How to learn pod-style factor neutral investing?
I'm an undergrad working in an equity research role this summer. I always been interested in the pod-shop's factor and market net neutral investing philosophy (the idea of minimizing macro exposure fascinates me) and hope to work at a multi-manager sometime in my career. I'm aware that nothing compares to working full-time at a pod-desk in terms of learning, but how would I learn more about minimizing factor risk, finding the most important quarterly drivers for earnings, etc?
Read Grinold and Kahn and the Barra/Axioma Risk Handbook and you will (shockingly) understand more than most multimanager PMs in the space.
Thanks! Out of curiosity, why don't most MM PMs know about this? Wouldn't these books teach concepts that are taught in good MBA programs?
Also, do you recommend I read Grinold and Kahn's first Active Portfolio Management book (1999) or am I fine just reading the one they released in 2019 (Advances in Active Portfolio Management)?
Oh sweet - I feel like I have asked in the past about this and everyone always says something about "unfortunately you only learn this stuff on the job or by assimilation"
Have always wanted to learn more about portfolio management and understanding how to position/take risk, but more importantly, how to go about building a market neutral strategy (or at the very least, how to hedge out risk other than looking for a few companies that are similar and shorting on a relative value/ranking basis/some fundamental theory)
great recommendation
MM PMs definitely "know" about this.. they can all regurgitate some jargon about factors and beta and what not. People overall are incredibly lazy - the amount of PMs who actually read the book cover to cover and took the time to understand the theory behind the concepts (and even implement them) is very limited.
Got it. Should I read both books by Grinold and Kahn then to understand their complete theory?
But does reading the book cover to cover really make you a better PM? There must be a reason why they don't read one book besides lethargy.
I assume that maybe it wouldn't differentiate your returns over the pack too much but not knowing the fundamentals would be a huge downside risk.
As someone with an offer to intern at one of the larger MMs I can say you're not expected to know anything about market-neutral investing when you're applying/interviewing. Definitely interesting to learn about though.
seems like despite the pay, reading a book cover to cover is still an antiquated idea. Interesting. Makes it easier to stand out.
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