been useful to them?

May 21, 2013
dnv05:

Thanks for doing this Q&A. I am a chemist trying to get a job at a hedge fund. Do any of your colleagues have science backgrounds? If so, in what ways (if any) has their background been useful to them?

I've seen a number of PhDs covering pharmaceuticals. You can gauge drug approval odds more accurately when you have a scientific background. How did they break in? I unfortunately don't know. As I've said before, though, it's a lot easier to get there if you network.

May 18, 2013

Thanks a lot for your help. I am a senior from a non target school to metals and mining M&A analyst. What would be the most important thing I do now in terms of networking to get interviews at a HF (unfortunately I am not in NY)? When would be the right time? When and how did you go about it? I am going into banking because I never made through my HF interviews last summer and I have a very clearly idea the type of investing and vehicle I want to pursue.

May 21, 2013
somehowwonder:

Thanks a lot for your help. I am a senior from a non target school to metals and mining M&A analyst. What would be the most important thing I do now in terms of networking to get interviews at a HF (unfortunately I am not in NY)? When would be the right time? When and how did you go about it? I am going into banking because I never made through my HF interviews last summer and I have a very clearly idea the type of investing and vehicle I want to pursue.

The right time to network is any time. It's about building relationships, not asking for a job. It's easier to call on a favor from someone you've known for a year than someone you've only recently met. I didn't personally do much networking as I knew my resume would get me interviews, though in retrospect it definitely would've been helpful to do so. Just reach out to people via alum networks, linkedin, or whatever other avenues you can find and learn about their path, their job, and get some advice from them. Keep in touch by sending interesting articles, updating them on your progress, asking follow-up questions, or anything else appropriate that you can think of.

May 19, 2013

Gave you a couple SBs, good info.

My fav parts getting yelled at in 98% of cases as a junior and firm performance > your performance both so true.

May 19, 2013

thanks for the resource, whats the CAGR of your firm so far?

    • 1
Sep 16, 2013
TheHoustonFlight:

thanks for the resource, whats the CAGR of your firm so far?

Being too specific makes it too easy to identify me. It's in the double digit percentages.

May 19, 2013

We've seen short squeezes send companies like TSLA and GME soaring. When sourcing for ideas, what do you think of searching among companies with a high percentage of float shorted for contrarian long ideas? Is this common at all among institutional investors? When you look at shorts, do you try to stay away from stocks companies with too high a % of float shorted?

Do you see people from ER break into hedge funds directly or often take a more round about path such as long only AM first?

Thank you for your advice!

    • 1
May 21, 2013
DB9:

We've seen short squeezes send companies like TSLA and GME soaring. When sourcing for ideas, what do you think of searching among companies with a high percentage of float shorted for contrarian long ideas? Is this common at all among institutional investors? When you look at shorts, do you try to stay away from stocks companies with too high a % of float shorted?

Do you see people from ER break into hedge funds directly or often take a more round about path such as long only AM first?

Thank you for your advice!

1) This is moreso how the people I've worked with look at highly shorted names rather than the market as a whole. Generally, they've been hesitant to look at these stocks on both the long and the short sides. (1) There's typically a very good reason that a stock is attracting that many shorts (2) cheap valuation alone isn't a good enough reason to buy a stock, as we've seen multiples go far below historical lows when a business is seen as a share loser in perpetual decline (HPQ, BBY, and many others) and (3) the shorts are usually right, so you need to be very sure that your differentiated view is truly defensible.

However, if you DO come up with a great thesis on a name with high short interest, the PMs I've worked with would love to own it. For example, I think that PPO will have a great run in the next ~6 months. I can't share the thesis and I could definitely be wrong, but I'm given comfort by the market misunderstanding PPO's competitive moat and many shorts don't have the level of insight into their customers that we do. If I'm right, I'll benefit from from both earnings growth, multiple expansion, and the supply/demand disequilibrium, given how many shorts would be rushing to the exit.

2) I've seen ER people break in directly.

    • 1
Sep 16, 2013
DB9:

We've seen short squeezes send companies like TSLA and GME soaring. When sourcing for ideas, what do you think of searching among companies with a high percentage of float shorted for contrarian long ideas? Is this common at all among institutional investors? When you look at shorts, do you try to stay away from stocks companies with too high a % of float shorted?

Do you see people from ER break into hedge funds directly or often take a more round about path such as long only AM first?

Thank you for your advice!

High short interest stocks as both longs and shorts scare me. On the short side, if I'm wrong I could get squeezed out of not just my position in the stock, but my job. On the long side, it's scary to think that so many people disagree with you, but it's also very exciting when you can develop an edge that gives you confidence. There's something very fulfilling about being contrarian and being right.

However, there's usually a good reason why so many are short a stock and you really need to feel confident that they're overly pessimistic, or in the best case scenario, their thesis is simply wrong.

