Q&A: I'm a Pod PM

Associate Director in IB-M&A

Thank you. Most PMs want to believe they’re fundamental investors but behave like day traders. How do I “trade” my PM to have balls to double down when things are going against for non-fundamental reasons?

I also believe I’m a more fundamental guy and try to keep the day trading to a minimum so hopefully I’m not deluding myself too much.

What helps our team is starting with a solid, well researched thesis. If the analyst lays out  and communicates what exactly we’re playing for before we put the idea on, then it’s much easier to not get swayed by daily price action and to double down as the risk / reward improves. It also helps make it more of a mutual idea since you’re both bought in and it will feel more like his idea (for better or worse) and he’ll be less likely to just puke it when it underperforms for a month.

A lot of these types of things are resolved by active communication and that’s not just on the analyst but there’s still a lot you can do if your PM sucks on that front. Definitely don’t be quiet or “hide” when the idea isn’t working. Actively communicate why you think the stock hasn’t worked and make your case why that’s wrong. If your PM still isn’t listening, that’s probably another problem. 

Research Analyst in HF - Other

how big was your biggest total comp year (ballpark - 1m, 10m, 100m?)

and what did it take to hit that? luck, skill? how repeatable is it?

Ballpark 25m or so. 

It took getting a combination of big themes right while hitting a bunch of singles and doubles along the way. It’s both luck and skill and I’m not smart enough to know how much of each. Therefore, I can’t really answer the last question. I hope it’s repeatable! Honestly though, if you decomposed our performance and looked at our stats as our CIO does, I think you’d conclude we could do it again. 

 

Investment Analyst in S&T - Other

What are some ways you have seen central management pull the rug from under PMs? ie: alpha capture/central book guys asking to "collaborate"

Unfortunately in more ways than I’d care to detail here, though most are fairly minor. The central book thing is annoying, but that’s the cost of doing business and you more or less just need to accept that.

In my experience, leadership is generally fair and there’s not much blatant “rug pulling”. Just some minor grievances. 

Summer Associate in HF - EquityHedge

am student so apologies if anything is nonsensical

1) where do u see things going in terms of coverage universes while ai probably at least makes wider universes more accessible? more multi-sector analysts / near generalist larger pods? 
2) based on above and also in general for generating L/S spread do u think going fwd there will be attrition of opportunities for intra sector spread? PMs might shift to trying to generate more inter sector spread?
3) if either or both of above are true, how do u think that changes analyst job / what makes a good analyst? 
4) if u were in college right now heading to pod L/S or aspiring to do L/S at pod what would you be doing to better prepare to be good analyst? feels like a lot is uncertain on what process might look like in the future with how ai could change or commoditize different things?
5) good sector or sub vertical to learn not necessarily to cover forever but to start with to get good footing / reps and develop sound process?

appreciate your time

1) I agree that teams will likely need to add more breadth in the future. This will probably look like more generalist pods where the PM’s mandate widens a bit but analysts remain mostly sector specific. AI will absolutely help here. 

2) I’m not sure that intra sector spread will go away much more than it already has. I do think finding intersector spread will be more important and I think it already is, at least within sub sectors of my own coverage. 

3) I don’t think it changes the analyst role dramatically. The analyst will still need to be the expert within their subsector. I think teams should be more collaborative and communicative across analysts so that the team has better picture of the “mosaic”. The PM will likely need to add a lot more breadth, relatively. 

4) It’s a good question and I’m not really sure what the right answer is because things are going to change quickly and likely in surprising ways. I think some attributes of strong analysts will remain consistent though. Be extremely curious about the world, work in a sector you’re at least halfway passionate about, be humble about both what you know and don’t know, be resilient because whether you’re humble or not you will be humbled by the market consistently. 

5) I think healthcare, tmt, and industrials are probably the best places to be now and in the future.

