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Bump
Why the fuck are you bumping this dumbass post? You and pod shops suck.
There is hate because pods have been doing well and the more traditional paths like investment banking / private equity have been stuck in the mud with higher rates (lower deal volume / higher cost of capital eating into IRRs) - anyone that went down the IB / PE path wouldn't feel great when they see the headlines about the big pod PMs getting >$10mm guaranteed to join
the pods are a non traditional path vs doing 2 years in banking --> 2 years of PE --> 2 years at a tiger cub as a jnr person --> hopefully moving to a more risk taking role
you can see pod guys move from analyst to risk taker pretty quickly all things considered
also a few years back - like prepandemic - no one wanted to ork at a pod or wanted anything to do with a pod - the low vol / downside protection really showed in 2021 / 2022 - when the tiger cubs got smoked
SM PM told me they'd never hire anyone from a pod, do you think going to a pod shop will permanently damage your SM chances?
To be fair, going anywhere except MF PE will permanently damage your chances at any SM worth working for
I think its a deeper ideological divide. One path is a pure meritocracy, the other has meritocratic elements obviously but is structured and focuses on prestige.
I don’t think that’s it.
The issue is more intellectual snobbery. There’s a narrative that the HF industry is bifurcated between real long-term investing and a bunch of monkeys playing pachinko trying to call quarters.
Pods are easy to paint in the latter light and to construct a sort of characterture of a fast money wise guy peddling in rumors and “bimbo” math about easy compares, 1 less selling day and a bunch of other first order thinking nonsense.
The reality is that the pod game is very very complex. Fundamentals, reading mgmt teams, following the narrative, understanding cards others are holding, positioning, macro, micro, etc and there’s huge power laws in outcomes and ability.
There’s maybe 10% of people that are exceptional at it and are crushing it. The fat part of the bell curve are just cannon fodder and go around the carousel every 2 years getting blown out of one seat and landing somewhere else.
People have a hard time understanding how a real person with a real career is getting blown out every few years and getting hired at the next place.
In short, the pod world operates on a very different set of rules vs. the rest of wall st and outsiders just don’t get it.
It’s like when I was a banking analyst working 100 hours a week and my dad was genuinely worried about my professional prospects bc he thought I was so bad at my job that I couldn’t get any of my work done on the timeline that the rest of the world operates on. It’s not his fault for misunderstanding, it’s just a dramatically different world than most are used to.
This is rly interesting. Did you ever consider joining a pod? Would you have any advice for someone considering doing so? For context I'm in O&G at a BB.
if you are making good money as analyst at a pod - have taking risk as a PM in sight why would you want to go work at a single manager
pReStIGe
Well you couldn't really transition anyway if you wanted to
At a pod there are plenty of things out of your control that have to go in your favor to be successful. However, I do agree the upside should be better
Because they point to large payouts that happen to 0.5% of the PMs / analysts as a “totally reasonable” scenario to non-suspecting junior investment professionals who then join and get blown out in 1 or 2 years. After that, the junior investment professionals travel from pod to pod until they just can’t get another buyside job with no transferable skills. Pod shops (to their credit and beneficial for LPs) have no slack to give to underperformers and it just sounds like a terrible place to work. I had opportunities to join a few different pods and I’m glad I didn’t as I look back on Linkedin and most of the people that I’ve spoken to are no longer on the team or have left the industry.
I’m not arguing that pods have consistently made money, but it’s the collective group / firm / LPs that benefit most and not the 95% of people that work there. If you get on the right team with the right PM, it’s an amazing job, but the majority of pods suck.
But the same can be said about single managers - like there are a few that have generated solid returns and have real strong multi year track records and then there are probably thousands of single manager hedge funds that don’t exist anymore
At the pods there are many solid PMs who have been trading profitably for years at the same time with the growth in aum there are going to be groups that just can’t generate pnl - westwind at exodus and aptigon at citadel great example
Dude no one is arguing about a fund’s right to exist or what’s better for LPs. I’m purely talking about which is a more conducive environment to having a long term career or a reasonable semblance of work life balance. Sure there are shitty single manager funds too but it’s just a different mindset when you have 5-10 analysts vs. 100s of them in the pod setting.
I mean, everyone hates everyone else in the business. Pod monkeys have been dancing on the graves of tiger cub returns for two years now. But I think some of the pod stigma is about it not being "real investing" and that the investment process is a grind so you don't get this magical uplift in WLB.
