Those at pods / MMs - ever feel limited?
Do you ever feel limited in what you can invest in given the need to position intra quarters? Like imagine you decide to put on a trade given strong credit card data, etc. is there ever a time you feel like a name has a strong long term thesis but can’t invest in it yet because of x y z reasons, maybe raised guide too soon, or buyside expectation lower so need to cut guidance first?
Based on the most helpful WSO content, this is a common sentiment among those at pods/MMs. The short-term, quarter-to-quarter focus of many MM platforms can indeed limit the ability to invest in names with strong long-term theses. The need to position around near-term catalysts, such as credit card data or earnings guidance, often takes precedence over longer-term fundamentals.
For example, a name might have a compelling long-term story, but if the timing isn't right—like if guidance was raised too soon or buyside expectations are misaligned—it might not fit within the tight risk constraints and short-term performance mandates of a pod. This is one of the trade-offs of the MM model, where the focus is often on immediate, actionable catalysts rather than broader, long-term investment horizons.
This dynamic is why some professionals eventually transition to single-manager (SM) funds or long-only (LO) platforms, where they can focus more on long-term fundamentals without the same pressure to deliver short-term results.
Sources: Credit - Pod Shop/MM vs. Distressed/Special Sits HF, Demystify the LT SM / tiger cub / "PE approach" vs. MMHF / pod shops?, Long term, concentrated, deep fundamental investing, MM to SM is it possible, Questions about Single Manager vs Multi Manager HFs
No and I’ll help you understand why if you respond to this question: explain why (you think) it would differ being at a SM
Because the SMs don’t care about intra-quarter vol
So you're going to buy something that you're fairly certain is going to go lower in the near-term?
The original question is silly. It's not about feeling "limited", it's about needing to be patient, and it happens all the time, whether at MM or SM or even LO.
Ok obviously the intern is wrong. but there are some SMs that genuinely are more tolerant of short-term vol, even if not the majority. Soroban for example. There is a significant gap between my SM friends and MM friends wrt how much they think about what's going to happen in 2 years vs. this quarter.
Lol at soroban. Eric must be feeling the heat with those comments. You actually think highly of them or you’re just referring to them as a firm that fits under this umbrella?
There’s a difference between duration in terms of the GP’s tolerance for pain and not having risk taken away, versus knowingly stepping in front of a drawdown
SM does not mean you can lose money just because you have a long term view. If that’s how you think about investing, stay in PE
I guarantee if that’s your perspective, you will be reaching out to HHs in 1 year with emails beginning with “hope all is well..”
The point of public markets is liquidity and being able to move in and out of positions. This is not to be confused with day trading or calling quarters. It’s about understanding a stock
I'm going to paste my reply to MMPM here as well. Obv no one is knowingly stepping in front of a drawdown, my point is about over what time horizon people choose to focus their efforts.
To me it seems like your time is limited, and you can choose to allocate more of it to figuring out where a stock will trade in 3 months or where it will trade in 3 years, but it's a zero-sum allocation.
So if you split your time 80/20 thinking about where it will be in 3 months vs. 3 years, don't you inherently have a lesser ability to develop a high conviction, differentiated view on where it will be in 3 years vs. the person splitting their time 80/20 the other way?
Conversely, the person focusing on a 3 year horizon will have a weaker view on where it goes in 3 months. but that's ok, because they see a compelling 3-year opportunity, regardless of where it trades in the short run.
My POV is that there are a lot of different ways to make money in the markets and it's not clear to me why nailing the near term trading is the strictly superior approach as many MM people on this site argue. Clearly the MMs have done very well, but I also know several funds who focus their work on the 3+ year horizon and have a long track record of great returns. They're just playing 2 different games and you can make money in either. Where would you push back here?
I agree with you. If an analyst wants to dismiss near-term moves as noise and focus on the longer-term, be my guest. Just make sure your PMs or your LPs agree with your "take", or you will find yourself in trouble.
Entirely different. You can never know with 100% probability what a stock does. MM wants to wait for 10% down and misses the 3 bagger while SM fine with 10% down after print to catch the 3 bagger. Why are you so arrogant to think you can predict the future 100%? Maybe guide misses but stock is up on de-risk and investors buying the last cut.