It's easier to short a highly longed stock because there are so many passive investors on the long side who tend not to know their companies nearly as well as many shorts do.

Your second Q: I've seen plenty of direct moves from ER to hedge funds.

May 19, 2013

1. Within TMT which sector do you feel has most upside/downside over next couple of years?
2. What resources do you lean most heavily on in your research process? Sell side, expert networks, industry conferences, broker hosted conferences, corporate access, etc.

May 21, 2013
EfferCore:

1. Within TMT which sector do you feel has most upside/downside over next couple of years?
2. What resources do you lean most heavily on in your research process? Sell side, expert networks, industry conferences, broker hosted conferences, corporate access, etc.

1) Very broad question. There's a ton changing - check out some tech/media blogs and you'll see plenty of new progress as well as speculation about the future. I see continued movement to "the cloud," investments in online/mobile security, more $ being paid for content (look at what NFLX is paying for content today vs 5+ years ago), payments, big data, yada yada yada (insert a million more buzzwords).

2) I use public filings the most, by far. There are also sometimes really helpful industry journals if you're trying to learn about a technology or get a better understanding of the competitive landscape. Finally, find it really helpful to actually sit down with a management team instead of just doing a phone call or emailing IR. Expert networks, etc are nice to have, but not all funds allow for such expenses. In those cases, you have to be good at cold-calling and doing your own checks.

Sep 16, 2013

1. I think answering this question is in direct violation of my confidentiality agreement.

2. Company filings & transcripts and corporate access first and foremost. I also like to read SEC correspondences to get more color on red flags. Experts can be great, but sometimes biased. They're incentivized to tell you what you want to hear because if you find the conversation helpful and you rate them highly, they (1) are more likely to get repeat business from you and (2) will get more business from other accounts,

I basically just read/watch whatever I can get my hands on. I got solid edge on a stock by watching a random speech from years ago by one of the company's senior managers.

May 19, 2013

First off, thanks for the all the great posts.

I know you said S&T to L/S HF is unlikely and you're better off going to buyside execution, but what would be the best way to transition to HF from S&T?

May 21, 2013
rpc:

First off, thanks for the all the great posts.

I know you said S&T to L/S HF is unlikely and you're better off going to buyside execution, but what would be the best way to transition to HF from S&T?

Perhaps if you wanted to go to a macro or commodities fund you could go to a desk that traded some of the products those funds focus on. There's also probably a bunch of esoteric credit stuff (mortgage-backed securities and their derivatives, for example). Otherwise, only the prop roles that do fundamental work would position you for a HF gig.

Sep 16, 2013
rpc:

First off, thanks for the all the great posts.

I know you said S&T to L/S HF is unlikely and you're better off going to buyside execution, but what would be the best way to transition to HF from S&T?

Maybe CFA to ER or something similar? Business school? I wish I could be more helpful, but I'm not too familiar with your situation.

I would definitely start learning accounting and reading research reports, then start doing your own reports (and actually buying/selling stocks). It's a great way to learn and show passion. Then, network your ass off.

May 20, 2013

Great post, thx.
Always nice to get some information about the first years within a hedge fund!

May 20, 2013

Is it possible to transition into a PM role from a prop trading background? College monkey would like to know

I know that diamonds mean money for this art, but that's not the shape of my heart.

May 21, 2013
leonrox:

Is it possible to transition into a PM role from a prop trading background? College monkey would like to know

Depends on what kind of prop trading you do.

Sep 16, 2013
leonrox:

Is it possible to transition into a PM role from a prop trading background? College monkey would like to know

Wish I could answer that. Don't know much about PM backgrounds.

May 20, 2013

I don't mean to get too personal, but where did you go to school and what did you major in? Also, do you see moving from a back-office position at your average bank to where you are now as something feasible? If so, what would one need to pull something like that off?

May 21, 2013
Engineers3323:

I don't mean to get too personal, but where did you go to school and what did you major in? Also, do you see moving from a back-office position at your average bank to where you are now as something feasible? If so, what would one need to pull something like that off?

Not giving out personal info, although I've probably shared it somewhere in past threads.

From BO to HF is very tough. You're going to need to get a front office role in IB, ER, or something similar, bust your ass working and building contacts, and then you might have a chance.

May 20, 2013

What do you wish you had done differently in Undergrad?

May 21, 2013
golf308:

What do you wish you had done differently in Undergrad?

I wish I had more fun. I worked too hard.

Sep 16, 2013
golf308:

What do you wish you had done differently in Undergrad?

On the social side: gone out more. Built more friendships. Perhaps been a bit less of a dick at times (typical cocky college ego). Mostly, I wish I had been less risk averse and more adventurous. You have so much free time in college that you can learn about or try a great variety of things at no risk, while continuing along in your formal education.

I also wish I had read more often. Love a good book.

