Taking a job right now at one of the big tech public + private SM L/S funds that's down right now
Would you do it? Why or why not? Have a decision to make. E.g., Cat Rock / Alkeon type fund.
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No.
This may piss a lot of people off because practically all the money has moved into Tech/Growth over the last decade, but going to give my 2 cents anyway.
Anyone over the last decade who has worked in tech/growth that is long only or basically long only got really lucky with a strategy that worked during one of the best decades for growth investing ever. It took no skill. Basically every PE/VC/HF that specialized in investing in software/tech and companies that produce little to no cash flows paying multiples on revenue got lucky with a decade of zero interest rates and QE. You could basically have thrown a dart at any random name company that fits this description and you'd probably would have made money all the way from 2010 through 2021.
The environment has changed completely. If you haven't read it already, read Howard Marks memo called "Sea Change." QE is finished and rates are likely never going back down to zero. It's proven over decades that cash is king and value investing wins over time. Everyone on this site just hasn't invested in times prior to this last decade and thinks software is going to eat the world.
My take is don't just join a fund like Tiger or D1 Capital or any other of these Melvin Capital type firms that basically goes long tech and short value. Strategy likely won't work going forward. Find a manager that has a proven skillset or investing niche over cycles who doesn't just go long beta and also a firm with leaders who still work very hard as there are a lot of PMs out their in their 50s that have made so much money already and don't care as much anymore.
Who knows, maybe I'm just another value guy and have some outdated view of investing and will be wrong. We will see.
We're early on this but I actually think it's a terrific time to be a good L/S investor. When markets only go one direction it's really hard to prove your value.
I don't necessarily agree w the view that value is the only way to go as I think you can still do growth but you need actual domain expertise / nuance as the future is in understanding dispersion not a giant factor bet on tech. Agree that tech bro funds that just went YOLO long disruption / short disrupted are not going to work anymore but that's healthy for the industry.
Agree w the fact that VC / PE is literally just a levered long bet on SMIDs. Doesn't take a genius to understand the implications of that strategy going forwards
Explain the implications of that strategy like I’m 5
stupid comment
im as critical of the tiger/levered beta model as much as anyone but we have completely 180'ed in terms general perception of what "good" investors do. its not that black and white - the value guys are just collectively jerking themelves in public now after underperforming for 10 years and having a giant chip on their shoulder about it
melvin capital is also radically different than tiger so the fact you bucketed those two together is insane/instantly lowers ur credibility
How is Melvin different than Tiger Global? Both were/are super levered to tech/growth stocks. Only difference is Melvin blew up due to also being short retail - Tiger is down 60% in less than one year which is completely irresponsible.
Tiger was one of the first to invest in growth/tech, nowadays there has been so much money that has flown into the space that the opportunity is so much different today. Combined with the fact that we are in a different interest rate regime than what has happened for the last two decades.
Like I said, Sea Change by Howard Marks - read it.
Opinions like the one above are popular today but miss the fact that the Tiger Cubs were highly successful investors long before the past decade. In fact, that is when most of these funds were the most interesting and made a name for themselves. It's too simplistic to think that none of these funds can't do anything else other than levered long tech and can't evolve to next trade.
Please enlighten us on Tiger Global's $ returns. I bet the LPs feel differently than you.
I'm just an intern at a shop similar to the one you mentioned, but I say go for it. Someone else mentioned this, but the fact that most of these funds were long-levered tech this past decade doesn't make them blind/bad investors--one bad year doesn't and shouldn't cancel out a decade-plus of solid growth. These funds still have lots of capital and sharp people, and regardless of the macro environment, I generally think that betting on smart people tends to work out in the long run.
My biggest concern would be about the high water mark with a fund that’s down big lately. I don’t have as much respect for a fund that make poor risk choices and / or which was too reliant on levered beta or growth type trades. But most of these funds have talent and a track record, and if they have preserved enough capital, will be able to change strategies and have a fighting shot of good performance going forward. That being said, the economics of funds well below their HWM are well documented on here, and that would be my biggest worry. Even as a junior with no shot at carry soon, the difficulty of getting performance fees going forward will of course affect the comp pool across the firm, and the odds that the carryholders take big swings to try to get back to the HWM is a real risk that could lead to a blowup.
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