Are there any good tiger cubs or single managers in general left? If so, what funds?
This is meant to be a discussion of well-performing SM funds with solid investment processes, if people know of any. Don’t be afraid to name funds where it may be difficult to get a seat at or funds that rarely hire. This is not meant to be a discussion of why MMs or LOs are the way to go or how the SM industry is dying. Thank you very much.
TCI
Edit: you’re a joke if you think TCI isn’t a top SM.
Why the ms wtf?
TCI isn't just a top single manager. I would say it is the top single manager.
I would take a job at TCI over any other top fund.
Agreed. Tell that to the folks throwing ms that probably still think working at tiger global is a better gig
TCI is the single best SM ever.
Isn't TCI a LO shop?
Activist investor.
Slate path capital
Any reasoning?
he prob interned there
No I’m an analyst ignore title. Just a place with 5bn+ AUM that take a along term view, has performed above index, and has interesting names in 13f.
Junto, Electron, Palestra, Contour are all solid and don’t get a ton of attention on WSO
Is junto a sm? aren't they MM
SM but believe the run market neutral. Viking spin.
Gladstone
Cadian
Maplelane
Junto
Palestra
Jericho
Ilex: they haven't fully scaled yet and are still raising, but I think they're going to knock it out of the park. Reminds of Melvin many years ago, which was once the best SM seat.
Permian
Marshall Wace: not a SM, but not a traditional MM, I just think it's an excellent firm
The analysts I know at each of these genuinely care, go the extra mile, and do fantastic research. And they've done really well.
LP here who has seen the returns of a few of these places, met with some people at these shops..
Gladstone is meh at best returnwise last I saw. The CIO Michelakis is terrible to work for with high turnover. I had to sit next to him at a dinner. Ugh. Great chess player.
Cadian - the intramonth gross and net swings are wild
Ilex is hard closed unless you are some super preftigious E&F LP.
The rest I would have to check. But this is just an LP's take. I've never seen the inside of these shops (and used to trade myself) so YMMV.,
Any new fund launches to watch for Q4 2024/1H 2025?
Gladstone culture is not great but he pays well and they do fantastic work, you can't deny that. Cadian - I don't really know how their CIO runs things, speaking from perspective of the analysts I know. Ilex is closed, but already at $4bn 18 months in, and wouldn't shock me if they're at 10+ in a few years. He's a killer
Curious what are some of the promising firms from LP's perspective? Especially the emerging ones with potential
I heard in asset allocators' world there are consensus emerging managers perform better than established ones? I was wondering what's the reason behind this? This seems to be against the consensus on WSO that the best is in $2-10bn range?
Also if you could please clarify what's the AUM definition of emerging managers ($100m+ or $500m)? what's the definition of established ones? $5bn is considered established?
Would second this post. While I can’t speak to all the individual names, the best SM’s from my observation tend to be in the 2-8bn range, where they are big enough to provide meaningful economics but small enough that they are not hindered by size and are still fundamentally incentivized to be returns-driven investors, not asset collectors.
If you are interested in working for an SM as a junior, you should look for a few different things.
1. Learning Opportunity - the single most important thing as a junior. Your future in this industry is dependent on you learning the right skill set to become a successful investor. Join a shop with actual quality of process and research, where they have indicated interest in mentoring you. I have the belief that smaller shops which hire and fire less frequently tend to invest more in their new hires as the cost of failure of a new hire is much larger for them than it is for a more institutionalized fund.
2. Fund Outlook - Do research on the fund. Make sure they have good returns. Make sure the PM has good returns. Look at how they actually drive alpha. How much of their returns do you think are beta, how net long are they?? How are they picking stocks? Did they just get lucky? Look at their past holdings and decide for yourself if you think their returns are replicable and they have a real process.
3. Comp/Culture - Generally goes hand in hand. At a SM, they can pay you whatever they want. This can be terrible but there are SMs out there still paying similar to what Melvin was paying. Make sure the PM is willing to pay his employees. Generally, I’ve noticed this goes hand in hand with being a good person. Culture flows from the top and you want the PM to exhibit the characteristics you want in the fund.
This is great advice, I have a few follow-up questions:
1. I generally found smaller shop takes stronger interests in mentoring people. But what's the threshold of AUM cut would you say is large enough to join? $500m? $300m too small?
2. How do you tell if a smaller firm has potential to scale up? Or more broadly speaking, what is required to scale in today's world?
3. Do you have any advice on where / how to research returns on the fund? It's usually not public or do you at the end of interview to ask them for marketing documents, etc.? I don't feel very comfortable asking at beginning as I felt it's like asking "how much money you make"...