May 20, 2013

How do you learn how to time the markets? Even with great fundamental analysis, you probably want to know how to enter the market and get out at the right times. Are there traders with that experience to help support you on that front?

Sep 16, 2013
WSOH:

How do you learn how to time the markets? Even with great fundamental analysis, you probably want to know how to enter the market and get out at the right times. Are there traders with that experience to help support you on that front?

Good question. If you can figure out an answer, please let me know :)

There's a common motto in the industry: "you're always going to lose a a few percent/couple hundred bps when you buy a stock," meaning you'll always get unlucky/mess up your timing.

Some people use technical analysis, but I don't believe in it.

Sometimes we'll process an event more quickly or understand it better, allowing us to go long/'short the stock before the whole market catches on (made a ton of money on the stupid rumor that RSH was going bankrupt simply by calling the reporter who wrote the article). We'll look at risk/reward, try to accurately identify and predict catalysts, and really just hope for the best. Always helps to have the tides in your favor, of course. Furthermore, if you speak with enough people on the Street, you can gauge sentiment and trade on a shift in it (I've never done this with buysiders, but often do with sell-side analysts - the former is probably more of a PM thing)

May 20, 2013

Thanks for the thread. A couple of questions:

1. What region/s do you believe it would be most likely to break in as a non-target pre-MBA?

2. When you're interviewing candidates for a FT or internship, what subtle attributes are you looking for?

3. What do you like least about your job?

4. If you only had one word to describe your firm and the HF industry as a whole, what word would it be?

5. In regards to your job, what past mistakes did you do that make you cringe at today?

Thanks again.

Sep 16, 2013
madmoney15:

Thanks for the thread. A couple of questions:

1. What region/s do you believe it would be most likely to break in as a non-target pre-MBA?

2. When you're interviewing candidates for a FT or internship, what subtle attributes are you looking for?

3. What do you like least about your job?

4. If you only had one word to describe your firm and the HF industry as a whole, what word would it be?

5. In regards to your job, what past mistakes did you do that make you cringe at today?

Thanks again.

1) The guy who shows the most understanding, maturity, and hunger. However, even if you went to Wharton, you're not likely to get a good hedge fund spot. We prefer bankers/ER guys because someone else does the basic training for us.

2) Hunger, intellect, intellectual honesty and overall integrity; passion for the markets, a constant desire to improve, extremely competitive, and burning desire to win, but the ability to admit defeat and learn from mistakes.

3) The stress. Losing money and worrying about your job sucks.

4) Driven.

5) Lack of understanding in how markets trade. Over/underestimating events. Being naive. Tons of stuff, but it's normal and to be expected/

May 21, 2013

If for whatever reason, you needed to find a new position, what are the questions your would ask your new potential boss/PM to get a feel for how they think about risk, capital allocation/efficiency and research/alpha? How much stock would you put in their answers?

This question is L/S equity specific and value/growth agnostic.

May 21, 2013

Amazing thread. Thanks for doing this (again).

Not sure if this has been asked already but what is your long-term plan? What advice do you have for sell-side associates who are trying to make that buy-side move? How is recruiting structured and what do you look for in a new hire?

I know it's a pain in the ass so if you answered these already just please let me know and I'll go through the previous posts.

Sep 16, 2013
Flake:

Amazing thread. Thanks for doing this (again).

Not sure if this has been asked already but what is your long-term plan? What advice do you have for sell-side associates who are trying to make that buy-side move? How is recruiting structured and what do you look for in a new hire?

I know it's a pain in the ass so if you answered these already just please let me know and I'll go through the previous posts.

1) Stay in HFs, become a private investor, and/or run my own business (though as a wealthy investor I could have my hands in multiple enterprises).

2) Know your companies inside out. Understand how a buysider thinks. Begin talking like one. If your analyst publishes some bullshit fluff piece, feel free to talk to a trusted buysider about what you really think and why. Earn their trust as an investor and network like crazy. I've seen the transition a number of times.

3) No real structured recruiting. Hires come from (1) referrals (2) headhunters and (3) job boards, like on Bloomberg or SumZero

    • 1
Sep 23, 2013

This is great, thanks again. I'll hit you up with some SBs shortly.

May 21, 2013

Questions:

1. Can you please give a list of the online blogs you like to read? You mentioned Brone Capital, what about the macro blogs like Sober Look. FTAlphaville, etc. Any accounting blogs like Footnoted?

Are there any particular authors you like on SeekingAlpha? Where else can I gain others' perspectives on investments, that are well-thought out perspectives, in your opinion?

Thanks.

May 25, 2013

deleted

May 21, 2013

Right now, I'm at a BB working a middle office role (think risk). Assuming I'm able to get into a top MBA program, would it be feasible for me to break into a HF if I network my ass off? Aside from the typical target school to IB to HF path, what are some of the more non-traditional routes you've seen break into HFs? Thx in advance.

