Choosing a Seat in an AI World
I’m considering moving from PE to HFs. I have a typical BB + UMM/MF background and am slightly concerned about how AI could influence the type of seat I choose.
I think I’m better suited to a longer term approach (1+ year holds) rather than quarterly trading and I also like shorting, so L/S SM seems like the best fit.
My main concern is whether there’s a meaningful resource gap between SMs vs pod shops and long-only as AI advances. That’s why I’ve mostly been looking at larger funds (Tiger, Lone Pine, Coatue, etc.), but I don’t want to miss strong opportunities at smaller funds given how limited HF seats are.
Am I overthinking this? Should I hold out for larger SM opportunities or also consider MMs and long-only funds? Is there a SM AUM threshold where this concern becomes less relevant (e.g. $5B+)? I’m new to the HF world, so apologies if these are basic questions.
If your concern is "we need to be able to spend enough on AI as a part of our process to keep generating alpha", I wouldn't imagine that's a meaningful hurdle at any scaled fund. If you can pay millions to analysts you can pay millions for AI resourcing.
You're should probably more concerned about finding a business that believes in the value add of the technology enough to spend the $ than the ability to spend the $.
If your concern is "we need to be able to spend enough on AI as a part of our process to keep generating alpha", I wouldn't imagine that's a meaningful hurdle at any scaled fund. If you can pay millions to analysts you can pay millions for AI resourcing.
You should probably more concerned about finding a business that believes in the value add of the technology enough to spend the $ than the ability to spend the $ given your belief that alpha = f(AI spend) in the future.
What is your view on these AI roles within discretionary hedge funds? Like all things in HFs, there is dispersion in quality, but I am coming across roles that pay as much as traditional investment-team roles, or at least close to it. There is obviously no established track record for careers in these roles, but I would be curious whether you think they represent an interesting role and long-term bet within HF world
Not every team at an MM trades quarters (we certainly don’t) and many single manager styles have collapsed towards trading quarters
I’m a noob and just trying to learn, but isn’t the typical holding period at MMs much shorter, like 1 to 6 months? Plus you have to stay market neutral and having less career stability.
I was thinking it might be more interesting to look for sole shorts rather than pair trades, with a slightly longer holding period to let an investment thesis play out. That’s why I thought a L/S SM might be a better fit for me. On the Long only side it seems a lot like privates
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