Great questions

Also learn to be concise, punchy, and make your writing less evidently ai and more natural. Not trying to be an asshole just general feedback so you don’t come across too hardo 

you gotta chill dawg when I was in your shoes I was cranking 90s on fortnite and everything worked out for me.

I had the same exact questions, and I ended up making it. I think you and I both know that a lot of these questions are unanswerable since there's a lot of wiggle room.

The most important thing right now is identifying that you're someone outside of finance. I know this is counterintuitive, but the selection pool for each type of person is one of one, meaning they want a diverse class of one-of-one students. You need to become a one-of-one in something in order to get in, be the best at that, and make sure it's really supporting the world in some way: solving problems using technology, being the one-of-one for the finance guy. Being the one-of-one finance guy is frankly impossible.

Just try not to do corporate finance and Python backtesting, and instead focus in on social projects, research, and passion projects that really showcase how special and talented you are.

Research Analyst in AM - FI

How do you think about capital deployment / risk budgeting throughout the year? Would you say you practice more conservatism before building a PnL cushion? How do you balance medium term (think 12-18 month) perspectives on the market with the more immediate term? When you reflect on the success you have had thus far, what personal attributes of yours contributed to this? Could you provide an example of a thesis that played out on a security you were L/S? How do you think about simplicity/complexity of the ideas you decide to allow into the book (i.e., a single thing going right/wrong vs more layered thesis)? Thank you.

It’s generally a function of my conviction in the book which is definitely more of a feeling than anything quantitative. I don’t really wait to deploy risk though having the cushion certainly helps me get comfortable with bigger swings. 

I’m not much of a macro guy to be honest. There are people who spend 80 hours a week with dedicated teams that struggle to predict all that stuff. I’m not going to solve it in my spare time. So I generally just try to stay a bit balanced and focus on business fundamentals.

I think a lot of it is psychological. I try not to get too high or too low. When things are working, you’re never really as smart as you feel. When things aren’t working, you’re not as dumb as you feel. Being truth seeking is important as I’ve found that things generally play out as they should, eventually. 

There’s a surprising amount of work that goes into a “simple” idea that can be expressed in a sentence or two. To your point though, an idea that offers more ways to win (assuming you’re not just throwing things at the wall and hoping one of them sticks) is almost always a better idea from a risk perspective. 

Can’t go into detail about any specific ideas. Sorry. 

Associate 1 in PE - LBOs

How do you find a good pod PM / get recruited given the lack of transparency / info out there?

I have a strong 2+2 background but don’t want to just reach out to pod BD and interview with mediocre PMs.

It’s kind of a crap shoot to be honest. I got very lucky when I first started out as I got paired up with a great guy and I had no idea. I would’ve taken any seat back then. 

You can try to interview the PM yourself and try to make the best judgment you can. If you ask others you know at the firm, they’ll generally have a good idea of a given PM’s reputation and that’s probably the best you can do.

garcia421

As a new first-year IB analyst, what path would you recommend taking to get to your seat today (2+2 or recruit directly for MMHF roles)? If you could prepare all over again for a HF seat, what would you do in my shoes to best prepare yourself?

If you know you want to be at a hedge fund, then I don’t think there’s much value in doing 2 years in PE. I didn’t take away much from it myself. Banking was more helpful in my career than PE imo. 

scrappyfinancebro

Having gone through PE what tilted you towards MM over SM? How would you recommend we think through the trade off in investing style and long term viability?

Honestly was the first job offer I got so I took it. 

The investing style really depends on the PM. Yes, you’ve got to follow the risk model, but you can still have duration and make bigger bets within that if you know what you’re doing. Also a lot of SMs I talk to sound increasingly “poddy” anyway. I’m not sure there’s a ton of daylight between them these days but I could be totally off base. 

LBOneKenobi

Thank you. Incoming FT in middle-market IB, and am very interested in HFs longer term. Considering pivoting to asset management. Would you say this makes more or less sense than sticking with my MM IB if I want to end up in your position in the future?