Sep 16, 2013
Mirando:

Right now, I'm at a BB working a middle office role (think risk). Assuming I'm able to get into a top MBA program, would it be feasible for me to break into a HF if I network my ass off? Aside from the typical target school to IB to HF path, what are some of the more non-traditional routes you've seen break into HFs? Thx in advance.

I don't really know many risk guys who have gone risk-->MBA-->HF, but perhaps it's possible if you're involved enough in school and network well enough. An IB or PE role in between sounds like it'd be more likely, but I'm honestly pretty clueless.

I've seen a ton of different paths make it. Accounting, consulting, industry roles, etc

May 21, 2013

ignore this realized it was answered earlier

May 22, 2013

General minimums for a high conviction idea? (at least x:1 upside/downside or y% upside, strong catalyst, etc.)

Sep 16, 2013
floppity:

General minimums for a high conviction idea? (at least x:1 upside/downside or y% upside, strong catalyst, etc.)

I'd take a stock with 20% upside and a 1:1 risk/reward if I were 95% sure of the catalyst and stock reaction... and that it would be happening soon. Generally, I like to see a 2:1 ratio, 25-30%+ upside (just the way my fund runs), and some catalysts to help me get there. There are no defined rules - generally comes down to a gut check after ingesting whatever pertinent information we can get our hands on.

May 22, 2013

Could you talk about computer programming skills in Hedge Funds today and what languages are popular?

Sep 16, 2013
ssg:

Could you talk about computer programming skills in Hedge Funds today and what languages are popular?

No idea. Most funds I know don't employ many engineers, and when they do, they're rarely seen or heard.

May 23, 2013

Does the work in Hedge Fund involve some travelling at your level?

Sep 16, 2013
serjik91:

Does the work in Hedge Fund involve some travelling at your level?

At least once a month.

Sep 16, 2013

Tons. At least once a month and can be upwards of weeks at a time (though typically a few days).

May 24, 2013

list of blogs you read? I saw someone asked this but you didn't answer.

Sep 16, 2013

Answered this previously. Perhaps in my first AMA thread.

May 24, 2013

Is NYU Stern a target school? what about barnard college? Thanks

Sep 16, 2013

Stern: yes, definitely. Don't know much about Barnard (good or bad).

May 24, 2013

Hi KingKong !

At the moment I have a "normal" job as a chemical engineer but want to switch to the hedge fund industry.
I'm trading the FX market quite successfully and want to find a mentor especially from a hedge fund.
I'm from Germany and have no network to the financial industry.
Can you give me a hint how to get contact to a hedge fund ?
I have no formal financial education but only a long term track record of my trading account.

Thanks in advance

Bernhard from Essen in germany

May 24, 2013

Lololololol. So you trade the FX market with your personal portfolio?

May 25, 2013
jcpenny:

Lololololol. So you trade the FX market with your personal portfolio?

Yes I do, I built up a 6 Figure portfolio during the last 5 years and want to start my own hedge fund due to
several requests.

Regards

Bernhard

Sep 16, 2013
behof:

Hi KingKong !

At the moment I have a "normal" job as a chemical engineer but want to switch to the hedge fund industry.

I'm trading the FX market quite successfully and want to find a mentor especially from a hedge fund.

I'm from Germany and have no network to the financial industry.

Can you give me a hint how to get contact to a hedge fund ?

I have no formal financial education but only a long term track record of my trading account.

Thanks in advance

Bernhard from Essen in germany

No one's going to take your personal FX trading seriously, unless you have some killer, sophisticated algorithm that can be scaled.

You're not getting a job without the right education (learn finance and accounting), growing a network, and showing that you're capable on the job. That will require starting at lesser roles and working your way up.

May 24, 2013

lololololol^

The HBS guys have MAD SWAGGER. They frequently wear their class jackets to boston bars, strutting and acting like they own the joint. They just ooze success, confidence, swagger, basically attributes of alpha males.

May 26, 2013

Thanks a lot for doing this. This is extremely insightful.

1) Several of the HF interview guides I've read have suggested that you call up employees/representatives of the stock that you're planning on pitching in order to develop further insight. Any tips/suggestions on how to approach this? I'm having a hard time seeing why anyone would want to divulge any kind of useful information to someone randomly contacting them over the phone.

2) Any general thoughts on the future of the buyside? In terms of PE, it seems that there's too much cash chasing too few opportunities and for HFs, I'm getting the impression that the 2/20 model is increasingly coming under fire due to a general weak performance by HFs vs. the broader market. Going forward, I'm slightly concerned that neither PE nor HFs are going to be as attractive a career choice as they previously were. Any thoughts on this you might have would be greatly appreciated.

Sep 16, 2013
Domino:

Thanks a lot for doing this. This is extremely insightful.

