What sets the best (long-term, fundamentally-oriented) asset managers apart from the scores of mediocre ones? Assume duration of capital is notwithstanding. Pod boys shh.
I suspect it's a focus on the very best assets, separating "good" from "very good" from "great" and disciplining to the latter category. That's part of it.
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At the end of the day it comes down to the people / investing ability. Having a repeatable proven process that works for long-term fundamental investing is a rare thing. When you meet someone who has it, you immediately know.
yeah I think it's smart alert people
This. You either have it or you don’t and I found that “it” is not really something that can be developed. Sure you can be a good Analyst and even make PM, but truly great investors were essentially born with something. There was a speech by Mark Sellers that stated something similar
Nah this is overplaying it. You can learn from a great PM who’s a successful investor if he’s willing to put in the effort to mentor you. This isn’t some innate athletic ability. We’re buying and selling stocks, guys. I do think this set up of having thorough, thoughtful mentorship from a legitimately great PM is less common than people think, though.
It’s honestly a combination of skill + luck + timing. Imagine you were an amazing investor, but launched in 2021. Terrible time to be net long into one of the first real drawdowns in 10-15 years whereas if you launched in 2023, you had a very supportive market environment. All of this normalizes through a cycle, but if you go -20% the first year launch, it’s not a good look and it becomes much harder to fundraise.
or you're buffett and you were around for when value investing was invented, riding the development of the industry
though I would think this is not 100% it, you can sort folks by track record over a certain time and the cream separates out. e.g. best of 2025, best 2010-26YTD are a real thing.
this separates decent from very good, but the best tend to crush it year after year (hohn)
Hohn has had massive drawdowns too. His firm almost shut down in 2008-2012. That’s a pretty low period of underperformance by any standard. Same with 2022 + 2024. So you really do have to look at longer term track record and your ability to survive as a business in periods of inevitable underperformance no matter who you are.
I guess I would argue if you were net long at 2021 valuations and held those into the “inflation is just transitory” narrative you weren’t actually a good investor :)
I know this thread is about fundamental equity. Could anyone shed some lights on (discretionary or semi-systematic) commodities and global macro?
I like this topic and hope more experienced people contribute to it, it’s discussed a bit but always something to think about.
A little thought experiment could be working backwards and disaggregating components -what is a rockstar? “You know it when you see it” okay so it’s a nonlinear mixture that’s a bit “fuzzy” to describe in discrete, linear terms.
But there’s got to be traits -
Performance; can’t be a rockstar without performance - performance itself is not linear, but very clearly it trends up without ruining the fund over time.
So does a rockstar have high vol or low vol? What contributes to vol? Idiosyncratic, beta to a factor and noise. Is all vol bad? What about up vol?
Basically a rockstar then has the highest up vol, over the longest period of time, with the lowest down vol.
Okay but what action do they perform and why is their constraints - how frequently can they trade, how much liquidity do they take (especially as they scale in size); who are their counter parties in the market (are they “smart” information traders or “dumb” rule-following buyers/sellers), how much friction costs are there? All these factors make different markets have different flavors, and all of these pieces shift over time.
Then it’s about concentration - is a rockstar the guy that picked the one trend at the beginning? Or is he the guy that consistently picks the right thing over time? Is he hyper concentrated in one view or is he spread across many views? How concentrated in a strategy is he? Does he shift it based on the meta-market (change of the times) or does he keep it the same?
This plays a natural counter to the above vol-adding factors; what is noise, information, general beta to the economy etc. what’s just plain luck (which is effectively good noise)
Talking through all this, you end up at a funny conclusion (at least to me); you get to Warren Buffett (whose style did shift over time - showing learning) but he was “fuzzy” around things that had persistence, and identified pools and ecosystems of capital that allowed him to scale.
I think it’s interesting we still talk about Buffett not because he’s famous, but because he is a survivor.
Do I think being a survivor can be taught? Probably? But I think there’s a trade off of learning how to become one vs applying it.
It’s people but - people quit and take their (your) best people with them. So it’s more than people, it’s a repeatable system of identifying talent, integrating them into your style of investing, and keeping the bench stocked when seats inevitably open up. The best firms have all been able to not only survive but thrive after key PMs defect. They realize this problem and have a standardized recruitment process and know exactly what they look for, how to benchmark, and what their red lines are. They ensure culture can indoctrinate new hires and what makes the firm successful is passed on.
Some take pride (or a direct stake) in the success of their alumni. Others view it as competition and try to shut it down as much as possible. But if the secret of success is people, then long term success is institutionalizing the management of people
Please ignore the poor English and grammar since it is not my first language.
what you mentioned is the job of HR and CEOs. If you are not Ken Griffin, people management is not your job, you are over-simplying how top firms manage to stay on top. Most hiring are done by PMs and they do not give a shit about young talents i can assure you that. Unlike PE.
First of all, top funds collected data from the early trading days of the Netherland equity markets or rare alt 3rd party data to collect behavioural patterns from the traditional equity guys. Traditional asset managers are not different from the top market-makers from the perspective of understanding of the broader market. Sure, they are slow and long-term capital but they have seen many cycles encompassing geopolitics, politics and corporate moves. Also, AM/HF firms do not make money at all over a long term horizon and their returns are terrible but the point of the entire industry is to stay afloat and survive. The best AM firm is the one that has a CEO that is good at sales and people management (like you mentioned) and not good investors. Good PMs are useless since I can grab one from r/wallstreetbets and fire him and get another one within the same trading day
The OP asked what makes certain firms successful in the long term. Unfortunately any individual PM no matter how capable isn’t alone going to determine long term success for a large fund.
Ken Griffin has done an incredible job despite the mercenary reputation. CBs to multi strat to quant/market making, the roadmap was crystal clear even twenty years ago. He had the right fee structure to invest enormously into the organization, talent, and systems which probably wasn’t by luck either. They have public bonds, read the prospectus for some interesting insights into the business
Finally, while you are about the HF industry underperforming as a whole, there is clearly very substantial alpha being generated consistently by the top firms individually, moderated by the extremely high fees they command. Perhaps much more alpha than in PE, hence the prevalence of higher than 2/20 fees in HF space. PE managers chose to massively inflate AUM from real estate, private credit, and now insurance. Any alpha has long been diluted away, fees are generally discounted from 2/20. And yet GP valuations are higher from higher multiples on stable fees so it’s hard to say they are wrong.
Large HFs still put up eye watering numbers - look at the recent Bloomberg piece on 2025 returns - and are more alpha shops living on performance fees. Attracting and retaining PMs is critical to enabling that long term
why are there so many non-HF guys commenting here
maybe focus on the content instead what you may or may not know about an anonymous poster?
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