Hi all,
Think I did one of these a few years ago but I've been in the seat now for a few years as an analyst & partner at a < $1bn L/S equity hedge fund. Interned in IB. Am a generalist but cover a lot of consumer, TMT, financials/REITs, industrials. Everything ex-biotech.
Happy to answer questions on career path in both IB vs. HF, LT career questions in HF, as well as general market questions, thoughts on industry, strategy, etc. Can also discuss my day-to-day as well.
Thanks everyone.
Hi, first off, thanks for doing this. I just wanted to ask about what was it exactly that differentiated you, as going into HF right out of undergrad is minuscule? Also, how can networking for HF be different from that of IB or something else, is there a difference in the approach?
Thanks.
I had interned with two hedge funds during undergrad that at least demonstrated I had a vested interest in the L/S & public markets space. That at least "proved" I was devoted to wanting to do public equities investing, but I think having relevant internship experience is important. Hedge funds largely don't have the infrastructure required to train junior investment professionals, with the exception of Citadel/P72. Even Millennium has outsourced that training responsibility to UBS equity research... ideally training students out of u/g with the idea that they move to Millennium after 2-3 yrs in a formal sell-side program.
The networking is different in that you have to show you can add value for a fund, versus IB I found it more meticulous... e.g. grabbing coffee and trying to demonstrate interest like you would tour a college campus. Hedge funds simply want to know 1) how you think / your thought process and 2) can you model effectively? What separated me in my networking was that I had developed 3 written pitches and models I was sending to most funds, so they at least had a taste for some level of work product and thought process. You wouldn't send a giant CIP to a bank in hopes that you show your ability to pitch deals to that point.
Would you recommend starting at one of the pod shops (Citadel, Point72) out of college?
If you're dead set on doing public equities I think the more experience you can get earlier is always better. I think some on the site may disagree and suggest that going through a structured, formal training program in sell-side banking or research is inherently more valuable but I think that only applies to junior professionals who are uncertain of where they want to be in that next role.
A part of my entire edge as a young investor is that I've spent > 4 years already in a buy-side public equities seat, where most peers my age have spent 2 years. A lot has occurred in public markets since then and developing a "rapport" with how stocks trade, how companies operate, and just identifying inflection points across markets takes time. I think if you were fully certain public equities was the path you wanted to go down, I think the best setup for anyone is to get there as soon as you can. You're thrown into the fire quickly and forced to learn and adapt. Citadel / P72 likely have the steepest learning curves out of any FT U/G job you can get so I'd say go for it.
Contract for life. He has to sit in his seat until pronounced dead.
Hi, first let me thank you for your help, I think I really need some guidance
I am a intern in ECM and I only joined because I really like financial markets and my main goal is to change to the buy side - either long onlys like family offices / HF or even Asset managers
My doubts are:
1) what are the skills you need to work on a HF ?
2) where you think you can learn the most to prosper in your work ?
3) Looking 5 years back, how do you feel regarding your work ? Happy ? And why ?
Regarding work/ life balance
1) do you feel much pressure because of dealing with the results you have to accomplish even though sometimes the markets are irrational and out of control ?
2) in terms of work hours, how many hours do you usually work and what is the expected annual salary when you work on HF
3)what do you think about ECM ? Shall I continue here for more 2 years and then try to change to a investor or should I leave right at the end of internship ? Main problem is that I spend to much hours on the office and do not have time to really learn how to invest. ECM consist mainly marketing/ selling a company not learning to invest. Any advice is welcome
Thank you
ECM isn't a bad place to be by any stretch so don't be discouraged by anyone discounting it on the site, congrats for landing that gig.
I think while it can be relevant and you could tell a rational story to get over to the public markets side, it's a bit tricky. I've seen more dedicated ECM buyside roles as of late (pre-2022) that were wholly focused on teams doing primary issuances, IPOs, SPACs, etc. If that's an area that interests you then you likely have a leg up being in ECM and trying to make a move to the buyside in a similar capacity. Not sure how these teams are doing YTD and can't imagine they're doing too hot to be frank, but an option if you find that style / type of investing interesting.
