Interested to hear from average pod PMs
You've had a 10+ year career in pod shops. You know what it takes to stay in the game. But you look over at THE star PM in your sector at your shop (or at other shops, if there are none where you work).
They consistently take home $10mm+ personally. You're still waiting for your first $10mm year. Some years you make 6 figures. You do the same work, you work just as hard, but you can't seem to crack it.
What differentiates them from you? What's stopping you from getting there? Why aren't you them? How do you deal, mentally, being so close?
I know there are a lot of you guys are out there and would love to hear from you. Would be a nice antidote to the incessant threads about some wonderboy that made $50mm at 28. Let's hear about the struggle, those of you that are better than most but not quite the best.
lol I’ve never met any PM that would classify themselves as “average”
Exactly. They prefer to call themselves beta
Lol- what do you want to know?
What goes through your head as you look over at the consistent $10mm+ PMs in your sector?
And any other musings and ramblings as you reflect on your journey, your prior hopes, your plan going forward.
The defining characteristic of $10mm PMs in equities is 1) they hired stars mostly through luck, and 2) they retained stars mostly through skill (usually fair and smart payout structure with a dash of charm and likeable personality). More rarely, there are PMs that just know how to take the right factor or sector bets and put up huge years single handedly (without the need to rely on analysts for alpha).
What do I think when I see them? That I want to do that one day. Most $10mm PMs in the pod world were not $10mm PMs in their year 1, 2 or even 3 as new PMs.
This is a great and unique answer imo. I think people underestimate what % of value add a PMs hiring/training/retention skills play into performance. You can argue that finding and developing A+ talent is a majority of the job as a PM.
Lol how old are you? Why aren’t you them? Why aren’t you Kobe? Why aren’t you Steve Schwartzman? What differentiates you from Lebron?
Hey, OP here. I know why I'm not Kobe/Lebron, I don't have the athletic giftedness. Like, that's not a mystery so I didn't ask that question.
What IS a mystery to me is that your average surviving pod PMs (or above-average once you account for those that didn't survive and disappeared) look exactly the same as your star pod PMs from the outside (and the inside, as someone who worked for one).
I'm trying to understand what separates them because I legit can't tell. It isn't hard work, smarts, or necessarily experience (have seen star PMs lose it after 10 years, and others having $10mm years their first year out the gate).
Hope that helps.
But it’s the same thing - what differentiates outcomes is just talent. It’s not your resume, your pedigree your IQ. Success in public markets is not correlated with raw intelligence. The intangible is judgement, instinct, commerciality and for lack of better words, “getting it”. That’s why it’s so hard to raise capital and only a few people from top funds can do so these days. It’s hard to really explain to an allocator what makes you special. Unless an allocator has actually done the job, everyone’s process on paper sounds similar. So why do some stars fade? Same thing as everything else. They don’t adapt to changing market conditions, their process goes out of favor, they don’t build the right team, maybe they lose focus, maybe they had a bad year and that screwed them up psychologically, maybe they lost the hunger, etc. Could be a variety of reasons..
im simply very average at my job
I would like to hear as well. I am at a big platform and feel the majority here probably in that bucket but everyone seems to have a big ego.
I'd probably characterize myself as an "average" PM in my sector, but given that since I've joined around half of the PMs have departed, if you factor in survivorship bias I'm probably closer to the 75-80th percentile.
I'd say there are broadly three buckets of PMs who get hired into platforms:
1. The "grifter" who has had a two year stint at every platform and manages to convince someone to give him another shot (this is probably the majority of PMs). Depending on seniority of grifter may have only been at one other platform or has had many stops already
2. The "youngster". This is someone who is given a first shot at managing a book. Depending on how his career pans out may develop into a grifter or turn into
3. The "big swinging dick" or someone who already has a proven process/team and has put up big numbers ($50-100m+) at another platform/fund. They are coming in on a huge guarantee
I think what people don't understand is that in order to become a big swinging dick, you need to hone out a process through multiple market cycles, near blowups and turnover on your team. Only then will you have enough experience to start consistently put up large PnL years. Earlier in my career I didn't really understand the value of tenure - I'd look at the PMs who where chopping around 0 or blowing up and think to myself that they were idiots. In retrospect most of them were, but while I don't find it particularly hard to be in my "average" position which still is consistently growing my book size and putting up decent numbers, I've realized that getting to the pinnacle is extremely challenging and just requires a lot of experience/ time in markets.
