MM to SM is it possible
Curious to hear if the jump is ever made. I understand investment styles are different and the way you think about business might clash but in the case one wants to do this, can they?
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Definitely doable. Becoming much more common. Would suggest looking at Brett Crauvign’s stuff on Twitter Brett @ Fundamental Edge. He has xp with talking to SM funds wanting to hire pod shop analysts.
times are changing… this isn’t 10 years ago when a quality SM wouldn’t look at a MM analyst as a potential hire worth interviewing…
in general the MM guys get much deeper on names and are excellent at building variant thesis’ with strong research and alternative data which is a strong skillset to have. If you’re not in an overly bullish market it’s probably more useful than whatever PE XP will hammer into you.
Employability is per person at this level. There’s a huge talent divide at this stage and it’s clear to see who can’t hack the transition from either PE to SM or market neutral to a beta-investing mindset. It’s up to the individuals but as an MM analyst you will definitely get looks from SM funds. Can’t really standardise outcomes though. Some people just don’t have what it takes to work at a hedge fund, and that’s ok.
“in general the MM guys get much deeper on names and are excellent at building variant thesis' with strong research and alternative data which is a strong skillset to have. If you're not in an overly bullish market it's probably more useful than whatever PE XP will hammer into you”
I vigorously disagree with this statement. I don’t think 90% of people at MMs are deep and a vast majority of them are shooting from the hip turning over their entire book every month. I know PMs that turnover 20% of their book a day. Of course some MM PMs are very deep but that’s the exception not the rule.
True it’s case by case, but there is a reason for the stigma and frankly the 2+2 guy will mostly get the role unless you know your stuff much better than them (which is the case sometimes).
Always exceptions and it’s possible to do, it’s just harder than going from PE/Banking and it is that way for a valid reason (in general).
Edit: I worked at a pod for years. Most trades we did were something along the lines of reading the CRC note on X before everyone else at 7am and shorting for a bad Q trying to make like 5%. Or going long Y because 10 teams are short it internally and the checks have been bad but we think the data is okay and it probably will rip in the 7 days following the print. Or going long Z because they have a very promotional management team and a good macro background for the last 2 months and the CEO/CFO are talking at a conference and will be promotional.
Almost everyone I know who still works at platforms will admit this is how they work 90% of the time. Yes there are like 10% of teams with 3-6 month holding periods or real views but it’s more an exception than a rule.
this post is pure cope, MM analysts are far better analysts than PE analysts. the next few years will prove this out
the entire job is to know companies deeply and know exactly what drives day to day and hour to hour stock prices - the "first principles" "private investing in public markets" guy will get absolutely demolished like they have been the past few months because your capital is no longer durable enough to let you spend 10 years playing long QQQ this time around
just to clarify this isnt a "mm analysts are better/smarter/more talented than mf pe analysts" or anything of the sort. its just the demands of making money in public markets under the paradigm we are about to enter caters well to a very specific, trainable skillset. mm analysts are trained to mechanically do this one task. it's a much shittier job than the 2+2 "long term" SM analyst, but it's the more survivable/durable one for the foreseeable future.
the pod shop process being described is accurate. its not a glamorous job at all. it does make money, however, at least for now, and thats what matters. not "holding real views"
I’m surprised you worked at a pod for years and are equating turnover with depth of research / horizon of thesis. Surely you know most of the turnover is rebalancing/sizing/risk not flipping your longs to shorts and back overall. Most pods I know had a couple longs and shorts that were on for years.
Ex. XYZ is my favorite LT thesis and upside name, it’s a great biz with great mgmt and whatever other navel-gazing qualitative special insightz that only reside with generalist-George who did 20 expert calls and even a super special site visit armed with special goggles from 4 years of hallowed MBA+PE sacred knowledge. Basically this thing is a compounder and itz got the moatz man, winner take all. Everyone loves it but we love it the MOST! Because duration.
If it’s actually accurate, MM and SM could both be long for 3 years and MM on this name could turn it over 3x a year while being long the whole time. Double size into catalyst and when valuation / technical setup is good, cut size in half when valuation is stretched and no catalysts, exudes it’s more a mkt/factor bet there. Trim/add a little weekly on factor rebalance or forcerankings.
So both agreed it’s a great LT idea and biz. If they were right guess who probably made more PL as a % of Avg Size? If they were wrong, guess who probably lost less as a % of avg size?
In many sectors, especially less secular-growth sectors MM absolutely go deeper on most names and know them better, esp because some names work in MM model (relative value) while not having the setup for being a crowded SM hotel because it’s not an absolute long. And this is coming from an SM analyst btw.
I had prior SM internship experience, but then banking then few years at MM. There were plenty of quality SM funds interviewed with, a few offers and the ones that didn’t convert were not due to MM but either fit or a bad interview performance. Now at SM.
It’s not 2010, most funds recognize these funds are solid training grounds on stuff like mgmt interviews and modeling and getting the reps - if you’re someone with a temperament match for SM model and demonstrate that in how you talk about companies or pitch, it is not an impediment. For the few firms that still view MM as an automatic disqualifier, they are also overwhelmingly the funds who didn’t have any respect for risk mgmt or flexibility or humility around factor bets and are now deep under high watermark. Some funds don’t want anyone with prior HF experience anywhere, some only want people with a tippy top school and banking group, or a certain SAT score or a certain type of personality test result etc etc.
If you’re someone who is actually a competitive candidate proficiency and temperament-wise and understand them enough to speak accurately to the (rather minor) differences in philosophy you’ll be fine, you’re more likely to be auto-dinged for your 3.7/4 GPA or because you failed a brain teaser and got flustered. That said, if you worked on a tiny book for a junk PM who made you trade weird and impressed upon you a bunch of odd and incompatible philosophies and you don’t actually have the knowledge and proficiency necessary then it’ll be an impediment. That used to be somewhat more frequent. A decade ago it was fair to say the best people in either model are very good but the range of quality in wider at MMs because easier to get / easier to lose jobs - no commitment to hire and fire so more slip into the system who shouldn’t have been there. This just isn’t the case anymore as things have gotten more structured in the banking to MM pipeline, grown and proven out the model with strong alpha performance and (for at least 5-7 years) junior bankers who want to do HF aren’t as likely to decline MM for PE in hopes of eventual SM (>7 years ago more so the case)