1) Ability to process information quickly and make critical decisions is huge. I think as an analyst your entire responsibility is to be your PM's eyes and ears, his/her boots on the ground so to speak. Can't speak to skills that a PM needs as I'm not there but what makes me a strong analyst is not only attention to detail, but going the steps further to collect, analyze, and process information in a way that connects the dots. I treat the entire market like a giant puzzle and you're essentially trying to fix the pieces together in a logical way to understand what's happening beneath the surface.
2) As a generalist I can definitely start to learn more about each sector. Often times I feel my theses are too simple or narrow-minded and those with sector-specific experience have a much deeper grasp of certain subject matter level information in those names that I may not be aware of. It's important to know how other smarter investors think through security selection as much as you focus on developing your own process, candidly because your process won't always be right and it will help explain moves in price.
3) Happy. Been an insane few years to be a public markets investor and I've learned a ton and made money / outperformed since I've started. Knock on wood but blessed to be in the seat under a very smart and successful PM.
WLB
1) Ha, yes. Awesome question but yes it's an insane amount of pressure. Shared this elsewhere on the site and don't mean to play the "holier than thou" card but public markets investing in a seat where you take risk is a different kind of stress than meeting narrow deadlines. Sure my role isn't client facing but in the span of 5 minutes I could be down in the $ millions, for any reason. Especially lately, you look at a guy like Plotkin who was a storied investor for > 15 years, all to lose it in the span of basically a month... in my view that's a hair more stressful than missing a deadline for a data room. (and yes I did pick a high-profile $bn blow-up and compare it to IB analyst level work).
2) ~60 on average. During earnings closer to 80. Pretty flexible, my time is my own. I work Saturday's and Sunday's when I have free time and want to look at stuff or have an idea hit me. The harder/more I work on generating new ideas though is pretty commensurate with getting paid more. Comp at junior levels was pretty similar to junior IB salary, but scales up quicker and then bonus higher in both cash and equity in fund.
3) Alluded to this above but it moreso depends on if you actually enjoy the ECM type deals. There are buyside seats exclusively focused on working on IPOs, primary and secondary issuances, etc. If you were really dead set on wanting to do traditional L/S investing, a pivot to a coverage or M&A group probably makes more sense.
No worries. I don't do much TAM analyses because I think they're worthless but yes, bottoms up as much as possible. Unit x price at base level but then moreover peeling back geographies, product lines, product-specific PnL... and then using alternative data sources, some of which available to retail investors but then others not so much. Correlating/backing into estimates using credit card data, using RevPAR and room night assumptions for hotels, state gaming level data for GGR on casinos, chemical pricing and capacity assumptions via Platts, stuff like that.
As a college student no one is expecting you to have that level of access so wouldn't worry too much there. But think wherever you can get creative in your modeling is always a plus.
how old r u and how much do you make?
Sure.
1) I like Tegus and have used it solely on trial, as with YipIt. We've never/don't use Canalyst, and have previously used Visible Alpha. Tegus is great to get up to speed on in the ins and outs of new sectors, often times we use it on a trial basis or temporarily solely to get up to speed on a new sector. If no new sectors, we tend to limit our usage. YipIt is fine but we've found sell-side credit card data that we already pay for as a function of trading tends to be just as good directionally.
2) Yes. I go through every call/transcript and give updates on each name in my coverage. Those we haven't been involved with in say, > 2 quarters, may be smaller bulleted blurbs on 3-4 major key takeaways, whereas names we're more fully involved in get longer write-ups, thoughts, trading recommendations, etc.