1) Several of the HF interview guides I've read have suggested that you call up employees/representatives of the stock that you're planning on pitching in order to develop further insight. Any tips/suggestions on how to approach this? I'm having a hard time seeing why anyone would want to divulge any kind of useful information to someone randomly contacting them over the phone.

2) Any general thoughts on the future of the buyside? In terms of PE, it seems that there's too much cash chasing too few opportunities and for HFs, I'm getting the impression that the 2/20 model is increasingly coming under fire due to a general weak performance by HFs vs. the broader market. Going forward, I'm slightly concerned that neither PE nor HFs are going to be as attractive a career choice as they previously were. Any thoughts on this you might have would be greatly appreciated.

1) I always address them by their name. A person's name is precious to them and they're almost always going to become warmer immediately after hearing it in a kind tone. Other than that, I try to probe them discretely either as a customer, blogger, whatever. I either try to get quantifiable information (hard), or ideas on what's working and what's not.

2a) 2/20 will persist at large funds. Fund flows have been disproportionately going to large funds for a long time and it appears that they will continue to do so. Small funds compete by lowering fees.

2b) Agree that there's too much money in PE chasing the same deals. Not sure how they sort through this mess, but then again I'm not well-informed on the industry.

May 26, 2013

I am surprised that no one asked this yet. Since this is all anonymous, I am hoping you would be open about your comp. Can you pls share your base and bonus numbers for the last few years. If you don't want to give the exact numbers, ranges would be helpful as well.

May 27, 2013
stern2005:

I am surprised that no one asked this yet. Since this is all anonymous, I am hoping you would be open about your comp. Can you pls share your base and bonus numbers for the last few years. If you don't want to give the exact numbers, ranges would be helpful as well.

No one may have asked literally for his comp and base split, but he already talked about comp. Read through the thread. It was mentioned earlier. He gave general numbers for first and second year analysts I think it was.

Sep 16, 2013
stern2005:

I am surprised that no one asked this yet. Since this is all anonymous, I am hoping you would be open about your comp. Can you pls share your base and bonus numbers for the last few years. If you don't want to give the exact numbers, ranges would be helpful as well.

I won't disclose mine, but the industry as a whole is highly variable. Large funds will pay you ~120-160 base and low 200s to mid 300s all-in. Could be a lot lower if (1) your fund is doing poorly (2) your boss is cheap or (3) you're getting a stub bonus, even adjusted on an annual basis. From there on out, it starts depending far more on your and the fund's performance. 400 second year at large funds isn't that rare. I've seen higher, though I've also seen lower.

May 26, 2013

First thanks a lot for the info and the time you spend answering all these questions.

Is there any particular service (apart from Bloomberg's Terminal) that you'd recommend for complex screens and generally data digging? I currently use Morningstar but I'm looking for something more detailed and with a broader set of criteria (for screens).

Thanks again for your time answering this.

Sep 16, 2013
Gregory V:

First thanks a lot for the info and the time you spend answering all these questions.

Is there any particular service (apart from Bloomberg's Terminal) that you'd recommend for complex screens and generally data digging? I currently use Morningstar but I'm looking for something more detailed and with a broader set of criteria (for screens).

Thanks again for your time answering this.

Bloomberg, factset, and capiq are all helpful. Might be others that I'm unaware of. Wish I could be of more help.

May 26, 2013

Great information here, thanks for doing this.

"When you stop striving for perfection, you might as well be dead."

Jun 18, 2013

I'm so late. Do you see value in publishing estimates on sites like Estimize and Sumzero, not in a resume building sense but to just contribute to the buyside consensus?

Sep 16, 2013
cacook:

I'm so late. Do you see value in publishing estimates on sites like Estimize and Sumzero, not in a resume building sense but to just contribute to the buyside consensus?

I don't really pay attention to estimates. Appears to be a tiny sample set (at least on SZ). However, I enjoy reading writeups on SZ and valueinvestorsclub.

Sep 22, 2013

If I end up at say HYPS or Columbia or Dartmouth, will it matter whether I'm an engineering major or economics major?

"Hold on a sec...you mean they made all this money without doing IB --> PE --> HBS --> PE --> God?
How is this possible?!?!?!!??" - TheKing

Sep 22, 2013

Economics will likely get you a higher gpa and higher likelihood of getting an IB job, which will then help get you interviews at HFs.

Sep 23, 2013

my high school background is mostly engineering though, should i just get in as one then change to economics?

Edit: jeez where are my manners... thanks for replying in the first place :D

"Hold on a sec...you mean they made all this money without doing IB --> PE --> HBS --> PE --> God?
How is this possible?!?!?!!??" - TheKing

Oct 1, 2013

Haven't been able to read the entire thread yet so hopefully this hasnt been asked.

