It's been a slow week and I'm not going away for Christmas so Q&A time. Some background: Engineering major at an engineering-focused school in the Midwest during the crisis (graduated 2011) IBs only recruited for back and middle office positions Got a gig in capital markets at BB bank in NY (2 years) Moved internally to IB (2 years) Recruited to portfolio team in an industry-focused HF as Analyst Promoted to Senior Analyst and then Director At this point I am responsible for coverage on a couple sub-sectors, help an MD with a few positions where we have significant exposure, and keep abreast of credit markets (where opportunities are currently limited)
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Ha to call it a success would be a stretch. I would need to do well consistently (in terms of coming up with ideas) for at least 5 years before I start thinking in those terms.
We have hired kids directly from college (parents know senior mgmt or PM hired them from his alma mater), but I would advise working on the sellside in a front office role. Gives you a wider view of the world and you make boatloads of connections (my prior colleagues are now spread across the industry).
Another thing is to remember that NOTHING you learn in the industry is unimportant. Yes, IG loans is boring but you probably understand large company funding better than anyone. Yes, operations at WF in Charlotte or wherever sucks, but maybe you will be a bank investor one day. You really hate doing that telecom industry update because there are no deals, but 5 years later its a super hot field for whatever reason.
Don't be that a-hole who is so desperate to move up that she forgets that EVERY role has something of great value. My greatest value add on many days is tidbits of info I picked up doing something I didn't enjoy 5 years ago.
It was a pretty traditional process from banking. I had 3-4 recruiters that I kept in touch with and they had my profile. Told them I was looking for roles with 3-5 years experience and was willing to do credit/equity or both.
I focused on bringing in a mix of credit (both corporate and asset-backed), and the more M&A/equity focused experience in banking. I was lucky to work at a large BB where I got a lot of breadth and worked across many groups.
I interviewed at a lot of shops (everything from traditional PE to long/short equity), including some that been my clients in capital markets. After a couple PE interviews, I decided I didn't want to deal with the focus it required. Overall, I lost a lot of time by not focusing early
I narrowed in on two kinds of roles: 1. Distressed Credit shops that are willing to be more hands-on (actually deal with the company in case their investment goes sideways and it becomes equity) 2. Multi-strat funds that were more industry focused but worked across the capital stack
I wish I had prepared for the distressed interviews a little bit more because I only made it past one of the phone screens. And even that interview didn't go well for whatever reason. I think this kind of fund was more focused on legal docs etc and I wanted something more market facing. Luckily I do work on a couple distressed situations now, and they're a lot of work (especially reading credit agreements, amendments, follow legal proceedings, etc.)
Did much better talking to multi-strat funds. I got interviews in funds that focused in the following industries: industrials, infrastructure, financials, tech. In hindsight, I think I enjoyed these processes more because there was a much greater variety in the kinds of people who worked in multi-strat (CLO traders, equity research analysts, bankers, etc).
Have a rich dad
Good question!
We have actually considered that... in fact given I'm the most CS-savvy person on the team, I have worked with a very good guy in our IT team to allow us to work with alternative data in the RE space (think beacon data or satellites)
Some industries (like retail, leisure, tech) have lots of alt data flowing and its literally impossible to trade those stocks without that data. My friends at other funds just get from third party providers and don't really do a lot of stuff on top of it.
I think that will change very soon... more alt data means less dependence on excel (UI-driven analysis) and more work on all sorts of regressions (and other analysis) running on top of this data. Of course lots of the old school fundamental guys are not big fans of this and so expect pushback
On job postings, think about it. If we decided to hire someone, more likely someone in-house steps up (me or the IT guy for example). Imagine some external quant hotshot comes in and then says "Oh my all your processes are so antiquated"... that's gonna result in her being fired in 6 months.
But should see more of these roles definitely. I know lots of friends (from when I was on the sellside) who did quant stuff and now they all have jobs on the buyside so clearly there are roles
Since I was at one of the larger BBs, the capital markets side of the business had about 20 distinct teams. DCM was particularly hyper-specialized so there were lots of 10-15 person groups.
I was in one of these groups focusing on esoteric structured product origination. We worked with the power, financials and industrials IBD groups.
I thought capital markets was super cool (obviously biased) because we all sat on a large trading floor and I could learn from all the other groups. Since structured land is a little unique we had our own intense 100+ page decks and spent a lot of time with the CFO’s team. Less so CEO.
