Current HF industry is unfairly biased in favor of older PMs who managed money before 2021 who benefitted from easy market conditions
Has anyone noticed, but the current HF industry is unfairly biased in favor of older PMs who managed money before 2021 who benefitted from easy market conditions, and overly punishing against PMs who started after 2021 who experienced extremely volatile markets plagued by inflation woes, wars, social media induced quant volatility, and uncertain monetary policy.
The older PMs who managed money in the 2008-2021 period has relatively easier market conditions (declining to zero interest rates, a more fundamental-market with less interference by quants and algos, far fewer short squeezes, more fundamental driven markets) that they benefitted from, unfairly, compared with the newer generation of PMs who started their money management careers post 2021 with much tougher market conditions. I've noticed BDs, hiring managers, etc... do not account for this difference in market conditions and give the same weight to PM track records built before 2021 versus track records built after 2021. No offense, but literally any monkey could have "printed" huge PnL in a year like 2019 or 2020, when literally everything was melting up. But somehow, PMs who have lost a bunch of money post 2021, but made "big PnL" (in easy market conditions) before 2021, are given a much longer leeway and more opportunities to make mistakes (bigger drawdown limits, can get rehired multiple times after consistently losing money or hitting drawdown limits) than PMs who start after 2021.
BD and hiring managers at pod shops and other firms seem to think somehow that as long as a person "made money", that person is somehow of a "higher skill level" than someone who didn't, but this is not true. This assumption does not take into account the structural change in market conditions post 2021. Pre-2021 was an "easy market" - any strategy that longed growth / short value would have printed. Post 2021 was a mess, with heightened volatility, fickle Fed policies, multiple wars, AI disruption, quants moving stocks +/-10% based on random social media tweets, trade wars, Trump's tweet storms, etc... that has made consistently generating (especially short term) alpha multitudes more difficult than pre-2021. But I'm still seeing a bunch of PMs using their pre-2021 track records to raise money and scalp management fees while completely delivering below market returns in the post-2021 market environment.
This just shows the industry and hiring managers have very little clue about the industry and the changes that took place. It's just disgusting to see PMs that lose money in the post 2021 regime move around pods and get rehired again just because they keep advertising pre-2021 track records, and dumb BDs and hiring managers who don't understand that any monkey could have made money in pre-2021 conditions in easy market conditions. The result is that the younger generation of PMs are getting shafted because they don't have a PnL cushion to make mistakes in this market environments, while the pre-2021 PMs get more than their fair share of opportunities to make mistakes (bigger drawdown limits, easier time getting rehired after blow-outs) just because they got lucky with timing.
Examples like this just show your entire career success is just luck, which outweighs all of your "hard work".
im happy for u / sry that happened
If you're actually skilled its much easier to stand out in a high vol, high dispersion environment, no? Also lol "interference by quants/algos" - unless you're a moron and executing entire orders at once (even then you're entry/exit would just get scalped), algos should have little impact on your success as a stockpicker. A statarb book is not interferring with fundamentals, and low freq signals are often fundamentals driven anyway - if they're beating you then you then that just shows you not good enough at the "human" aspect of investing to beat basic data crunching.
You sound like someone with zero actual fundamental l/s equity experience at pod shops. The vol is much higher but it is UNPREDICATBLE vol rather than predictable patterns, making it far more difficult to generate consistent alpha, especially over the short term. In the past year I've been seeing charts/technical signals fail due to the influx of stupid retail money (leveraged ETFs) and quants pumping stocks based on random social media posts. This means PMs now in this environment face significant hurdles in building a track record, which wasn't the case 10 years ago when you could (like many older PMs) mindlessly long growth/short value which would have worked. You could have racked up significant PnL even if you underperformed the market (which nobody minds in an up market). So even if you didn't have skill, you would have made a ton of money, had job stability, and then use this track record as a cushion to get new gigs when you blow out. That isn't a luxury available to newer PMs now, who have to fight for every single bps and can easily reverse a stupid tweet from the joker in the White House or from Elon Musk, etc....
Yes, i'm not in discretionary, but it sounds like fundamental market drivers have simply changed? if there is higher idio vol then there is a greater opportunity for outperformance if you can harvest said vol. sure it was easier for a below average pm to rack up a track record previously, but if anyone can punt a fairly similar trade and get a fairly similar performance then if you are actually good it seems it would be harder to stand out, unless you had looser risk limits which i assume would come hand in hand with strong performance prior to the pack doing well. if sentiment, for example, is driving stock significantly now, its not the "market is wrong" when it pumps because of this - your approach is wrong for not factoring that in.
