Is there much problem solving as a HF Analyst?
I’ve recently discovered I really love problem solving…. perhaps not in the typical way you’d put on your CV or mention in an interview.
I’m sure many others on here are interested in, and capable of this stuff; I’ll clarify I’m not tying to project that I’m a generational talent, nothing close, I’m just trying to properly describe the problem solving I’m referring too. I’ve been becoming increasingly interested in digging/using multivariate/abnormal styles of analysis to work things out, eg: I can identify anywhere in the world based on a photo (within reason) and have been messing with some other stuff that utilises movement & various sources and styles of information.
I digress.
TLDR: What I’d like to know from those who work in L/S, equities, event-driven, really anything fundamentals-type (non-code) strategies is:
1) How much problem solving is there in your work?
2) Can you give me some examples of strategies that require or benefit from lots of problem solving?
3) Am I a complete idiot to think that there might be occasions in a HF where you are figuring out the Strat of another HF to your advantage or thinking through problem solving like in Billions: eg in Taylor’s introduction scene deciphering Kraków’s utility of satellite images to monitor truck movements in the Chinese microchip factory to then short the supply chain.
Sorry if a slightly strange question, I’m just trying to work out how I can enjoy this skill as banking is unbelievably mundane in relation.
Hedge fund analysis, especially in strategies like L/S equity, event-driven, and other fundamentals-based approaches, involves a significant amount of problem-solving. Here's a breakdown based on the most helpful WSO content:
1) How much problem-solving is there in HF work?
Problem-solving is a core part of the job, particularly in research-heavy roles. Analysts are constantly tasked with uncovering unique insights, challenging consensus views, and identifying mispricings in the market. This requires a mix of creativity, analytical rigor, and the ability to synthesize diverse data points into actionable investment theses.
For example: - Idea generation: Analysts often start with sector coverage or specific themes and dig deep to uncover opportunities others might miss. - Investment theses: Developing a thesis often involves eliminating false heuristics and avoiding common pitfalls, such as over-relying on metrics like ROIC or EPS without considering broader context. - Deep dives: For larger positions, analysts might spend weeks conducting detailed research, including contacting experts, suppliers, competitors, and former employees, to validate or challenge their assumptions.
2) Examples of strategies requiring problem-solving:
3) "Figuring out the strategy of another HF" or "Billions-style problem-solving":
While the dramatized scenarios in shows like Billions are exaggerated, there are elements of truth. For example: - Competitive intelligence: Analysts might monitor the behavior of other funds, such as changes in 13F filings, unusual trading patterns, or shifts in sector focus, to infer their strategies. - Creative data use: Some funds use alternative data sources, like satellite imagery, web traffic, or supply chain data, to gain an edge. While this is more common in quant or hybrid strategies, fundamentals-focused funds can also benefit from such approaches. - Strategic thinking: In event-driven or activist strategies, understanding the motivations and likely actions of other stakeholders (e.g., management, regulators, or competing funds) is crucial.
Final Thoughts:
If you enjoy problem-solving, hedge fund roles—especially in research-intensive strategies—can be a great fit. The work often involves piecing together disparate information, thinking creatively, and developing unique insights. While it may not always be as glamorous as Billions, the intellectual challenge and opportunity to apply unconventional analysis can be deeply rewarding.
Sources: Starting a small hedge fund, week in the life of a Hedge Fund analyst....., Most academic style of investing that requires the most thought?, Q&A: London L/S + event-driven analyst
for the most part you are following a process. you can always call something problem solving but when i think problem solving what i mean is "X failed, lets try Y. Y failed lets try Z. oh based on these initial attempts, i think actually we only need W which is not as good as Q but is good enough given resources." this type of work style is not really something you do at traditional hedge funds tbh.
Appreciate the comment.
1) Uncommon as you mention but would you be able to name a few that do operate with more flexibility or scope for creativity?
2) On the topic of billions, of course theatrical, but I notice that the PM (or actually perhaps more senior mgmt) is running with different strats so L/S, Merger Arb and other event driven, all at once. I know senior members at certain firm would be playing with different strats whilst building the book, but are there any firms where Analysts would have the freedom to cover a few strats at the same time? - event driven & L/S, say.
hfs are not disney land
No there aren’t any firms where an analyst would cover multiple strats. That’s just retarded and dumb when doing one properly is already difficult enough.
So in macro (depending on the type of shop you are at, i am at a big macro pod shop), you are able to cover multiple strategies and asset classes, although it is not the typical path.
eg. i started off doing solely EM FX but eventually cover fixed income, G3 rates vol and developed markets FX.
If you want to cover multiple strategies, try break into macro and accept that it will be feast or famine career choice
And also i would take a contrarian view to the other comments and i feel that every day feels like problem solving, albeit whilst following a process but it is not stringent and completely rule-based.
It is important to have repeatable edge. That repeatable edge may comprise of pure alpha and risk premium harvesting, but the exciting thing about macro is that the information set and broad market regime we are in varies drastically to we have been used to over the past 30 years.
Current discretionary macro trading is in my opinion of the few seats today akin to the typical prop trading roles int he 90s and early 2000s.
Alpha has become more of a commoditised product at the platforms.
Including macro. i.e citadel and millenium have a large chunk of macro business in basis. Whereas guys like tudor caxton brevan rokos etc take thematic rv and macro directional risk, which is difficult to completely commoditize but is orthogonal to the typical return streams offered by the big platforms.
Hence this trading style feels like problem solving and prop trading does feel like that.
Very energy consuming. My brain is fried on fridays haha
LOL, Fairytale
Most of the problem solving I do these days is data validation and the trying to figure out how to optimise my information channels to “back out” something I’m solving for.
85% of my job is the same though to be honest. People overstate the pod role a lot. If you’re on a top team, eventually you develop a scaffolding/process that is like 80% of anything you do.
Not really problem solving. Majority of what u do is just process like what everyone else said. Have rough sense of the business, follow what mgmt is saying / peer set is saying, see what’s in the price / what needs to happen for stock to go up or down / figure out what you’re playing for - whether it’s momo / mean reversion / turnaround / sotp catalyst. And then continually follow data points and news of what could impact the stock in short or medium term. Not rocket science.
The entire job is problem solving. The problem is the bar, and the solution set is above the bar or below the bar. Your job is to solve for the bar.
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