Diligencing the PM
Currently interviewing with a few pods at one of the larger MMs. Trying to do my DD on the PM as i know it could make or my break my experience there - are there any good resources for learning more?
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When diligencing a PM at a multi-manager (MM), your experience can indeed hinge on their style, track record, and management approach. Based on the most helpful WSO content, here are some actionable steps to conduct due diligence:
Understand Their Track Record:
Assess Their Investment Philosophy:
Evaluate Their Management Style:
Leverage Industry Networks:
Tailor Your Questions During Interviews:
Study the Firm's Culture:
By combining these steps, you can gain a well-rounded understanding of the PM and make an informed decision about whether their team is the right fit for you.
Sources: Q&A: Non-Target School to Portfolio Manager at a Top Hedge Fund – 6 Years Out of Undergrad, Hedge Fund Guru Answering Inbox Questions Here. Thanks Mr. Pink Money, Q&A: From Big4 Audit -> Big4 Advisory -> MBA -> AM Portfolio Manager, Q&A: Emerging markets investment analyst, Citadel vs. Millennium vs. Point72 vs. Other Multi-Managers
Equity sales people on the sellside are the easiest resource here. If you’re already on buyside this is easy, just reach out to your network of sales people and ask for a call on a reference check (keep it anonymous over email). If you’re not in the buyside yet, reach out to any analysts in your network and have them connect you with equity salespeople to conduct a reference check
How would they know? Just because they talk a lot to people? Are buyside people ever honest to sellside, or to anyone really?
The equity sales person attends many of the meetings with their sellside analyst when they go talk to investors. So the sales person would have seen how they interact. Also the sales person likely would have met them for coffee/beers or schmoozed them plenty of times at sports games, fishing trips, on bus tours etc to get a good sense of the PM’s character. This is a small industry, everyone knows everyone, and everyone remembers
Convenience =/= quality. Any equity salesperson who knows a PM has an economic reason to "do that PM a favor" by giving them a rave review and implying to the PM after they've hired that person that they helped them land talent. Also, a PM can be a totally different person when speaking to externals vs. members of his team. Some of the biggest jerks I've ever worked with either purposefully cultivated great reputations with the Street or were important enough to books of business that their coverage said nothing but good things.
I find that asking them for a list of their former analysts is a way better way of getting details.
You should ask people that have worked for him before or are currently working for him.
One weird pattern is many juniors seem to believe asking the PM inquisitive questions is off-limits. Ask the damn PM about his track record! See how he reacts. Does he get defensive? Most people with a decent track will respect that you're discriminating about who you want to go work for.
Use your judgement - you probably don't want to ask for daily or monthly detail, but ask about bad years and how they came back.
Feels like too many juniors claim they want to diligence the PM but then they are afraid of upsetting them with legitimate questions and not getting called back.
What's your track record? Don't need daily/monthly detail, just bad years and how you came back. Thx.
braindead response on a valid point.
Specs are a great source of intel, especially through informal coffee chats where nothing goes on record. The key is hitting multiple independent touchpoints - analysts, sales coverage, PB contacts - and looking for pattern in the feedback. If it comes from multiple people, usually that's telling. Could help framing these conversations informally and nonbiased, e.g. "between us, what are the +/- on X?" to get more candid assessments.
Most people won't directly call someone an asshole, but they'll use coded language. "He's a character for sure" or "maybe not for everyone but he puts up numbers".
Don't hesitate to ask the PM directly about track record specifics - drawdown management, analyst development, preference for how interact with analysts and delegate responsibilities. Good PMs have thought about this and respect thorough diligence. Especially as you'll be doing just that for a living for said PM. If they get defensive about legitimate performance questions that should tell you something. That said, even if someone's #'s has been "meh" it doesn't mean it won't be a good seat for you. Past perf ≠ indicative of future results.
Two words of advice:
#1 It's just as much the PM diligencing you as you diligencing the PM. The interview process goes both ways.
Case in point: I had a conversation with a CIO for a new platform a while back. I asked him about corporate access & conferences. He said "yeah I guess sure feel free... but I don't want you to rock up to a CEO and ask about the next quarter"... It instantly put me off. A) Ehm... that should be table stakes wdym "I guess?"; B) I'm not a child who needs to be told how to behave in front of the C suite; C) If there's a big catalyst the next quarter, I reserve the right to make a judgement call on what's relevant questioning and not; D) Just a weird thing to say.
His tone put me off. In isolation it might have not been enough. But that comment, in combination with some other things he said over the course of multiple meetings had me convinced I should decline the offer.
#2 Feedback ≠ experience. For my first seat in public markets I had universally good feedback on a SM seat most people here would characterize as a "prestigious shop" working under a guy who had great pedigree & rep for training analysts. Fast forward... The experience was underwhelming.
A few years later I joined another shop. Someone told me "don't go there". Whilst the PM had good rep for being well-trained and being "a good guy" he had no experience running risk at scale or train analysts - it did worry me but I took the offer anyway.
We had great chem. Before I started he told me "I don't pay you to agree with me", encouraging me to contradict him. He broke down his portfolio and risk management process in detail on a weekly basis, and really let me in on his thinking... we debated everything. He rationalized why he rebalanced or entry/exited positions and how he adapted to changing markets. It helped me understand how he thinks, which made me better in supporting him, and provide value added views. We had a great feedback loop which improved with time. As a contrast: at the well-reputable SM seat I could see names I've researched & presented being occasionally put in the book (I'd never knowing why now) and exited without being told a word. I would only see it on a weekly sheet, and if I was lucky, I'd receive a 5 word rationale.
At the second shop, we had an amazing run and built a great team despite the initial question marks I had. He ended up getting poached for one of those ridiculous guarantees. Today, my association with him is valuable goodwill for my own rep and helped accelerate my career.
Bottom line: whilst market feedback doesn't guarantee quality a seat, sniffing around enough discretely can aid in minimizing errors, and help gain conviction in alignment with the things you value.
Alright, that's enough WSO for today... Back to the Twitter-verse nibbling on popcorn watching Elon v Trump for some evening entertainment.
Second story is amazing to hear man, thanks for this
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