If I went to a non-target (Fresno State) and graduated with a decent GPA 3.5-3.6 with a degree in Business Finance, whats the value of getting a MBA from a significantly better college? I know I'm not getting into harvard but what about a school like UC San Diego? Basically anything will be better than Fresno State. Bottom line I guess is how do hedge funds value MBA degrees? And would it be a waste of time?

Oct 1, 2013
Early Retirement:

Haven't been able to read the entire thread yet so hopefully this hasnt been asked.

If I went to a non-target (Fresno State) and graduated with a decent GPA 3.5-3.6 with a degree in Business Finance, whats the value of getting a MBA from a significantly better college? I know I'm not getting into harvard but what about a school like UC San Diego? Basically anything will be better than Fresno State. Bottom line I guess is how do hedge funds value MBA degrees? And would it be a waste of time?

HFs care about experience. If you are able to get good roles out of college and continue building on your career, you have a chance. College name alone won't get you anywhere unless you go to a top school (M7) and, even then, there will be limited HF roles available. Furthermore, candidates with experience will get those roles, not someone without it. HFs will train an analyst to invest, not to build models or understand financial statements, though you'll get better at both with time. The best feeders to HFs are investment banking and equity research.

Oct 1, 2013

Hi, thanks for doing this.

My question: A lot of guys / gals I know of in PE (at the Associate level) make the move to HF after their 2 year Associate stints instead of B-School. Have you worked with folks with this background and how have they generally performed? Has their PE backgrounds been beneficial from your perspective?

Oct 1, 2013
Stringer Bell:

Hi, thanks for doing this.

My question: A lot of guys / gals I know of in PE (at the Associate level) make the move to HF after their 2 year Associate stints instead of B-School. Have you worked with folks with this background and how have they generally performed? Has their PE backgrounds been beneficial from your perspective?

Depending on background, they have a pretty easy path to a HF role. Some perform well and others don't. Hard to say anything definitively. The one major issue I've seen is that they struggle to work autonomously, after spending 4 years as direct reports who often had superiors tell them exactly what needed to be done. At a HF, the work you do for one company may be entirely different from the work you do for another. Furthermore, you have less information to work with and have to be able to think outside the box. Some people struggle, others adapt. I don't know of any stats off-hand of who succeeds and who doesn't.

Oct 1, 2013

Is it possible for a Fund of hedge funds analyst to lateral to a hedge fund? Thanks for doing this.

Oct 1, 2013
Crame:

Is it possible for a Fund of hedge funds analyst to lateral to a hedge fund? Thanks for doing this.

Never heard of it since you don't have a modeling/business analysis background. If I understand correctly, you only look at managers/funds, which isn't a transferable skillset. Makes more sense to go to IB/ER first. Or get CFA. Or do anything that helps make you more marketable and network, network, network.

Oct 1, 2013

1) How do you assess the chance from getting into a HF from the Buy-Side at a BB?
2) Would you recommend to start at a big Asset Mgmt firm to then join a HF later?
3) What kind of literature would you personally - in addition of WSO suggestions - recommend for a current student who wants to break into a HF eventually?

Oct 1, 2013
Nerquin:

1) How do you assess the chance from getting into a HF from the Buy-Side at a BB?

2) Would you recommend to start at a big Asset Mgmt firm to then join a HF later?

3) What kind of literature would you personally - in addition of WSO suggestions - recommend for a current student who wants to break into a HF eventually?

1) How do you assess the odds of the final score of a game between two professional athletic teams, including who wins and who loses? There are models that do their best to guess, but from an unsophisticated standpoint, if an expert must make a gut judgement, they think about:

A) History: what's the historical performance of the teams? In other words, how have individuals with your background typically fared?

B) Current trends and differences: maybe team A has a key injured starter or team B has had an unknown player explode into prominence. You may start at Y bank in Z group and history may say that you won't get a HF role, but you have some quality or qualities defined by "X" that allow you to separate yourself from the pack. It's that X factor that can allow you to win even as the underdog.

C) Motivations: is team A's motivation impacted because they've secured a top spot or perhaps are in last place in their conference with no chance of moving up? Is team B's coach going to get fired if he doesn't win? Do players have contracts expiring and need to maximize their value in negotiations next year? Or, even more critically, is this a must-win game for Team B so they're all the more driven to succeed? Some people who claim to be interested in HFs don't try hard because they don't believe they'll be able to secure a position, or perhaps their desire isn't genuine. The most successful ones have had a mindset that screams "I want THIS and nothing else. I WILL get there no matter what it takes. Failure is not an option."

Those are the guys who are out there researching ideas, networking with existing HF employees, getting their hands on experienced professionals' ideas & absorbing their methodologies, perfecting their interviewing, and generally excelling in their jobs such that they impress superiors enough for genuinely compelling recommendations. These guys go into interviews and come across as so hungry that they're starving. These guys love talking about ideas even if they have no background on the specific companies - they are curious, love to learn, and desperately want to succeed as investors.

