Are we at peak pod shop?
Before all the MM bois come shout at me (levered beta etc, lazy LOs etc etc) let me say first that I have immense respect for what the MMs have done and the return they put up. Ken Griffin is a true pioneer.
Now, after a post here that questioned the SM's reason to exist, certain conversations on fintwit and a recent podcast with the seawolf cap guys, I am starting to think we might be at peak pod shop.
A market neutral, mega levered strategy coupled with stressed out, sharp, vampire analysts makes a ton of sense. But at current scale I think it presents an issue for most market participants, and an opportunity for longer duration LO guys that can see through the noise and go back to the fundamentals.
This is because between passive, quants and pods, the amount of capital that really cares about valuations is really a minority at the moment, and you have a mountain of capital with the same strategy of following momentum, calling quarters and other short term trading strategies. A lot of capital now looks at stocks rather than looking at businesses. Which is totally sensible, but at this scale might be problematic. Look at coinbase, a nothingburger business which is running an illegal operation, up well above >100% YTD.
Couple the above with the outsized fees and comp the MMHFs require and I don't know, feels quite toppy to me, and opens up the door for longer term focused investors that are truly able to pick up good companies.
Not sure, but we are at the peak of:
Disagree, we are at a evolution in what IPs expect from founders and how to net/manage risk across various asset classes. Many SMs will start to move towards more of a multi-strategy setup soon.
Fair enough, just giving a different perspective. Think another thread mentioned how SM is just an organizational format truly. When I entered the industry, we were coming off a time where Macro SMs had formed like crazy in the prior 5 years mostly from former heads of bank prop desks. Then during a 5 year grind it became clear many SM firms were netting employees, many people we’re truly not that good and founders stopped even paying a 5yoe analyst even a %book. Now in the last 5 years as macro vol has picked up the MMs have been ahead of the curve and structured things differently where talent/LPs are happy.
Another example, Citadel the gold standard MM as we all know has stopped taking in capital for a while now. Instead they are focusing on raising fees and locking in capital. At the same time, they are hiring and moving people around all the time (without new capital). Are these the attributes of more a SM or early stages MM they were before?
Not on the equity side but from far all I see is a bunch of dudes who own sports teams and their funds got crushed over the last two years. While 5yr+ analysts on here mention their comp has max’d out. 2bn-5bn funds below hwm being mentioned have 2 years left, how aum/ip math is not great but the founder is a well known name.
Is every IP at a fund to blame for owning peloton? Is the guy who helped keep last year to a -5% loss vs -40% not the dude everyone on the street wants to talk to?
These are the major issues I see SM equity guys having to face. The days of having to work for a bank or brand name pay your dues to get/grow capital after 10years when the founder throws you a fancy toy I think is well behind us.