What do hedge fund employees do in the interim after they set up all their long term stock positions?
If you are employees at a hedge fund and your strategy is only long-term/consistent stock value growth. And the hedge fund finishes taking 100 different stock positions. And just waiting to sell the positions in 5 years for a profit..
What do the HF employees do in the meantime while waiting for the stock prices to reach their target? Just chill and play ping-pong and arcade and sleep for 5 years?
Doing work on new names that could have better risk/reward, and upside than the current stocks in the portfolio.
When you allocate capital, although you may aim to hold positions for 5 years, there can be stuff that changes your thesis. You also have to constantly consider whether the risk reward remains skewed in your favour and if it is better anywhere else (opportunity cost). A really simple way to think about this is imagine they'd set up their portfolio with 5 companies they believe we're going to compound at 20% each for 5 years (so average 20% returns for the portfolio each year). They then happen to stumble across a company they think will compound at 35% for 5 years. They're not just going to go "ah it's a shame, we've already set up our portfolio", they're gonna buy that shit and maybe reduce their worst risk/reward position.
So nah, not just sitting around, constantly criticising and scrutinising their portfolio for weaknesses, things to add/remove, position sizing (adding or removing size to a position based on conviction, pricing etc.)
Yep basically, or just keep moving PT in the direction you want. That way you can optimize for time spent chilling, paddle in hand.
😂😂😂😂
This isn’t my style at all but there are definitely a few funds that come to mind as having this mindset.
Also, 5 year average hold = 20% turnover, 20% * 100 names = turning over 20 names per year. lots to work on.
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