Can you be one of those guys?

The chances depend largely on you. It helps tremendously to come from a program with great placement, but if you're determined enough you can overcome some challenging odds. Have, act on, and share that burning desire to become an investor and heads will turn. They will want you working for them.

2) I would ideally recommend investment banking (or, if you can't do that, ER is an option too) for a year or two before jumping to a hedge fund. Investment bankers tend to have the best pedigrees (vs. ER or AM), so that's where headhunters and HFs often look for recruits.

Furthermore, AMs are highly variable. You may go to a shitty AM where you have to cover far too many companies at once, ending up as someone who would be useless as a HF analyst. Your time constraints would turn you into someone who can't do a deep dive on a company and understand what makes for a great short or great long. Therefore, you'd be difficult to justify hiring and you'd also likely be a subpar interviewer. Again, this is fixable if you spend your free time getting good at the things that you need to excel at to be a good HF analyst.

I have a friend working at a mutual fund who creates robust models and does deep dives on companies in his free time because he's so determined to go to a HF. He wants to be qualified and he wants to show them that he's hungry. Those are very attractive qualities in an analyst.

3) I would say study up on accounting and then also google/search for book recommendations from HF managers or any official HF lists (this is list put together by Blue Ridge, one of the best and most respected HFs in the world: http://www.marketfolly.com/2009/05/blue-ridge-capi...).

What would be really impressive from a young prospective analyst is someone who can piece together a good short. The Art of Short Selling and Financial Shenanigans are both good books. The latter is particularly helpful because it helps expand your accounting skillset.

Read analyst research (preferably from good HF/MF analysts like on sumzero.com or valueinvestorsclub.com). And then just practice writeups when you can. Do deep dives, build models, and make recommendations. Track your progress over time. Even better, invest your own money based on your research. You'll be extremely engaged and you'll learn a ton. You can also publish your research on those sites and get feedback. If it turns out that you do good work based on responses online, you can then reach out to HFs with your recommendations and impress them with your initiative and talent, leading to constructive conversations that can build to some great relationships and jobs.

There are too many good books already recommended out there, that it's unfair of me to suggest that I have something meaningfully better up my sleeves. I only recommend that you focus on books that help your skillset (accounting and investment analysis) or your mindset (helping you think more like an investor than a banker or whatever your job may be).

    • 2
Oct 1, 2013

Thank you so much for doing this!

My questions (if you've already answered a question, please just state that and I'll search in the thread):

1) what is the time horizon of wich your firms cares about the fund's performance? E.g. do you try to be up every month/quarter with your positions at all price, or do you say well, the current position will hurt the monthly PnL but is likely to turn around and improve the year-end performance, so I hold the position.

2) how do you typically hedge a long/short position?

3) how do the uncertainties in the current market and political environment (US budget, European debt, tapering etc.) affect your idea generation process?

4) how do you make sure that you haven't missed any important information on a position before taking it?

5) does the analyst work prepare you for a potential later pm role?

Much appreciated!

Oct 1, 2013
Space_Marine:

Thank you so much for doing this!

My questions (if you've already answered a question, please just state that and I'll search in the thread):

1) what is the time horizon of wich your firms cares about the fund's performance? E.g. do you try to be up every month/quarter with your positions at all price, or do you say well, the current position will hurt the monthly PnL but is likely to turn around and improve the year-end performance, so I hold the position.

2) how do you typically hedge a long/short position?

3) how do the uncertainties in the current market and political environment (US budget, European debt, tapering etc.) affect your idea generation process?

4) how do you make sure that you haven't missed any important information on a position before taking it?

5) does the analyst work prepare you for a potential later pm role?

Much appreciated!

1) Some guys care about performance #s every day, but typically you get judged by quarters in the near term and annuals in the long-term. I'm more of a long-term oriented guy myself.

Would we hold a stock if we believed it was going down the next month but then up later in the year? No, most likely not, assuming reasonable liquidity.

If you had a very firm belief that a stock was going to go down over the next month based on something you've uncovered and the market hasn't, but soon will, then you would either get out of your position or reduce it as much as possible without alerting others. You can even hedge with puts while you wind down and profit off of those if your thesis plays out. You may also short the stock if you fully get out of it.

How long do we hold a position? Depends on why we own it. If there's a secular theme we're playing for and buy a company at a cheap price that's a strong earnings/cash flow compounder, with a great management team, high and improving ROIC, and top-line & margin stability due to some competitive moat (and the secular trend), then we'll likely trade in/out far less because we'll likely make it a big position so it's hard to move our stake meaningfully without moving the market.