I’m not really sure what asset management means in this context. Plenty of MM IB candidates get interviews so I think that’s a fine enough starting point. 

tomatosingh101

Thanks for doing this! I am about to start FT at a top shop for ER and was curious about the fastest ways to break into a pod. Do I just wait for BD's to reach out or should I leverage my clients?

Also just graduated so was curious how do I network now? Can I just shoot over cold emails w/ pitches to HF Founders before my job starts? 

Thanks again for doing this!

I’d wait a bit on all that. Spend some time learning your current job then pick your head up in a year or two and see what’s out there. You’ll be a better candidate and have a better understanding of what you want to get out of the job. 

ffx900

What’s your thoughts on hiring L/O analysts or those trying to make the transition into L/S? Any advice you can give ?

For context, I’m a L/O analyst covering Industrials (6+ years experience). I have gotten pretty close to getting hired after a few coffees with some L/S pm’s after pitching some live long and short ideas to illustrate I can potentially do the job. Unfortunately these opportunities have fallen through for headcount reasons I can’t control.

I’m still finding it’s a massive uphill battle to “get in” the L/S space. And the L/O space isn’t in great shape in London at the moment.

I’m open to those types of candidates. As long as you can demonstrate that you know what a good short looks like and are genuinely interested in that side of the business. Some guys look for people they can plug and play into their process and won’t require training or mentorship so that may be an uphill battle. Others are looking for people with a good process and all the other high level traits that allow someone to be molded into a strong L/S investor. Just gotta find the right fit. 

ankit.gupta.us

Hi

I'm in my early 30s and considering a path of recruiting for IB after my MBA, then eventually moving into public investing, ideally at an MM platform. I come from a statistics background and have always wanted to apply those analytical skills in investing.

One thing I'm struggling to gauge is whether breaking into banking as an analyst in my mid-30s would be a meaningful disadvantage. Is that hurdle generally surmountable, or does age become a significant factor when pursuing this path? I'd love to hear from anyone who's seen similar transitions firsthand.

I think that’d be fine. I don’t think a lot of guys care too much about age. There’s a wide range of ages and backgrounds at these places. Just need to have the right skill set and enough of a resume to get your foot in the door with BD. 

kobeoffinance

If data and modeling gets commoditized w/AI, and now these SS conferences are increasingly open to most as every fund has access to + ai summaries of vast expert interview libraries…where do you drive your conviction/variant views from? 

I think data and modeling are already largely commoditized. 

I’ve always felt the “where does your edge come from” question to be a bit funny. Ultimately, I think it’s because, for better or worse, think about and process information somewhat differently than the median person. 

stockbondanalyst

How do you deal with market unwinds ? Do you ride them out or hedge ?

How do you deal with factor exposure or macro moves that might impact your book ? Do you look to hedge that out or shift the portfolio a bit to “act” better during these periods.

Do you trade events or quarters? Or you’re more thematic / longer term ? I find trading quarters to be so tough these days given positioning and buyside expectations are pretty accurate. Then you’re just guessing about positioning

How many longs and shorts do you have, and what position sizes ?

Are you more momentum or contrarian ?

Do you find modeling to be helpful ?

I tend to just ride out unwinds as I’m just not the fastest reacting person out there. I think that’s a function of our team’s ideas tending to be a little longer duration than average.

I try to mitigate factor and macro bets since I simply don’t think I have any edge there.

We’re more thematic and longer term, but quarters and other events are key catalysts to realizing our long term views so we take a lot of print risk. We’re not swinging things around every quarter, but we’ll size things differently depending on our view into an event.
 

I oscillate between being momentum and contrarian. Bit of a cop out, but I tend to just go wherever our ideas lead us.

Modeling is important, but table stakes and not a material source of differentiation.

henry10

I'm interested if you ever think about who is on the other side of trades you make? Do you think there is a typical counterparty profile that you are harvesting from? Do you think that is changing?

