Strategy vs Trading for Macro HF
If my end goal is to work at a macro hedge fund, would a strategy role or a trading role better set me up to make the move to the buyside? With the assumption that both roles are in macro products (FX and Rates). I have heard that it is hard to go from strategy to trading, but does this apply to hedge funds with my end goal to be given risk (ie become a PM)? I feel as though strategy would give me a better education in how to come up with trade ideas along with learning more fundamentals. However, a trading job I would actually be having to manage a real pnl book, but will benefit from spread and not be able to keep positions on for a long time.
Trading, and it’s not even close. Traders do research, but researchers don’t trade.
my 2 cents, did an internship on the sell-side where I rotated on trading and reseach desks, then went for a full-time on the buyside. My sense is that although theoritically, you could develop trading ideas on the trading desk, it is increasingly hard in practice. I was at a top BB in my internship and found that flow desks tend to just market make with limited input, while structured products have more legal/commercial work to do. That said, a big con for strategy is that you don't trade, and it does not allow you to develop a market read, the fundementals are half of the story. Looking back, I think the best stint is to start in strategy, move to trading then jump to the buyside. This is not to say HFs won't look at your profile if you're a trader or a strategist. But looking back, I think this is the ideal self-development journey on the sell-side.
is S&T FICC at a BB mostly flow trading?
Yes mostly since BB's will assign parts of the curve to traders. i.e. One trader going 7-10y swaps, another doing 5-7 etc due to the sheer flow they get/have to fulfill. Mostly vanilla desks, in particular.
If you want more active risk management (bank bullshit for prop trading), try and see what products specifically each desk you're interviewing for trades.
Hey can i pm you?
can you ask here, better visibility?
Hey can i pm u?
mind asking the question here?
If you want to be a PM/trader who allocates risk at a macro fund, you absolutely want to 100% trade FX and rates. Quick list of pros.
1) You will learn to use python for integrating into APIs, data gathering, processing and automating your trading (assuming you're not just a BBG chat monkey doing 11 figure treasury clips with 60 year old traders at your counterparties). If a trader of any seniority that I am trying to hire can not pass an in-person and a take-home coding exam that we give, its an easy decision. There are too many hungry traders out there that know their way around python/pandas/etc. where its basically a requirement now.
2) The majority of PMs, and a bigger majority of elite PMs all come from either a trading or a research background. With both of these backgrounds, you will be able to talk sector KPIs and what a certain metric looked like in a lower interest rate environment 5 years ago the way your average mid can talk about the backup safety on his favourite football team.
3) Fund flows, trading the markets when you are in your 20s for a living, you will become an expert on patterns of block orders, what types of participants do what types of trading, what orderbook shapes look like going into events, and the list goes on ad infinitum. This knowledge and the way it becomes easily recallable because there was risk/reward emotion connected to it is next to impossible to learn without being in the trench.
4) A good PM has a network of peers that can always get on the phone or meet for a lunch/coffee/beer/degenerate activity. During a career as a trader, you will meet other traders from broker-dealers, hedge funds, family offices, etc. After doing this for about 5 years you will know who is the best at understanding some niche sector/geography/etc, you will want to talk to them and assuming you develop some talent, they will want to talk to you.
5) A trader's experience gained from years of trading gives him/her what he/she will need to develop the strategy from intuition. This is what they refer to as "gut-feel" or similar phrases. Read the last couple of sentences several times, its important that you understand this.
RE: your first point - as someone who works at a smaller regional with less than two yrs of experience (bonds), I haven't necessarily been exposed to an extreme amount of coding. I understand using python and integrating into APIs can be useful for data management and self sourcing market insight, I do it, but how are traders actually automating their trades? I operate in the IG, high yield, agency/non-agency mtge world where I don't see an exorbitant amount of evidence that points to fully automated trading. Obviously the tsy market and IG corporate worlds are extremely liquid and listed automatically at spreads, but what about the less liquid pockets of the market? Are guys just building their own proprietary scripts that communicate with their firms trading platform? IS there automation in the less liquid parts of the market?
Would love to PM you if that's cool
It somewhat depends what you mean by Macro. A lot of "Macro" PMs are really doing fixed income RV. I'm not saying they won't do directional exposure now and again, but really they're coming at it from a flows/RV perspective. For that sort of job you absolutely want to be on a bank flow desk. And I know a lot of people who have taken that route.
There are relatively few true Macro pms. And their backgrounds can be pretty idiosyncratic. In general I think rates vol or fx vol are the best trading seats to start in if you want to do that. But strategy and structuring can work too. It's just kind of a crap shoot cause there are so few funds that really do that. And a lot of the bigger ones don't really hire from the sell side.
Where do the big funds hire from?
Generally straight out of school, or in some cases from government. Thinking specifically about Bridgewater and DESCO here.
What would you say is the path of least resistance to a risk taking seat with rates from college? I assume buyside out of undergrad is the top option but very rare, but how long do you have to sit on a rates desk to get good opportunities?
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