Im not so arrogant - the point is its not black and white. I think you don’t understand how the business works. The idea that the blanket statement of MM waiting for 10 down and missing a 3 bagger is dumb. I’m sure there are some teams that think that way, but they probably aren’t very good. Everything is about probability and risk - you size accordingly. Who said you can’t take a draw down on a single position? Of course you can. The drawdown convo is at a portfolio level. Just like how at a SM you can’t have your entire portfolio draw down 10 bc you think the book is going to triple. You still have to manage the probability.
Why don’t I make it concrete for you
5m compounded over 30 yrs at 20% is 1.2bn
1m is 237m
His current aum is 300m
How’d that happen? If his returns are so amazing, why isn’t his asset base higher? Why are people redeeming? Why isn’t he raising more money? Everyone is a dummy and missing what a great manager he is? Oh let me guess, he wants to stay small so he can be nimble and he returned all the capital to investors. Got it!
The problem with your framework is you’re missing nuance. His style is pretty straight forward. What are some big themes? Oh wow large cap asset managers are going to continue to get bigger and are money raising machines, therefore fee income growth will be durable and should trade at a higher multiple. I have never covered an alternative asset manager in my life and I can tell you that. I can also tell you that yes if you buy and hold kkr you probably won’t lose money over any duration of time. See? I did very little work and just told you a money making idea. I surmised this thesis literally having done zero work. Now, I can do a ton of “work” and build conviction in this theme. I can spend 8 weeks on this. But I just told you the answer in 2 min.
I'm talking about greenhaven associates, not greenhaven road, which manages $7b
OP here. Didn't think my 2am drunk thread would get this kind of attention lol
I think calling the next 3 months move is good and makes sense insofar as you're calling an inflection point that is "variant" to the expectation of the fundamentals of the business. There will always be a place for this type of investing, under strict and quantitatively sound parameters. But when that's your entire mandate, and specific within a vertical, how "differentiated" is your view? And at some point what really are those 2nd 3rd order expectation play moves post-quarter? some recognition of value? how many times have you seen stocks go up into earnings because of "raised" expectations and have a selloff on an objective beat? It just seems counter-intuitive to me to dedicate my life to this type of "investing" if i have to allocate all of my headspace to a way of thinking that necessarily doesn't think 3 years out. Yes you do kinda get to think 3 years out, contextualized by what that means for expectations today, but you don't actually get to care. Kind of makes me feel like this pod style of investing has become crowded, it just makes me a little concerned to want to do this LT. someone said you're kidding yourself if you think you have a differentiated 3 yr view. I mean but isn't that the point? of investing? I feel like at this point even having a 3 year view is differentiated.
Pod monkeys are insufferable.
Feel like there is always this focus on SMs being able to exploit duration, with the pod counter being "that doesn't matter why would I step into a name before a 10% draw down"
I also used to believe that there was an advantage in having a 3yr view, until I actually had a 3yr view and watched what happened after 3yrs. The world changed so much by then... and the reality is the pods also have a 3yr view , but the risk framework has tied them to updating the incrementality of that view everyday, and then especially every earnings as it evolves. Good SMs should be the same though...
So is all investing over outside of the pod framework? I don't think so
Withstanding volatility can be a feature and it should increase the potential for absolute returns, but also allows you to express views when pod shops might not want to, right? It probably ties in to where do you maximize your due diligence efforts along the alpha curve given so much time restriction, and where do you look accept more or less vol in the portfolio.
I did a post a while back trying to get at the heart of the differences between pods and SMs "with a PE approach" or "tiger cubs" or whatever, solely to understand why the latter felt that PE experience had such high utility while pod guys used to be seen as less well equipped there. I definitely never agreed with that philosophy and it wasn't an exit opp conversation, purely investment process oriented, and I couldn't find much in the investment process to understand major differences.
To me it seems like pods are just as good at "understanding a business," and the 1 week, 1 month, 1 quarter, 1 year, and 3y year story, just a well as any other investor. AND potentially have an even deeper feel on the incrementality to evolving narratives because they are forced to play there. Also because they are so honed in on every KPI change, their understanding of unit economics, at least in theory, should be just as solid. In that context, its hard to believe a pod is going to miss the 3yr story because they were too focused on next quarter's KPI beat, but who knows time is a precious resource here.
I honestly don't have a great answer to what can the SMs exploit that pods cant - Brett had a thread a while back talking about SMs reinventing themselves on where they want to focus and play. Eminence podcast on capital allocators was also thoughtful here.
This is kind of like refinement culture to be honest - the game has evolved!
https://lindynewsletter.beehiiv.com/p/happened-baseball
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