Yeah they’re all dummies ;)

But seriously, I don’t really think about that outside of trying to understand what the bull and bear theses are for a given name and what others are probably looking for fundamentally. 

Investment Analyst in HF - Event

KG in an interview said some guys just cant do it without almost all the facts laid out in front of them. Does that resonate with you based on your experience and what you’ve seen in your peer group? Asked differently, is some of the skill innate or can it be taught? 

Whats the best advice you can give to an analyst who wants to make that next leap?

Sounds like he might mean some guys just struggle with uncertainty and taking risk? I definitely see that amongst peers and I think that results in a lot of “chasing”. It’s a great inefficiency to take advantage of if you can avoid falling into the groupthink trap (we all do sometimes though). 

I do think some of the skill is innate because it’s such a psychological game and you can train some of that but it’s simply not a good personality fit for a lot of people. 

I think the best thing an analyst can do is just crush it at their day job while trying to think a bit more broadly. Do your best to pick up a coverage universe a bit outside of your core. I think having a bit more breadth allows you to see through a lot of the poddy debates and groupthink. 

claudealtman

Thanks for doing this - super super helpful. 

1. With AI increasingly commoditizing research and modeling, do you think fundamental L/S is still as attractive a career to enter as 5-10 years ago? Are junior-level analyst seats going to disappear (or even be worse learning opportunities) as PMs leverage AI to cover more names with smaller teams?

2. If you were 25-30 today with an IB/PE background, would you still choose public markets over tech given the AI opportunity?

3. Given the shift in talent and capital toward pods, do you think joining a decent fundamental SM or LO is still a good first seat? Or would you recommend going directly to a pod given where the industry is headed? 

I think it’s a less attractive career vs 5 - 10 years ago simply because it’s a more crowded space. It’s become a lot more attractive relative to PE in the last decade so competition is tougher across the board. I think there will be fewer junior seats because of AI in the future. It’s just a lot easier to cover more names with AI now.

I would still choose public markets because I genuinely like it and the job fits my personality better than just about anything else. I would do this job even if it didn’t have outsized pay. I can’t speak for you or anyone else though.

I think that’s a decision to be made on a case by case basis. If you’re working for a bad PM in a shitty seat at a pod, then the median LO / SM seat is better. It also depends on what you want out of the job. But yeah, objectively joining a SM or LO is a good job to have.

showmethemunny

thanks for doing this - want to explore equity L/S but current shop runs a different strategy and spend much of my time on the private side with some exposure to publics on more of an ad hoc / special sits basis. Sector agnostic. Graduated not too long ago and took the first HF role I could to get myself out of banking.

Out of interest I want to, at least in my own time, start developing a coverage and coming up with L/S ideas, more from the lens of learning rather than immediately trying to generate alpha. Any advice on where one would start (with the current tilt to privates) and what the ramp process looked like for yourself coming out of PE?

Honestly the best way to do it is just to do it. Write up your ideas, track companies, track your performance, be honest with yourself. Maybe keep yourself accountable with a Substack if your firm allows it. 

princey.8999

Thanks for doing this.

What's the general consensus regarding hiring of IB Associates after MBA? Especially if someone is International with prior Buyside experience (albeit in a different geography). How tough do you think is for IB associate to make a transition? Like age factor & seniority a risk/liability? Is there a specific preference for certain B schools? 

The recruiting process is a lot less rigid than PE. If you have a decent resume even if a nontypical background, as long as you can get your resume in front of BD either through a headhunter or networking, then you at least have a shot.

claudealtman

What do you typically see happening to the 2+2 guys who can't crack it at a HF (wash out after 1-3 yrs)? Do they end up significantly worse off vs having never entered HF to begin with?

Some go back to PE, some go to business school, some go to industry. A lot take another shot at a different fund. They’re probably a bit worse off if they found that HF is not for them but I probably wouldn’t say “significantly” so. 