The main downside was the recruiters only connected with people in IBD and basically thought everyone in capital markets was a DCM dimwit (which many were, but definitely not all). Not sure if I can blame them, they have so little time.
1) I actually read a lot of the popular finance books when I was in college. Just pulled up my Amazon: Liar's Poker, A Random Walk Down Wall Street, Fooled by Randomness, When Genius Failed (a personal fav. since back then I thought I was super smart), Smartest Guys in the Room, Barbarians at the Gate, The New Paradigm (by Soros), A bunch of books on the financial crisis, etc.
Not sure how much they helped, but definitely got me excited about finance
I didn't go to a target school so I wasn't familiar with the Vault guide or WSO or any other online resources. But I was just generally aware about the world
2) Too broad of a question. I basically try to follow any name I have looked at in the past and see what's going on with it. Also try to pick up peripheral names every few months or so to keep expanding my universe
3) No. I have great network because of IB. I SHOULD have moved earlier that's for sure given 2013-2015 were generally good years for the buyside (markets UP), but trying to look forward.
Also we pay the college hires way less (not sure if the case everywhere else)
Hey roversam,
Thanks for doing this. I joined a L/S hedgefund out of undergrad. I was wondering what the investment horizon of your fund's positions is.
Furthermore, I wanted to know how your fund measures your contributions when you were an analyst (including financial performance measures and more qualitative measures). What did it take to get promoted to senior analyst and director? How do they assess leadership potential at early stages? Seems super impressive that you managed to reach that position in two years.
Nice. Congrats on getting that out of school. How long you been there? Do you feel like you're compensated fairly relative to hires from outside?
Huge range in time horizons. Literally some trades are less than 1 day and some have been traded around for about 5 years. The longer ones are often names we love, or positions we're stuck holding because its way too illiquid.
The way our firm works, there are four levels of analyst that work for the PM: analysts (recent grads / new hires), senior analysts, Directors (manage multiple positions), MD. I did NOT understand this completely when I signed the offer for an analyst role.
An MD is basically someone that has full control of a part of the book. The PM flexes the MD's book who then give Directors some autonomy and so on. Thus, The MD's performance has more specific line item level attribution, and below that it's more qualitative although of course people are watching your ideas.
Anyway a few months after being there, I spoke to a couple of the guys and expressed my displeasure at being only an analyst, since I wasn't a new grad and brought a lot of experience/maturity to the team. They pushed my case and helped me get promoted pretty quick
At that point, I dove in and tried to get as many names in the portfolio. It took a little while, but I listened to the kinds of ideas that the PM was into and then pitched them constantly. As I got more confident, the seniors got more comfortable with me and I gained more responsibility.
I think my breadth of knowledge and general comfort across multiple products made it easier for me
We are a multi-strat shop so not restricted by asset type or time horizon. We do believe in some high-level themes though, a couple of examples below:
1) There is value in legacy structured product, because nobody wants to do the work eg. a couple months ago a broker hit us up asking for a bid on a pre-crisis Synthetic CDO mezz tranche. The CDO referenced 4 CMBS tranches of differing seniority. And in each CMBS there were 7-8 loans. At this point I pulled together the basic data (CDO remits, CMBS remits, CMBS servicer reports from Trepp, list of all properties) and figured based on some simple math that we would never come close to the price talk that had been indicated. So, I just had an approximate price in mind and moved on... also learned a little bit about those 4 CMBS deals.
Probably have to look at 15-20 of these before you find one you like. But these are smaller $ tickets so not impossible to pull the trigger
2) Complex capital structures lead to opportunities We can use CZR as a generic example (although obviously that was a HUGE deal and all of Wall Street was on top of that) of something that was a complete mess, lots of different seniorities/securities and asset sub-pockets. But essentially something like that (maybe smaller in size so not a lot of people are looking at it), hopefully with a lawsuit in there that scares away most investors. In these cases, if we see value the goal would be to become a major stakeholder in the clean-up process whether that's getting involved in the debt or equity.
Maybe something that ultimately results in a deal like GSO is doing here with Hovnanian (this has been in the news obviously): http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9Njg2MDQ0fENo…
These investments often involve positions in 4-5 different securities simultaneously, eat up a lot of time and resources and require a LOT of reading. But the upside is the ability to invest large sums ($100M+) and generate multi-year double-digit IRRs