Analyst Turning it Around at HF
The hit rate on ideas in the cash book has been bad over the last two months in a subsector. It’s been trending better but still can’t seem to make money in the cash book.
What are some tips to turn it around? My PM is on my case and it feels like a detriment rather than a benefit. For what it’s worth my mock portfolio at the firm is generating PNL.
The blame is on both my PM and I but I can’t help but feel like being profitable in the mock book the firm tracks makes me think it’s less my fault.
This isn't on you. Your PM clearly doesn't have a good process they have built upon. My best advice is to use the opportunity to get more responsibility for resume building (if needed) and look elsewhere. No one is going to look at you poorly for being at an ill performing fund if you can get through the interviews.
OP is not sharing pivotal info. If his fund is performing, and his competition (within and outside the fund) is performing, then he could be the problem. Nobody cares about a mock book, and a PM can’t teach someone to perform recommendation-wise. Even if the former 2 questions/factors are a “No”, and OP’s recommendations have a 100% success rate, there is still the question of “can OP pitch/communicate effectively or is that costing alpha?”. Because hindsight is 20/20, but nobody has a crystal ball to predict the future.
I was under the impression ideas not hitting the cash book meant the fund wasn’t performing well. I don’t know what it’s like under a fundamental PM. The trades we are interested in are more quantitatively analyzed in a way both the PM and I agree makes sense.
I am gonna be the dick here and say what I think is the truth.
1) Nobody cares about your mock book. not at all comparable with a real book. You gotta factor in stress, uncertainty, and a bunch of other stuff that you only get from actually having skin in the game. I had a mock book once, and it was a radically different experience to actually allocating in my sector within my PMs book. Other gurus like Pabrai say the same thing.
2) Your PM could be to blame since the buck stops with him, but ask yourself: is anyone else comparable to you being able to perform (within and outside the fund)? Are you costing alpha because you get wrong ideas (they underperform, or your recommendations just go tits up/go wrong?) or because you are not being able to communicate/pitch and convince your PM effectively?
3) It could very well be your PM is stressed and you end up being caught in the blast range. If he is only stressed towards you though, it is a you problem (regardless of whether it is merited or not).
Bottom-line: It could be that the PM is the root of the problem, but that doesn’t matter since you’re in it too. Do you think your PM is more expendable than you? Do you think that, should they fire your PM, they would maintain the same team?
Either figure out what’s wrong and try to fix it, have a conversation with him as to how and where you can improve, or start looking for something else cause it may seem your days are numbered.
I think the advice above is bang on. Will only add one thing; calm the eff down. If has been 2 months. This is the gig you chose and life that comes with it. Everyone is going to ride you and frustrate your team cause you are not performing. Does not mean you have to cave to that pressure.
Thinking your mock book is performing but cash book failing is effing cancerous stop that shit right now.
Grab your PM talk it over, adjust, say eff off management and lets crush this thing. 1 month of good performance all be forgotten. This is the nature of the life.
Also if anyone ever started an interview “with we failed, but my mock book…” Yah that would be red flag city.
Yeah, this post rubbed me the wrong way as well. The way you turn things around is to be of value and take ownership of the book. Re-underwrite your positions. Be proactive and start making recommendations to the PM to cut out of positions, add to positions, or do nothing. If he doesn't agree but you feel that you are right, this is the time to pound the table. In the end, you guys are a team.
Thanks everyone. I only brought up the mock book as it’s been dangled by management that a good track record there is viewed favorably in the future. I’m not talking about running net 50% long with NVDA as a top position either. I really do try to manage it like a real book on a day to day basis, but your point on it being different vs. a real book is taken.
What I was really hoping to hear was what people have done after encountering a dry spell? I’m trying to underwrite all ideas with more frequency and paying closer attention to avoiding crowded trades.
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