In those scenarios, we expect investors to eventually take notice of strong earnings outperformance, the creation of a steady track record (this was an issue post-crash), and start paying more for steady growth allocated to high return projects or returned to shareholders by a top notch management team. For example, see WYN performance since the crisis. Great team that grew EBITDA & cash flow, monetized assets with hidden value, returned capital to shareholders, and improved its business model to significantly reduce risk and expand capital returns. The stock is up ~15x since the bottom (from memory).

Essentially, if we've discovered great value others haven't, we'll be more patient, but you'd typically prefer a catalyst that either unlocks that value or guides others to it. You also have to hope that in the latter scenario the market buys into the value of the "hidden gems."

2) Market hedges, ETF hedges, industry hedges, basket hedges, or sometimes individual hedges (particularly in M&A).

3) They don't. The process stays same. You tend to be more risk averse, though. Furthermore, you're going to be buying different kinds of stocks if you believe there's a moderate growth environment vs. a high growth environment. In a high growth environment, I'd buy stocks with tons of cyclicality and operating leverage. I don't necessary want to own that guy if growth is slow.

4) Do as much research as possible.

5) Somewhat. It's a very different role. At a bigger fund, a PM is never doing deep dives - they're instead relying on analysts and thinking more big picture. Portfolio management is very different from picking a stock. You have to think more thematically and figure out how each stock fits that theme and affects the risk/reward/volatility of your overall book. Many people end up as career analysis, or break off and start their own funds to try the PM thing out. There are also funds like SAC, Surveyor (Citadel) and Millenium which are different in that they give successful analysts a little bit of money to run as PMs and then give them more/less based on their performance. A lot of the more successful guys have gone on to PM roles elsewhere or started their own funds.

Oct 1, 2013

What are your average hours daily/weekly?
How long do you think you're going to stay in HF?

Once I did bad and that I heard ever. Twice I did good and that I heard never.

Oct 2, 2013
IBNazi:

What are your average hours daily/weekly?

How long do you think you're going to stay in HF?

Most people are putting in 50-60 hours a week, though some sweatshops require 80 hours a week, meaning you're often working a full day on the weekend as well.

Most analysts tend to want to stay in HFs for life.

    • 1
Oct 1, 2013

I'm a someone who only has a distance learning degree, no internship experience. What kind of specific skills should I pick up to get into the same role as you?

Oct 2, 2013
chronotes:

I'm a someone who only has a distance learning degree, no internship experience. What kind of specific skills should I pick up to get into the same role as you?

You're better off getting real work experience, moving into banking, and then going for HFs. I've talked about the skills you need on numerous occasions throughout this thread.

Oct 2, 2013

How common is it for an ER guy covering a sector switch to HF?

Oct 2, 2013
ERenthusiast:

How common is it for an ER guy covering a sector switch to HF?

Very common

Oct 2, 2013

I imagine this is less common, but do many guys from structured finance make the switch to HF?

Oct 2, 2013

Thanks for doing this, I enjoyed reading the responses in your thread. I have several questions as a fellow practitioner that I think about frequently and I would love to get your opinion if you're able to comment. Thanks in advance for any helpful comments. BlackHat and others should feel free to comment as well if they want.

Also, I'm not sure these questions have an objectively best answer, they are pretty open-ended IMO.

Four questions:

1) If you look at the average long / short fund, they are screening in much the same way, e.g., high ROIC, low P/E, and other commodity data metrics, etc. You implied above (I think) that you are (at least sometimes) looking at these metrics on a mean-reversion basis which I agree can be an advantage in some cases if applied correctly (mean reversion, in general, works in the stock market). What's interesting to me here is that if most fundamental funds are looking at the same metrics, then by implication to want to play this game you must think you are smarter than the other participants doing the same thing. Do you think you can be sustainably smarter than a group of very smart and driven people? What do you do better than your competitors?

2) Are there any example strategies you can think of that avoid being a participant in Wall Street's foot race in the market (e.g., all running the same race, faster runner wins)? Seems like a good idea if I'm Usain Bolt, otherwise I don't love it as a concept. What factors / strategies / etc. negate the need to be smarter than everyone else? What happens when you realize that even if you are Usain Bolt, RenTech has a Cyborg Badass Runner that will lap you in the 800 meter dash?

3) Related to the above, is your goal to be smarter than everyone else in the market on the specific stocks you follow? When is your research effort "enough"? How do you balance being part of a fund that presumably holds roughly 30 stocks or something like that (I'm guessing based on what I read) vs. a fund that holds 200 positions or a fund that holds only 5 positions. Which of these fund structures is optimal?

4) What is your fund's average holding period and how soon do you need to be considered "right" (based on price) before you need to start thinking about exiting the position? Are you looking to have the stock move favorably within one week, one month, one quarter, etc. after purchase? If the stock goes down on "no news" (as stocks can annoyingly do), do you buy more, sell, freak out, etc.?

Oct 5, 2013