Investment Analyst in HF - EquityHedge

What distinguishes an analyst candidate? Pedigree?  Idea Quality? Being right?  If a candidates ideas play out favorably during the interview process, does that impress you?

Curiosity, intelligence, humility, passion.

It’s marginally positive but there’s so much variance when you’re talking 53% hit rates in this industry so it doesn’t really matter. 

BulgeBracketBrand123

What are your thoughts on hiring analysts from MBA programs that have a specialization in Investing? (e.g. Columbia's Value Investing Program) I know some shops are open to it, while others strictly look at IB exp from UG, so curious on your thoughts. 

I haven’t done it but others have. It’s not particularly common at pod shops but it absolutely does happen. I think a lot of people would be open to that as much as they are open to IB or PE candidates (I.e. potential high ceiling candidates that will take time to develop vs ER or hiring from another fund).

SilentCarry

Appreciate you doing this. The line about failing IB recruiting your first time around stood out, since most people on here only share the version that worked.

What actually broke that first time? Technicals, networking, the narrative, or just variance? And what did you change before the attempt that landed?

You also mentioned sacrificing quite a bit to get into PE. In hindsight, was PE a necessary step for the seat you have now, or would you go straight to the buyside if you could rerun it?

Last one, building on your point to claudealtman about fewer junior seats because of AI. If modeling and coverage get commoditized, where does a junior's edge come from? Variant perception, management access, sourcing ideas the street isn't looking at, or something else entirely?

I networked poorly and frankly built the job up too much in my own head. Probably some element of variance as I got a couple second round interviews I didn’t convert, but mostly the networking, which I fixed later on and through that and a very lucky break with someone responding to a cold email, I landed in a great IB group.

PE was definitely not necessary. I think I did it because I didn’t know enough about HF recruiting at the time and a lot of my peers were doing PE so I just sort of went with that. I didn’t hate my time in PE, but it’s just not for me so I wouldn’t do it again.

All of those. A lot of investing is just seeing through bullshit and figuring out where the world is heading. A model won’t help with that. I think management access and being on the road at conferences and finding other unusual datapoints or perceptions will be more important going forward.

sams3

Thank you for doing this. Threads like this one are gold for those of us trying to figure out the path. A few questions on portfolio construction and risk within the pod shop setup, if you don't mind:

1) What level of ann. vol do you typically run your book at? Is that something you set yourself based on conviction and strategy or is it largely driven by the MMHF’s risk framework?

2) Does your shop impose hard vol caps? One thing that's always bothered me about vol-based limits is that they're inherently backward-looking. They bind hardest after vol has already spiked which means cutting positions at the point of max dislocation, exactly when a still-intact thesis offers its best forward returns. Have you ever found yourself a forced seller at the worst moment because of the risk system? And how do you manage that tension please? How do you size with enough headroom that you never breach, running hedges specifically to damp realized vol or is there discretion to hold through a vol spike if you can defend the thesis?

3) Roughly how many names do you run at any given time? How do you think about the tradeoff between concentrating in your highest-conviction ideas vs diversifying enough to keep idio risk manageable?

4) How do you manage incidental Barra factor exposure (momentum, quality, growth etc) so it doesn't eat into the thesis? Do you actively hedge residual factor risk or do you view some of it as an acceptable cost of running the book?

Thank you very much again. Really appreciate you paying it forward to the community.

Without going into too much detail I will say that my vol is definitely above average. It’s not something I target, but it’s an output of our ideas. That said, if vol is simply too high like in the last few months, I’ll find ways to reduce it by reducing gross, sizing down volatile positions, sometimes even sizing up risk reducing positions.

Risk definitely will call me out when vol is too high and yes that’s often at the most inopportune times. I’ve reduced positions and cut risk at the bottom before for sure but it’s just kind of the way it goes in this seat. I have a decent enough track and performance where I’ve yet to be forced to massively cut risk, but more about trimming around the edges while still maintaining the core profile of the book, if that makes sense.