3) Ahh, it's tricky. We have a pretty robust and consistent process here, we look for stocks with misunderstood earnings power in either direction that we think the market is underappreciating and mispricing. To your point, that can vary widely across sectors. My best way to describe how our process works and as mentioned briefly above: it's either a bottoms-up idiosyncratic approach, where we're looking to find names that the market has maybe oversold on fears of earnings being cut much more drastically than what the fundamentals imply. A great example of this was VVV coming out of the pandemic: this company owns and operates oil change stores, but also sells its own private label oil lubricant products. When oil went negative, they were essentially being paid to take on base oil, and then refine it to sell as lubricant. Their raw materials pricing went to $0 (for the case of this example), but miles driven actually held in and so therefore their GM % increased by ~500 bps in the interim, and EPS followed. Now it's probably a short, lol. The top-down secular example would be looking at something like chemical recycling. CPG companies largely need to pay up for higher cost materials, but as oil structurally settles higher as a result of potential implications surrounding the war, the cost parity between virgin and recycled plastic resins narrows, making it much more affordable for PG / CLX to buy recycled resin for their products. They can still go to consumers and charge the same thing, but now the relative hit to GM % isn't as substantial, and they wield pricing power.
Apologies for the lengthy response, but those are one cyclical and one secular example of how we evaluate investments. I'd say on the latter (secular) that if it doesn't fit with some sort of tangible fundamental change to the financials within ~2 years then we may avoid it as it likely won't drive the stock. I'd just add that it's important to know both the cyclical AND secular stories regarding all companies; industrials all have secular stories albeit occasionally negative, and lots of consumer & tech is more cyclical than people are willing to admit. It all matters.
Not overly sensitive, definitely seems like a real issue to grapple with. I don't know the structure of the fund or the team so I can only opine on the details you provided... but that being said multi's have made a much more devoted effort and commitment towards diversity, but yes the industry as a whole tends to be male dominated. There are more 100+ person banks than there are hedge funds.
Also will preface the response with: as a man in the industry I can't really speak for it how you feel being the sole woman on a team of all men, being the most junior as well potentially creating odd power dynamics; so a lot of what I may say is really speculative.
Couple thoughts:
1) Do you feel as if being the sole woman is the main driver behind the odd team dynamics? Or is it primarily that you are junior, you're young, and so therefore takes some time getting fully comfortable? I would say in my experience I was incredibly shy/tentative to share my views early on knowing that I knew very little, and so therefore it felt a bit lonely and uncomfortable at times. I was the youngest on a small team by a large margin and so not only was I abundantly inexperienced in comparison, I also had little to nothing in common with my co-workers. I made due, but it still took some time to warm up to everyone's perks. I'd also add that public equities in general tend to be a more intellectually challenging space from a cultural perspective, and definitely less social. Less work related happy hours and more intense work environments just from my view (not all will agree though).
2) The talent thing shouldn't be a question yet in my opinion. Everyone goes through bouts of imposter syndrome and especially being in what sounds like a great seat so early on in your career will naturally be intimidating, surrounded by analysts & PM's with years of experience, who also likely took longer than you to reach your current seat when they were starting out. I'd rest my case that being in a HF analyst seat at 23 is a pretty remarkable achievement in and of itself. Your goal now should just be focused on learning and absorbing as much as you can from the smart people around you, regardless of whether or not you want to do HF longer term. Will be invaluable either way.
3) These are probably connected. If there was another woman on your team I'd be willing to bet you'd be less concerned about your ability or talent development as she could act more as a mentor to assure you were headed in the right direction and performing up to par. I also think that if you had a few more years under your belt and started to really excel in the seat you might also say, "who cares about other women on my team? I'm better than most of the men here anyways." The latter being more a guess.
Would wrap and say try not to overthink it, focus on the core job at hand. If in a year or two's time you come away having felt underserved from the gig or the learning experience or the team/culture, there's ways to solve for it. I'd add that part of being successful in the job IS innate ability to invest/trade, but that innate ability in my opinion is only uncovered with years of experience. I think very few analysts in their first few years are just natural-born talents with an instinctual ability to have a high hit rate on stocks. I think there are personalities that can be pre-disposed to success in the industry, but would say that it's a combination of learned development and process as well as having the inner mindset.