If your process was essentially just filling your book with market/factor beta then yes now sucks, but if you had any faith in your ability to harvest alpha then I don't get why you wouldn't want a harder market weeding out the chaff.
This sounds like a bad case of coping.
Truth is market hasn't been easy for a long long time (if it ever was) and has always required PMs to constantly adjust and adapt.
In the decade before COVID, I can think of taper tantrums, Euro crisis, Trump v1, Brexit, and constant factor unwinds, just off the top of my head. It was not easy at all, and hundreds of PMs lost their jobs and had to exit the industry for good.
I would argue today it's easier than ever to get promoted to PM, as you have a ton of newer MM HFs eager to deploy capital and take a chance on a senior analyst with no formal track record. Whereas 10yrs ago every MLP and Baly of the world would only hire experienced PMs, which created a massive chicken and egg problem for aspiring PMs.
But then again, it sounds like you've concocted this theory to help yourself deal with rejection, so I doubt you'll change your mind.
Been reading you comments for a while now and rare are the occasions where I do not agree with you, however he does seem to have quite a few points here (despite the obvious copium he’s smoking).
Big bro here didn’t claim 2008–2021 was some frictionless bull market where PMs just printed PnL with their ass. Yes, there were taper tantrums, Euro crisis, Trump, Brexit, factor unwinds etc. But that entire period still sat on top of one dominant regime: ZIRP/QE, massive central-bank put, and a long, pretty clean growth>value, duration heavy. If you were long quality/growth, underweight cyclicals, and didn’t do anything too stupid with gross, the tide was broadly in your favour for years.
Post 21 is structurally kinda different with rapid rate shock, inflation, factor rotations happening in weeks not years, meme squeezes, hyper crowded pod factor books getting whipsawed by flows and news, and buy side positioning data being weaponised by quants. The signal to noise ratio for discretionary stock pickers has collapsed and the half life of fundamentals in price is way shorter. Saying markets were always hard is true in a generic sense, but it completely ignores regime dependency, a 10 year track built mostly in a one way duration trade is not the same thing as a 3 year track built in a regime where your factor exposures get reversed every quarter.
On the career side, yes, there are more MM platforms now, but that actually supports OP’s complaint. The older PMs already locked in their pre 2021 track records in that easier regime and now carry that halo around pod to pod, getting rehired after repeated drawdowns because everyone underwrites to their 14-19 Sharpe.
Before you come at me with the cope accusations, I work at one of C/MLP and see this everyday. Just my opinion tho
MMPM, lol it seems like the only person trying to protect their own egos is you. You must be one of the "older PMs" who are still advertising your pre-2021 track record from an easier regime and misleading investors and hiring officers that you are somehow more "skilled". That's just a plain lie.
The fact that "Analyst 1 in PE" (another user who commented below, and who has worked at multiple pods) agrees with my assertion just adds credence to my points.
The pre-2021 period was a significantly easier for long/short fundamental strategies, there's zero denying it. Anyone could have made money in 2019/2020. I made bank in those two years, but I find the current market a struggle everyday. It's not even remotely comparable. In today's market environment, you have random 10% intraday swings based on what people say on Twitter or based on positioning changes alone. Rotations happen like 2x every week. Pre-2021, rotations happened maybe once a few months, and the ZRP/infinite QE just means every rotation would last very short period of time before growth would outperform value again. Investors never had to think about "interest rates, inflation, and MEME squeezes".
So again, you haven't stated anything that can refute my arguments. I actually have worked at multiple pod shops as well, so don't fuck with me. I know what I'm talking about.
“Have worked at multiple pod shops”. Think you’re part of the problem bud
I've more than qualified to run billions. If I were born about 10 years earlier I would be a billionaire because I would have caught a great run in the 2008-2021 boom with minimum effort.
Why don't you actually address my arguments rather than ad-hominen attacks fuck face?
bump.
Fwiw - academic literature/research somewhat supports OPs initial claim. It is true that post 2021 the correlation between stock prices and earnings (I.e. fundamentals) is weaker then versus pre-COVID. HOWEVER this is only true in the short term. Over a longer time horizon this correlation has not broken. So certainly fair to say it’s more likely to see your short go up 25% on nothing but if you’re right about the fundamentals, you will ultimately get paid.. as for whether this is harder or not. I don’t know honestly. Higher vol means more opportunities for mispricings but is harder to manage
If you want to test this empirically on your sector, just make scatter plots of earnings revision vs stock price moves over a 1month, 6month, 1 year time period.
everyday the lame answer of time arb / liability optimization rings more true
I agree with your initial point, however - please point me towards pods with long term investment horizons… 99% of them trade quarters/intra quarters
You don’t need a 5 year time horizon. Just more than 3 months, which believe it or not is possible. In fact all successful scaled pod teams do not have a 5 day time horizon.
