Do Macro strategies require more sophisticated quantitative techniques than L/S or Long-only Equities?
Hello,
I am a recent graduate with a PhD in Economic History, focused more on qualitative economic analysis. I want to join a Hedge Fund at some point in my career and I want my skillset to match the requirements. Now, I wouldn't say that I am the best at quantitative or heavily numerical task. Preferably, I would lean more qualitative or fundamental research-based investment strategies. Would you say that this rules out Macro-focused Hedge Funds (i.e. are Macro funds heavily quantitative -- I have very basic quant skills, nothing too impressive by any means)? Also, would you say that Equity L/S and Long-only strategies require some numerical skills but nothing too intense or complex? I am trying to learn more about each strategy and any help would be appreciated! Thank you so much for reading.
If you don't actually know what the day-to-day of these jobs are, how can you say you want to do it/join a HF?
L/S isn't very mathsy at all, most of it is Excel. It is very numerical and you need to be very comfortable with what your numbers are showing. Having a margin of 15.5% vs 16% matters and you need to understand exactly how incremental dollars earned translates into profit etc while factoring all of the things the business does. I wouldn't do this job if you're not very comfortable with numbers tbh
Thank you so much for your response. I am not saying that I want to join a HF now, but at some point in my career I would love to after gaining some experience in an IB or ER role. What I understand from what you're saying that it is numerical in that there are numbers to analyse and try to understand the forces behind them, I am okay with this. After all, I did take courses in calculus, econometrics, etc. I was just saying that I don't feel comfortable with complex calculations or derivations (e.g. calculating curves in graphs or complex mathematics) which as I understand from you is not a component of L/S.
This is what I mean though, you're trying to optimise for something you have 0 XP in. I would spend time building models and doing stock pitches to figure out if its what you actually "would love to" do.
But yeah, good luck with IB/ER, they're pretty solid careers and HF door will be open from them if you are sure you want to do it.
Yep.
Don't you do econometrics in econ history tho? From your other comment, you said you're not super familiar with 'calculating curves in graphs' - isn't that literally FOCs and Lagrangians in Econ 101? What did you focus on in your PhD in EH (I'm genuinely interested to know)
Fundamental equity (i.e., classic LS) is what Warren Buffett does - just take a look at what he does. He's a qualitative business analyst, not an economist, there's no way this line of work would use quant
My PhD degree was very qualitative. I had to write about economic events and took figures at face value from history records or books. I assembled this data to describe the economic situation of a country and also interpreted it philosophically and politically. There was no econometrics or even any calculations. The econometric and math courses I took were during my undergrad degree, and I graduated from that less than a decade ago so I forgot most of that stuff and never used it after my degree. I'm sure a bit of exposure would refresh my memory but I wasn't as good in these courses as pure econ courses anyway. That's why I consider myself to have a quantitative base but I am trying to play on my strong suits in my general approach to reach my goals.
Thank you for your response as well! I was talking about classic LS.
I see. That's interesting as well. What did your dissertation focus on?
I'd add that discretionary LS isn't just smtg you just 'fall back on' after thinking 'Oh, I'm not technical enough for quant/ macro, guess I'll do this then' lmao. It's smtg that the best analysts have prepped for their whole lives, and candidates have literally no excuse for not already starting, because it's the public markets and everyone is on a level playing field. If you haven't already been building pitches and models of your own, read Buffett letters, and at least know what discretionary is so you wouldn't have to ask this question here, you need to ask yourself why.
for the brunt of L/S shops hiring, buffet letters are p useless ngl
yes and no.
Yes, in the sense that any buffett like pitch may not be very applicable most of the time
But what the pod monkeys take for granted, is that at some point they had to learn how the markets function, and how to value stocks in the first place, and thats where learning warren buffett and value investing probably helped (as well as being informative on how the marginal LO buyer/seller is going to be viewing the name), and that a lot of the stuff you are narrowed in on also reinforces a longer term debate about the stock
or...
Maybe the whole job is really only about 2nd derivative changes on 2-3yr CAGR stacks on 1 KPI driving top-line item, with overlays of input costs from your data-science team, and listening to the daily Yipit release, only to fade whatever all of this says anyways.
Thank you for your kind words about my research. I was deliberately trying not to reveal too much information as this is a public forum but I covered research about competition, markets and business law. I would say it's all very relevant to fundamental research but nothing close to the traditional modelling, etc. I can see ways of how I can extrapolate my research into the hedge fund space but not in the traditional sense, which is why I think some equity research training and modelling skills would enhance my CV. I definitely should work on building pitches and models as you said, and I have recently started reading more about this. Will keep Buffet letters in mind!
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