Our book is fairly diversified and I would guess I take less name specific concentration than average. I honestly haven’t had great success in my top 5 ideas at a given time (ie the top 5 positions in our book return on a % basis in line with the median name).

I’m fine taking some factor exposure but if it becomes outsized I’ll look for ways to reduce it. Sometimes that’s cutting low conviction names that add to that specific exposure or sizing up medium conviction names that reduce the exposure.

PM in HF - EquityHedge

Great thread and thanks for doing this. Couple of q's:

(1) How big is your team? What sort of layers do you have (e.g. RA / Analyst, Sector head, etc.)? 
(2) How do you collaborate with your analysts? Do you cover any names on your own?
(3) How do you benchmark your analysts? 
(4) Do you think much about scale? Would you need more people?

5 analysts. No layers.

Extremely active collaboration across the team. Constantly discussing and sharing ideas and datapoints.

It’s not very scientific. I look at how their names perform on an absolute and relative basis while qualitatively judging the quality of their research and effort.

I don’t think we need anyone else to meaningfully scale.

Determined

As one "old guy" to another, it's always good to have experienced folks giving back to the community.

I'm interested in how you manage the team since that's a system that, done right, compounds quickly.

What does your analyst development process look like? 

How often do you meet with different members of the team individually? 

What has been the highest leverage management practice for you?

How strict are you on performance management? 

I’m very open with my team and interact with everyone on a daily basis. Whether that’s discussing ideas and datapoints or reviewing pitches, ramps, and other work and giving feedback on that. I’m pretty direct with how I interpret and view things and encourage analysts to do the same so there’s a healthy amount of debate and disagreement, which I encourage.

As a result, I think we have a very strong team culture where everyone is rowing in the same direction and working to the same end goal. Above all else, you need to hire the right people for that from a temperament and cultural standpoint and I think that is a meaningful source of differentiation for our team and is probably the “highest leverage” management practice I employ.

That’s a sort of hard one to answer. Each team member knows how to do well at their job and they don’t need me to tell them they fucked something up or got something wrong. I think that goes back to hiring the right people. So performance management is more about diagnosing and doing post mortems to see what we missed and how to do better going forward. We haven’t had any major issues yet though I’m sure that will come eventually.

henks313

How did you ultimately learn your investment and allocation process? Did you replicate what your previous PMs did? If you’re in a sector specific pod, what do you do when macros is going against your sector?

Yeah it’s a combination of what I learned from past managers, talking to a bunch of more senior guys and seeing what works and doesn’t work for them, and adapting it to my own strengths and shortcomings. There are many ways to be successful in these seats, but there are styles and processes that I know that are just not good fits for my own skills and personality so it’s a lot about self reflection. 
When the macro is working against us, I just try to ride it out and keep my head above water by hitting singles and doubles. There are things we do to try and make big money (long term, thematic, big ideas) and things we do to stay in business (get earnings right, more tactical trades). 

Ehmerica

Are you more comfortable managing your money or OPM?

Good question. I haven’t thought too much about it. At a pod OPM is sort of faceless and unemotional. If I ran my own fund and was managing individuals’ and pensioners’ money directly, I might feel different. 

futurerockstar56

Hey, in ECM biotech

Do you think there are any transferable skills or should I look to move to coverage?

Interested long term in HF just based off of an internship I thoroughly enjoyed in Undergrad.

Yeah honestly there’s probably not a ton of overlap, but I’m not really familiar with the day to day of ECM. It’s not disqualifying by any stretch, but probably not the most directly transferable. 

Associate 1 in IB-M&A

What sector do you cover and do you think coverage area plays a big part of success

Yeah I think sector selection is underrated. It’s a lot easier to scale as a tech guy vs a fins guy and there’s probably a lot more dispersion. You should also genuinely enjoy your sector otherwise work will be a slog.