Pod shops don't have time to "wait for the long term" bro. Investment time horizon is like 3-5 days.
A lot of the top scaled pods running multi billion dollar books do indeed wait for the long term and have relatively lower levels of book churn
This is just wrong and if this is your team you should leave ASAP. No successful team has a 5 day hold period
Have been in the business for 15 years.
There’s a lot to unpack in your post. I understand the sentiment and there is no question that the business you have to build now is different from back then for a myriad of reasons and you have to juggle a lot more now, but I think that’s probably true for many many industries. I also don’t know that it’s common practice for platforms to sponsor an outsized number of PMs who have lost money since 2022, to use your time frame.
Re-reading this whole thread, it seems like OP could use some time to reflect on his/her process.. if that many of your ideas are going 10-15% against you on nothing, it seems like the problem is with your ideas, not the market. If it’s happening on a single position and you’re covering/giving up, that’s a process issue. If you bought a stock at $100 and it goes 10-15% against you on nothing, you’re suppose to buy more. Not that complicated.
Again, you have no fucken clue what you're talking about. A stock that goes 15% against you means you're likely out of a job and fired at a pod shop. In today's regime, stocks move 20%-30% on absolutely no news. Your entire portfolio exhibits random short-term movements of this magnitude. How is one expected to maintain a 5% drawdown limit, if one is fully deployed, when the market (stocks) randomly move 30% in a few days on nothing but social media sentiment and random news/macro?
The pre-2021 market was objectively easier because longs continued to go up and shorts would stay down. There were very rarely any big 20-30% moves, and if they happened, they usually occur in a span of a few weeks, giving PMs time to adjust. In today's market, 20-30% moves happen in ONE DAY. Anyone who is actually a PM at a pod shop can attest to this - it's clear you're not a PM and never actually managed money before and talking out of your ass.
In today's (post 2021) market longs basically don't go up unless there's some sort of social media squeeze/MEME element, and it basically rips for 2-3 days and then tanks. That's not even close to the pre-2021 regime. You have no fucken clue what you're talking about it's clear you haven't actually managed money in an actual PM role at one of the big pod shops. The other posters who have actually worked at C/M/P/B in this thread AGREE with what I'm saying. You clearly don't have any experience being a PM hence you think everything is exactly the same as pre-2021. It's not.
If you think it's so easy, why don't you give me a pair trade long/short two stocks and let's follow your performance for a week. If your pair loses more than 5% you shut the fuck up and apologize to me?
Care to take up this bet? or just too chickenshit to actually deliver specific ideas? Generic talk is cheap. You have no actual experience at a pod shop and are just talking out of your ass.
Those posters on here who actually worked at pod shops actually AGREE with me, so I'm right.
Quiet as crickets on here when I ask for specific trades.
If you think the job is easy, give me a long/short idea that prints on Monday. If you're wrong you get fired.
I'm just curious - are people retarded on this forum? It seems like this forum (WallStreetOasis) is populated by people who no actual work experience as a PM at a pod shop. It's more like college graduates just dreaming about securing the "HF gig" with no actual work experience.
No pod shop PM in their right mind would agree right now that the market is "essentially the same" as pre-2021. It's a completely different regime and I've heard everyone (who actually work in the industry) talk about this but the people on WSO seem to think "value investing" still works. It doesn't. People here have no fucken clue what they are talking about.
Pod investors aren’t real people.
bump
Think OP needs a new job lol. Maybe IR
Not like you can actually do better fuck tard.
I'm convinced OP is David Orr.
Excellent take
lol what are you on about
2021 was ez as shit. 2018 was harder imo
Pre-2021 was easy as shit. The key was fundamentals actually mattered, to some degree. Not every day stocks gyrate up 10 down 10 due to a post on social media.
The current market regime, stocks basically gyrate 10% intraday based on who said what on social media, and there is no fundamental buyer to set price. Valuation doesn't matter at all. There is no valuation support for prices. Stocks move every day based on flow, positioning, social media mentions, squeezes - that it. Stocks react to earnings for only 1 day before the position unwinds and decays. You can't hold any "good company" for weeks and watch it compound. Everything is a rolling pump and dump. Goes up for a few days and tanks. Rinse and repeat.
some guy in 5 years. fuck 2023/24 was SO EASY. just own AI. easy as shit.
