Intellectual Stimulation at MMHF’s
Will be joining a MMHF this summer as an intern and was wondering how intellectually stimulating the work is on a day to day basis.
https://www.buysidehustle.com/life-on-the-buyside…
After reading a few articles I’ve begun to second guess myself on how enjoyable the work will be. I enjoy investing, but this article seems to paint the experience in a pretty negative light. I understand and knew beforehand that the style was short term, but at the same time, I was still expecting something that I would enjoy doing.
Im in the same boat. From what I’ve heard, compared to IBD/PE work it will be very intellectually stimulating but the short term-nature of the funds’ strategy means you’re more trading than you are investing. Often missing the big picture and not really doing either of value or growth investing like many of us imagined working at HF would entail.
Obviously haven’t interned yet, and the beginning will be very stimulating, but I’ve heard a lot of analysts want to move out into some smaller single manager funds with more interesting investing styles since they felt they weren’t intellectually being pushed anymore and a large part of their PMs’ “alpha” generation process got monotonous when having to checking up between quarters.
I think this comes from the MMHF style of investing not really being investing in the first place?
It's only "investing" when you start by losing money, do I have it right?
It isn’t a loss til it’s realized
Well clearly you haven’t been paying attention to this forum! Point72 >> Lone Pine > Blackstone!!11!!1!! /s
Lmao ANYTHING compared to IB/ PE is intellectually stimulating
I worked at a top MMHF for a c.1 yr before leaving for another fund (very different strategy). I rotated across quite a few pods so I'll try and explain what you should expect and how I found it (in general but every pod is very different!)
Forget being an intern as its not super relevant, but let's start with what you should expect to do as a junior Associate/Analyst and then how that should progress at one of these funds (this is for L/S eq btw):
Depending on the size of your pod, you will either be helping your PM/Sr Analyst with the names they cover (if it’s a small pod that only covers 30-50 names). If it’s a large pod (each analyst covering certain stocks in a subsector) then you will be allocated a few stocks that you should start ramping up on gradually, with the goal of fully initiating on these names within your first year. Fully initiating = these are now your stocks, and you will be the major driver behind them (alongside the PM of course)
You are neither a “true” investor nor a trader at one of these funds - you are almost always something in between. The best way to describe what you are doing is that you will be using fundamental analysis (alongside other alternative ways of analysis) to determine what your coverage stocks will do in the next quarter and how you want to be positioned for them.
For the initial work you will be doing, this is the most fun part if you are passionate about actual investing/learning about new businesses, as you are ramping up on new names by pretty much knowing everything about them. Ramping up includes speaking with sell side, reading all research reports and all their releases, creating your model, speaking with industry experts, etc. For the model, you’ll usually start by inputting the historical financials in accordance with how the company reports for ease when they report in the future (can be quite tedious), then you will start creating your own summary/model tab which has whatever analysis you want.
After ramping up on the new names and knowing everything about them (literally everything) you can now initiate on these names. This is when the job got extremely boring for me, as you aren’t thinking about the bigger picture, you don’t care about the company as an investment. All you care about is what the STOCK will do in the next quarter, something which could be influenced by a variety of factors such as missing/beating earnings, macro, etc. A lot of your work here will be trying to narrow down something like if they will beat or miss earnings, and you can do this by having a very detailed bottoms up build for their costs or by having alternative data such as credit cards (a little outdated but you get the idea). You will also think about how the market is positioned, factors, etc which will influence how you will be positioned before the print. You will rinse and repeat this for the foreseeable future (which makes the job extremely monotonous as all you do is update your models, speak to IR for guidance etc.
What I described in last paragraph is what made me sort of hate the job. Ramping up on your new names and having complete autonomy over your schedule is amazing at first, but then once you start doing the actual job, it gets boring extremely quickly if you are passionate about investing/deep fundamental research, as it’s the farthest thing from that. If you are someone who is motivated by competitiveness of public markets (and of course the money) then maybe you might find it fun from that aspect (it also helps if you aren't too focused on making your entire life revolve around your job). If you are getting in because you are truly passionate about investing, then this is most definitely not the right fit for you (PE, LO, SM is a much better fit).
See the below post from a good fintwit account regarding life at a MMHF - Will be helpful to further illustrate your day-to-day: https://twitter.com/bucketshopcap/status/1623085815155896322?s=46&t=ZZZ…
There is nothing wrong with what I described above, some people love it and make a lot of money doing so. You just have to be honest about what motivates/drives you in life to get an answer if the MM life is for you.
This is just an overview but happy to expand more if you have any questions.
Above poster focuses on something I think encapsulates the MM strategy. You’re studying stocks rather than businesses. They’re different.
Exactly. There's an interview with Bezos & Rubenstein where Bezos touches on this/ a similar point in depth - attached link if anyone wants to have a listen to the specific point
This is a great overview. How has the new role been for you? Guessing it’s LO or SM? How did you think about joining a LO or SM in this environment (i.e., secular decline of SM and LO vs. MM pods) and how did you diligence the new opportunity?
Actually my new role is with a cross-cap stack activist/distressed SS fund, so very different from vanilla L/S eq. I need the adrenaline rush in my day to day life of everyone constantly trying to fuck me over.
Apart from all the points mentioned above, stock picking (whether at a MM or at SM/LO ) is suitable for people who are more on the introverted side (on average), and don't really care if they have any impact/influence on whatever they are getting involved in. This was one of the reasons why I chose to go to my current fund amongst other reasons
Thanks a lot for your insightful write-up. Mind if I ask how you were able to transition to the fund you’re at now given the difference in strategy? Did you have IB/PE or other specific experience prior to the L/S stint that allowed you to get looks for that role? Thanks
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