4. Also on comp, if it's P&L linked it's fine, but for SM funds without good individual performance tracking, how do you figure out if PM pays? I felt PMs generally don't want to talk about long-term comps trajectory. I guess it's understandable because it's all performance driven and it's hard for them to tell...
what was melvin paying?
Coatue
bad pay
really?
These change all the time
SMs are disadvantaged in every aspect of the investment process. It's hard to fathom. LPs are catching on.
To justify solely investing in MMs, a LP once said to me: "if I invest in millennium, the risk team is on my side. If I invest in a single manager, the risk team is on the CIOs side."
That always stuck with me.
Bro didn’t read the prompt
How is MM performance outside of Citadel and Millennium? How much are scalable are those platforms?
That’s certainly not true as someone who has worked at both. The incentive structure is certainly more aligned, on fee per dollar of alpha go LP. The diversification and risk model mean basically the fund does manager selection for the allocator. And the result is low vol and reliable which is attractive for many institutions. But some LPs can tolerate vol and want higher returns, or they believe they can select great managers - similarly to some how some people believe they can pick stocks and earn more than indexing. Most can’t do that. Some can. The attribution is fuzzier in non-mkt-neutrals, so it can be hard to separate manager selection vs luck, or whether those factor/beta tilts you’re paying SM for were luck or inefficiency. It’s also hard to pick stocks vs indexing, and more people think they can than actually can. That doesn’t change the fact that the highest returning funds, net of fees are still single managers. Finally, while MMs can deliver some alpha at lower fees, the way they do that constrains them to particular types. They can’t rehabilitate a commercial building, run an activist campaign, etc. all those things also have directional exposure to rates/beta and don’t have robust attribution of skill vs luck, but they still make money and with MMs close to capacity, they’re rolling LPs into long and illiquid lockups which are effectively a transfer of economics back to the GP from LP. I agree MMs are the best at doing what MMs do, which is generally attractive to LP mandates, but not always and it’s capacity limited either way. Also from an investment professional side, much of advantage comes from the scale of the mothership, which enables easier capital access & alpha generation for an equally skilled PM. That PMs payout is substantially lower (via onerous mandate, no management fee, front running, back-books & low duration).
The MM model is incredible for the scaled MM founder - which is useless observation noone here or maybe anywhere can recreate it. For LPs it addresses a certain type of return stream more efficiently, but that’s not the only attractive return profile and its capacity limited anyway. For investment professionals, it offers faster access to more capital in exchange for a much more onerous and difficult mandate. In general the market is pretty efficient SM vs MM for LPs and IPs, people who think otherwise (insinuating they’ve figured out some truth all the stupid endowments and investors are missing) don’t really understand the broad landscape of priorities which are served by the broad landscape of investment models.
Common sense perspective!
"But some LPs can tolerate vol and want higher returns."
Don't disagree here. You haven't heard of portable alpha? Competent LPs can construct their portfolio to target any vol they desire. They outsource their alpha generation to MMs and replicate beta for free. You get higher returns than benchmark at lower volatility as long as your MM delivers.
"That doesn’t change the fact that the highest returning funds, net of fees are still single managers"
Which SMs have delivered high returns for more than 1 cycle? Outperformed S&P? If you want the *highest returns*, see above. Portable alpha is the answer.
95% of SMs are closet beta vehicles. In a decade, no-one will pay 2/20 for that.
It's already happening. The old allocator guard is being replaced with younger quantitative MFE/CFAs who are able to run a risk attribution.
For e.g., Canadian and ME pensions are already staffed with sophisticated allocators. The US LPs are behind but catching up.
What risk attribution are they doing that wasn’t done by the old guard? Genuinely curious because factor/beta isolation has been around for decade plus
Risk attribution is nothing new. Rather just an increasingly bigger weight and focus in manager selection in the last decade.
A star SM manager used to raise based on his/her fame and reputation despite the #s. That is no longer the case.
I have friends who are external allocators at several large pensions and endowments. The GPs / managers will remain unnamed -- but they turned down many of the star managers that everyone on this board admires because the statistics said to.
You're like 5 years too late, minimum. Capital already left the SM space. For those left it's actually a slightly better environment. Also SM doesn't mean net is 100%, and any fund worth anything markets on sharpe at least in part
This is so true and something no one here realizes. Money has already left the space and the well performing SMs I speak with tell me it’s easier because there’s less people doing true long term investing.
Thanks for sharing. 2022 accelerated the exodus.
Easier lately? That hasn't been the experience of my network at SMs. A couple friends work at top decile funds (last 5 years) and have trouble raising capital. Actually experiencing outflows.
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