No offense, but tough. What do you want, someone to take pity and pay you 2/20 for losing money because the “environment is harder”
It was even easier in the 80s, why don’t you bemoan how it’s unfair that Soros and Druckenmiller could bully central banks or that convert funds back then could just delta hedge CBs and make 30%.
Had you been around during the Opium Wars just a willingness to travel around the world meant you could rape and pillage and get rich.
You can spend all day whining about how others had it easier and wait for DEI programs to return or you can grow a pair and figure it out yourself.
Throw MS if you’d like but know that it just consigns you to wallowing in misery. There’s plenty of opportunity out there. Don’t be such a lemming and channel your energy into finding alpha. People are still getting rich. It’s not something anyone is entitled to, and nobody is stupid enough to leak their trades process or alpha to you simply because you troll on some message board.
edit: I stand corrected, you did complain about how easy it was for Citadel. Don’t know what to tell you bud, maybe change industries? Be a trophy spouse? Go back in time?
For the record, you are wrong on KG. He wasn’t just a brilliant investor trading out of his dorm room, but consider how he built his dominant franchises step by step and leveraged strength to strength to become what Citadel is today. Despite the reputation for ruthlessness he still manages to attract and retain talent. You’re still playing tic tac toe and can’t even begin to comprehend how impressive the man is.
Are you a PM? Do you actually have experience managing capital?
As I said before, it's easy to find alpha in the markets. But it's not easy to hold positions without experiencing 5% or less drawdowns, which will get you fired at a pod shop, even though if you hold for half a year or so your gains will be significant and the stock appreciates.
There are millions of people as smart or smarter than KG or any of those Wall Street honchos. These honchos made their money because of extremely good luck, circumstance, and timing. If Ken Griffin blew his account in 1987 by being a month early or late before Black Friday, he may be nobody. That's how luck works. You rarely give credit for luck if you're the beneficiary, but multiple scientific research shows that career success is >50% luck. Ken Griffin, Buffett, Stanley, Soros are no exceptions, they are extremely lucky. They may have worked hard, but so have I and millions of other people with similar IQs, but who didn't get in the exact trades at the exact perfect timing.
The fact that you deny luck and worship KG or any other "billionaire" and you think it's because they worked "hard" shows you have no fucken clue what you're talking about.
Yes, and you’re clueless. 2020 is just five years ago, you’ve seen one partial market cycle. If you can’t understand that you’re over extrapolating, or if the industry is simply too tough for you, quit.
Spend any time with these guys you bitch about and you really will see that they have a secret sauce.
Of course, there are also billionaire bull market investors that have only made easy money riding the wave. It’s telling that you aren’t complaining about them, and if you spent any time studying what made others successful you would know.
It’s not easy grinding with a 5% drawdown for sure and if it’s not for you, don’t work in a pod. Credit, CB, macro, quant, single managers are all options.
But seriously / you seem to have zero capacity for self reflection and unfortunately if you keep it up will just continue to languish. Combined with general dick energy people will root for you to fail and laugh when you inevitably do while decrying how unfair it all is.
The pre-2020s were objectively easier. Did you see the volatility we had in the last month and yesterday (due to events like Quad Witching)? Stocks are up/down 20%+ on zero news, just "flows". The market didn't use to be like this at all. There's no smart way to control daily volatility within a tight 1-2% band unless you just don't invest at all and just hold cash. There's no way to pair trade everything exactly so that your book always doesn't fluctuate and only goes up, and you somehow now the perfect time to size up or down. It's not possible in today's environment. You can make money, but you have to accept huge volatility. You can't make huge money with minimum volatility. It's just not possible.
Nothing you cited shows you have any fucken actual work experience as an equity L/S PM in the industry today. Giving me erroneous examples of historical facts has zero bearing on my core argument, that the L/S industry should expand drawdown limits for PMs to factor in the inherently higher volatility of today's markets.
Look up the returns for funds with strict risk limits since 2020. They are pretty good. So clearly others are doing just fine under the same constraints.
Complaining about flows is funny. Did you ever occur to you to track flows which in some cases are structural. Can’t do your job for you
I can criticize KG or anyone other person as much as I want, because I am 100% qualified to do so. They started out in an easy time period so there's not much to worship - they are just a few of the millions of "hard working" and "smart" people who also got insanely lucky. To deny the role of luck is to be a fuckface dumbass.
A week or so later this thread will drop off the top page and nobody will remember you. Good luck, I hope you can wait around enough with your 100% qualifications to “get lucky” like Druckenmiller
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