How did you make "Portfolio Manager"?
Given most funds don't have structured programs, I'm curious how people here went from HF analyst to PM, and any advice they could give to current/future analysts. Thank you.
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Pretty linear at pods:
Analyst --> Senior Analyst / Sub PM --> PM
You perform well in your role to the point where you are basically doing the job above you. Then you either get promoted (often have to ask management for it, sometimes with leverage) or hop firms to go one seat up.
What does "leverage" mean in this context?
How many "bad years", if any, do they allow you on this path?
Leverage meaning get an external offer and force the managements hand
This plus a hodge-podge of other random routes: battlefield promotions (PM gets lifted elsewhere, PM gets fired), get promoted up to co-PM, manage risk on sell-side with P+L responsibility and parachute in as a PM, et al....
Is the easiest path to analyst still via sell-side trading?
It depends on your strategy. If you are interested in macro, S&T is a viable starting point. If you are interested in equities, ER or IBD is much more common.
Also is the phrase portfolio manager not accurate? I thought they would need to understand correlations between assets, mean variance optimization, and other risk analysis. Seems like there is a quant team that does this ?
At the places I've seen, these central "quant teams" support and challenge the PMs. E.g., they try to show PMs what biases/skews they have, which of their behaviors/decisions have been positive/negative for P&L, etc. They try to make sure the PM doesn't miss anything.
Not sure if you're talking about the same folks.
There are also folks that look at firm-wide correlations / strategy mix / etc.
Sorry don't understand, can you give me a more concrete example? So the quant team does the math, and the PM analyzes it and then asks for more feedback or further analysis?
Start your own fund and you instantly become portfolio manager :)
Only really makes sense if you are able to raise at least a few hundred million within the first two years or so, which you can only do with an amazing track record and relationships. Having a great trading strategy is only one part of the puzzle here
You’re joking right… If you’re the only
manager you can live on like a $5M AUM as you go raise more capital. You really don’t need $100M to start with.
I opened a $50 PA in college and I've been calling myself Portfolio Manager since then.
I asked for and was given a small book to manage under another PM which was uncorrelated with his book. i made a very small amount of money on very tight risk limits while trading that book and was able to convince management to give me stand alone PM status. Ironically the timing was awful because after that I quickly lost all the PnL I'd built up previously, but I'd already been promoted. Eventually I refined my processes and made all of it back and more, but had I asked for the promotion even 3 months later I probably would have been denied.
My current perspective is that if you promote a fresh (sub?) PM and he doesn't lose you money in the first two years, he's probably skilled. Because while he was probably a decent analyst, there's so much he doesn't understand about trading that he's likely pissing away a significant percentage of his alpha. If he's willing to put in the hours and learn about his own biases and fix his mistakes, the skill will eventually shine thru.
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