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citadel! citadel! citadel! citadel! - some guy at Walleye
The real ones hate on VCs / CRE and other levered long back patters (including some SMs, but not due their being SMs). who know levered beta riding a fed rate cycle would something so many would use as formative evidence of their own genius
VCs shouldn’t exist
Is there even pod shop hate? I feel like a lot of it is just pointing out that we were in a massive pod tailwind and we MIGHT be at peak pod shop, and the obvious criticisms of how bad a pod shop seat is on a risk-adjusted basis. If anything, I'd say there's a SM hate - the typical beta-riding argument
dude, the number one trending post right now is called Pod Shop Hate from a prospect
Yea, but that's literally a prospect. I'm talking abt the professionals
Who cares about whether they’re a good business for clients vs SMs. All I give a shit about is how much am I going to be paid the next 10-15+ years or so. I’ll fully admit I don’t know if I can make money consistently 10-15 years in a row under those constraints. I think maybe I can, but I don’t know. Just don’t have the balls to try the pod life if I’m honest. I’ll get paid 500k-1.5m at a SM as an analyst depending on the year (which is nothing compared to a good year at a pod) but at least there’s consistency and it’s honestly pretty decent vibes. Maybe do it for awhile to build a nest before going yolo at millennium.
the people that move to pods are either:
1) ppl who found this to be their way to get on the buyside (it’s tough to get an SM seat we get it)
2) sick of mediocre comp at their SM and said pod pays them big guaranteed
Don't want to wait too long though because once a wife/kids come its a harder risk to take.
Don’t know why you got MS. Yea I’m waiting for wife’s comp to ramp up to the 7-800k range so I can fuck right off to pod land.
Folks just can’t admit that they’re wrong and the era of cub dick-riding is over. I cannot think of a single argument for pro SM, excl only PS & LP. I get that this forum is populated w/ college kids & bankers / PE bros who’ve never worked a day in public mkts, but literally not a single real L/S PM / analyst thinks this way (SM / cub obsession)
This. 90% of pod hate posts come from job title "PE - LBO Associate / vp", or Prospect etc
Anyone who has been on buyside public markets should know enough not to be envious of the pods. It's truly a miserable lifestyle (this goes double for the "top" pods because they work even harder than the average pod). The median pod will still have a crap lifestyle and won't get the right tail of compensation that people fantasize about. I guess you could be envious of the median pod but that would be silly and misguided.
Now, I can see why someone would hate the pods (without being envious) because the pods probably exacerbate volatility and cause more heartburn for everyone else.
Having been a pod guy, there were a couple things that I really disliked. I prefer to trade off real fundamentals that play out over a few months vs. random idiosyncratic speed bumps. There's a sense from a lot of guys that they’re the smartest person in the room, in my experience even more so at pods because you’re competing vs. both the market and the other teams in your sector. And because of that a lot of pod guys engage in a ton of group think but think it’s all PrOpRiEtArY iDeAs. Generally guys that all cover the same sector have relatively similar thought processes so they’re all in on the same trades. I’d say there’s about a 1% chance that you’ve got an edge on a short-term trade vs. you can do real work on longer duration stuff.
It was super helpful for me though because I know how those guys think so the deep work we do allows us to get in/out of trades before the pods catch up to what we’ve uncovered.
Where are you now?
A SM with some MM features
Honestly feel like I was really fortunate to land here because I’m really happy with it
I’m guessing yes and no. The classic argument is in the last decade pod shops are harder to get in as a college grad but potentially much more pay with alooot more risk immediately….however “markets could carry a cat throwing darts at a board” during most of that time. This is certainly tougher right now. Bankers get a lot more busy work + hours and have a lot less autonomy but aren’t really responsible as analysts for the success or failure. Some have even argued on here as long as you learn to take your lashings and don’t suck you can grind and float your way to a consistent half mill a year+ as a sell side Vp.
You can definitely coast as an analyst in an SM for 500k a year. Put some option value in there for better comp in great years and it’s much better seat than banking. Probably doing 60hrs a week. Slightly less stability obviously but it AUM is ok, then it’s not that bad at all.
Actually i just startes my First Semester and My Dream is to get into a pod since i am 16, although several people told me that i couldnt Build a ”real” career there. Any tips?
A lot of this is people slow to update opinions from what was consensus for probably a decade. The world changed the last few years but not everyone has realized that. I'm sure the SMs will have a growth period again but tbh this is going to be a secular trend for awhile until we're in a new equilibrium.
The story that its a much riskier career path is not really that true. Awhile back I compiled exits from several SMs vs. MMs. Its true that more people at MMs leave the industry, but it's far a common outcome (I would say 5-15% of cases). The top 20% of MM people probably get more than the top 20% of SM people and the median is higher too. You're compensated for the greater downside risk.