Hats off
do you mind sharing your rough comp as an "average" PM? Really curious what average means in terms of comp
it’s just math and there can be good yr and bad yr. can be $300k-$10m+. ive seen sub pms make $5-10m+ (and actually had 1 sub pm/snr analyst under me make 8 figs one yr…its a name many of u will recognize ha ha)…ive seen those same guys w/ zero bonus the next year…it’s a wide range…but it’s totally tied to your pnl and payout so u can easily think about the scenarios…u bank the good years, be grateful for keeping for playing the round and passing go & collecting base in flat years and reset the scoreboard, and polish resume in down years. only need a few unless u have a few loose screws like me and can’t walk away!
separate story from guy above, but many yrs ago i had an analyst who spun out and started his own team….smart guy, we made good $ together, but he had a hard time scaling his team/finding the right guys…he was an avg pm but fantastic analyst. his first year on his own he crushed it and made 8 figs. next year something similar. the next year flat/no bonus. year after lost $, left industry/retired and now has massive RE portfolio…collected all his deferred and left
it’s a tough biz and tons of variability. down yr happen but the best pms haven’t had down years in a long time…need to realize this is about building a business with guys under u running $…consistency…
The few PMs I know that are crushing it are more like a high-powered athlete and their life revolves around the market (along with their analysts). The difference between me and them is that I have not "killed" my other self (yet, WIP!). I love running into them and try my best to learn -- but there's really not that much else one can do.
i was once an average pm but now fit your “star pm” persona…though the only people who think im a star are my daughters…certainly don’t feel like one…certainly not on the golf course today :(
everyone can find longs and shorts that’ll work. some do it better than others…what’s incremental at this stage isn’t informational…a bit analytical…sure…but majority time/experience based. ive seen more cycles and mini-cycles than most…i know mngmt and experts better and for longer…i know who’s lying and who’s not…i have a novel of mistakes i’ve made…i know when theses break and narratives change…i know how to ask questions
but that’s tablestakes. the majority of differentiation comes from risk mngmt and team mngmt. the big funds want u to run big teams and put up 100+ of pnl which means u run billions and have snr guys under u.
are u an expert on the risk model? can u size risk better than others? can u gross up/down your book and those running books under you at the right times? can u build a team? how do u incentivize people under u to perform? how do u retain them? how do u hire the right people? do u treat snr analyst/sub pm and pm relationship like a partnership? can u take $2bn more gross tomorrow? if i gave u it how would u deploy?
it’s a process. the 8 figure payday will come
GOAT
Incredibly insightful and exciting read. I will create and run my own single manager hedge fund one day. Reading first hand experiences like this is just super motivating. Thank you!
(currently just a passionate student)
IMO it comes down to either; the quality of your strategy / insight / alpha or your strategy's capacity.
The performance of your strategy ultimately determines your payday. Your strategy is based on the alpha you have discovered. If you have a weak, noisy alpha that is difficult to capture then this will be reflected in the performance. The alpha may only work on a single instrument, market or asset class and therefore your capacity is capped, which will only allow you to earn a maximum amount. Additionally, HFT alpha differs from MFT alpha, where the former tends to have a very consistent pnl stream, low capacity and high alpha decay, whereas MFT alpha tends to have a lumpier pnl stream, higher capacity and low alpha decay.
An "average" PM is a direct reflection of an average quality alpha or an average capacity strategy. From my personal experience there's a couple ways to improve, either you gain in-depth knowledge of a specific instrument / market and you essentially find a strong idiosyncratic alpha or you gain broader knowledge of multiple markets and you discover a generalised alpha which works across many instruments. An idiosyncratic alpha will likely have lower capacity, whereas the generalised alpha will have higher capacity which is more likely to lead you to an 8 figure payday. These types of improvements tend to be correlated with level/years of experience.
Maybe a silly question, but what makes an alpha generalizable across products? I feel like every asset has idiosyncratic flavors, so taking say equity factors and applying them to credit generally won’t yield great results.
Yes, every asset class does have it's own idiosyncractic flavour and its perfectly fine to construct an alpha that is limited to an asset class. However, its possible to think even more broadly/fundamentally about what behaviours are universal across all instruments and asset classes. Here are a couple of well known examples that illustrate the point: trend-following / momentum or orderbook imbalance / pressure. Hopefully that answers your question..
Ratione unde alias iusto voluptas id sed. Laborum est voluptas sint ullam. Et voluptatibus in laudantium. Debitis voluptatum nam eum numquam ut provident. Est ut nam qui et minus. Consectetur minus labore eum iusto voluptatem odit. Non accusamus corrupti ipsa eum.
Iure minima odit delectus et quos neque perspiciatis. Quia deleniti molestiae exercitationem blanditiis quod. Temporibus est accusamus laboriosam ex et quaerat. Incidunt est reiciendis magni ea est.
Eveniet dolores qui sed sed quis dolorem. Occaecati eos odit cum similique suscipit dignissimos eaque. Molestiae ea minima nisi velit doloribus dignissimos expedita. Ex recusandae earum blanditiis veniam est recusandae occaecati. Nobis quis eaque nam ut sed facere. Rerum voluptatibus iusto ut pariatur esse voluptatem non.
Est ea omnis libero neque quis unde quia. Quasi ea cum hic est exercitationem. Itaque fuga sed inventore molestias voluptatibus expedita.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Quidem aperiam eaque pariatur possimus et. Mollitia voluptate dignissimos officia dicta. Minima et et voluptatem labore. Delectus laborum expedita sunt. Similique consectetur assumenda reprehenderit enim et facilis illum.