SMs are still great jobs though and I don't people should be that picky. That said, if you're the type to think "long term" about "industries and quality" then its worth applying same analysis to your own career decisions. Most growth at SMs, LOs, mutual funds is from markets going up, not from more customers giving more money to the asset class as a whole. Maybe this has changed, but this is why my friends that work at fund of funds tell me and what I've seen in the data myself. This makes complete sense. SMs, LOs and mutual funds are not compelling products and MMs are. There's exceptions, but overall this is true of the industry. In other words, KPI growth outside of MMs is sort of "inorganic" to me - it's mostly caused by markets going up rather than getting truly more customers / clients. I've thought this for years but I'm really sad I was right. Not because I don't think the best should win, but because now my career is in the hands of fewer and fewer people and will require more and more external systems. (Note that in many ways this is the industry "getting better." Citadel actually does have a strong moat, but the bigger the moat it has the more that they control the game versus their employees. I'm sure it won't be like Uber but I think bad things happen when you get all the drivers by paying them more -- maybe you just do that initially to win then you stop once you run the show.)
The story that they don't think as long term is probably true. Honestly though who cares. Why are people so philosophically attached to one approach versus another? It's also tbh pretty hypocritical to be the dude who thinks long term about being on the right side of change, then works for a segment of the industry very clearly a worse product with worse pricing / on the wrong side of change lol.
I think I have a unique perspective on this given my family background. My dad used to run a pretty consistent top 5 book at one of the big pods (think SAC/p72, citadel, millennium). He left (didn’t blow up), and had a very successful SM fund (billions AUM) afterwards. Here’s why he hated working at a pod / I have very little interest working for one:
1. You’re just a number there. Over his pod career, he probably generated over 100m of alpha. Despite his prior track record, he never felt safe/secure — “always only one drawdown away from having your capital cut/fired”.
2. It’s not investing, it’s information arbitrage. He describes investing as identifying and riding secular trends as they play out over the long term. Finding minor inefficiencies in the market and playing the quarters to squeeze out a few points of alpha is more information arbitrage.
3. It’s a soulless place to work. Everyone is hyper focused on their pnl, there’s no sense of fulfillment or that you’re “building something” or community. You’re constantly getting moved around within the office (he stopped unpacking his stuff). Somewhat related to number 1.
4. You don’t get rich working for a pod, you make steve, ken, and izzy rich. Despite what ppl say on this forum abt how well the pods pay, the economics absolutely suck for the PMs. You basically have a fraction of the revenues of a SM (as the pod takes a % of the fees), and all of the same costs (ex rent). You pay for your capital, your team, research, BBG terminals, commissions (where the pods favorable rates aren’t passed onto you).
5. If you’re good they make it very difficult to leave. Most of your comp is deferred and you basically have to leave millions on the table or take years off of work if you want to leave. Ik this isn’t unique for finance, but it’s def among the worst.
Disclaimers: not sure if all pods are like the one he worked at, but I am guessing they are similar. This was >10 years ago, so everything I said may not be true/relevant now. Also think there’s some variation between PMs
delete
The pods also make it easy for you “as they don’t want to give you any excuses for not generating returns” in my dads words. — you don’t need to do anything other than generate alpha; whereas at a SM fund you’re running a business: manage back office, office leases, marketing, raising money, tech issues etc.
That being said you pay for all that convenience and more in the economics.
Is your dad hiring?
100m in "alpha" over 5 years isn't anywhere close to a top 5 book at any of the big platforms.. even 10 years ago
Also comparing the economics currently versus 10 years ago is apples and oranges. The economics have basically converged to the same as if you were managing your own mediocre SM. Especially given the high costs today of running your own hedge fund
The point was you can have a strong track record of generating returns at a pod shop, but if you slip up you're gone without a second thought, the number was an estimate (based on being there through 2008 and starting with a relatively small book), but is ultimately arbitrary...To draw a parallel to how pods think -- they focus on the details that really don't matter (playing the quarters) and miss the bigger picture (the greater secular trends).
You're probably right, there's very high operating leverage in HFs so if you cant scale the economics suck at a SM fund...but if you can make it work, its not even close. I don't think any pod PMs are donating mid 7 figures to charity every year :)
Are you implying that the (inflation adjusted?) costs of running your own fund are higher than in the past? Why? (Genuinely curious.)
Because they monopolize every 2x1 with modeling questions IR could handle in an email.
Given I am outspoken on this topic on this forum... I too will take a stab. Somewhat redundant but bit of pushback to prior respondents.
SMs got greedy with beta disguised as alpha and pushed their risk parameters beyond what they even realized, whereas pods have insanely tight risk controls. The GOOD SMs (yes, Ackman at Pershing Square) have had quite decent performance all else equal and what I'll add is that SMs typically run long-biased. So inherently they're designed to take more market risk and should underperform in down markets (vs. pods), and should theoretically outperform in up years. The ORIGINAL SM model was very similar to pods but that's since adapted given markets were usually going up every year.
I actually think the job / seat / career risk is largely the same. Unless you are a very scaled SM player (and sometimes this doesn't even insulate you), you have company / fund risk. If you have a bad year or several you are likely out of business, that said if you're at the analyst level it shouldn't be too difficult to find another gig. But it is a risk. The MM risk is given such tight capital controls and risk parameters, if you lose $ you have an inherently tighter leash. It's no longer what your LPs decide on the future of your career but more so the higher ups who will have no problem in cutting you and replacing you with ease. That's the somewhat higher seat risk that a pod seat carries. It's less forgiving quarter to quarter and given the hyper-focus on earnings prints and very immediate term alpha, the seat itself becomes more volatile. I cannot comment on earnings power as I think top seats at scaled SMs can pull in a larger % of that pie but perhaps MMs offer more consistent upside if you can succeed within the top quartile or better.
I think people hate pods because it isn't investing, it's trading. Historically, investing was developing a thesis and a view on earnings / markets / industries and how they'd change over the course of [insert timeframe here]. Stocks barely moved quarter to quarter. Now, you have pod analysts intensely focused on alternative data, gaining more AUM, and aggressively trading or pairing stocks against eachother without a view on fundamentals exceeding ~6 months. Not saying they don't know the fundamental backdrop or medium/long-term drivers, they just don't focus on them or get compensated for having that sort of view. Most management teams do not give a shit about October vs. September 4-year stack comps, they're managing the business with a quarterly / annual / multi-year lens. So the rise of pods and growth of headcount/AUM has resulted in far more distortions and volatility in the market relative to historical levels + tend to over-focus on the wrong things that actually create value in the LT.
It remains to be seen if the edge of pods will get completely eroded vis a vis this large capital growth. I think if pod-style investor AUM grows and capital is dictated by those models, it actually probably offers SMs a more unique opportunity in taking advantage of pods trading excessively and offering better entry points both long and short based a variety of non-important factors. Pods are the guys asking "why is XYZ stock underperforming by 1% today?!?" when in reality it could be one of 1,000 reasons but they need to be able to explain it to protect their performance and justify everything to their PMs.
Great post as usual - thanks. As someone who is not in a pod, what are the usual steps to diagnose the question "why is x down 1.65% today when the rest of the subsector is only down .30%?"
Obvious starting points are news articles, sell side reports, and alt data prints. If nothing is there though, what are the next steps? Is it just talking to sell side research + traders and asking them for a pulse on things? What is truly left after that?
I can build a narrative that fits all of the somewhat recent and relevant data + macro stuff, but that doesn't feel very "scientific" if you know what I mean.
The pods can look at their risk model and the entire quantitative tools used at their disposal and be like "ah yes this was factor risk here" or "you were overly long app software here and not long enough cybersecurity." The concentrations that you can explain those sorts of returns (vs. mkt) are very clear at a pod. SMs probably more directional (you're long 40 software companies so inherently you're exposed to the growth factor at a net of 50%).
I agree with most of this, especially the point on SMs being (in some cases) levered beta. LPs are more sophisticated and want to pay fees for alpha only because they get beta from LOs or just index investing (both with lower fees). Right now, the “in-demand” HF product is steady alpha (ie Pods). It might not last forever, especially if we have looser monetary conditions, but the days of SMs having 8/10 stocks and holding them for decades is finished imo
At SM, what happens when price target for one stock is reached?
2 sources of hate
1 - SM guys that seem to not get it done projecting their frustration. In theory, greater % of market focused on factors that don't matter over the LT should make it easier for you to generate alpha, not less. in 2017, people were complaining the industry got too competitive because too many smart people. now we're complaining too many people don't care about fundamentals? which is it? isn't not both.
2- guys that sound smart and were never good. Prep school -> ivy -> BB - > PE -> HF. At a SM, it takes longer to get exposed. It weeds out the guys that have some combo of knowing the right folks and sound good, but were never really that clever.
I personally think it's just creating greater opps to do things they don't.
Let’s just see, once tech starts ripping again all the guys who joined at the SM bottom are gonna eat good
Setting aside performance because that’s a different matter, pods just sound absurd on a risk adj basis. You have to work just as much with way more career vol. why not just go into PE or privates at that point? That’s what always did it for me at least
But also prob comes down to interest and what people wanna do. Some people like trading / day to day vol, I get it
While others like understanding businesses and thinking about longer term trends. I think it’s a different mind set and both ways clearly work, albeit it’s harder to do the long term stuff in publics
Adding to the Pod boi hate :
https://x.com/fundamentedge/status/1730368241401528513?s=46&t=FejHnfDgd…
Kenny is concerned.
bump
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