Saw this article about struggles on the Index Rebalance strategy, apparently it’s been an overcrowded trade for a few years. What do the PMs/analysts do after their trade has become overcrowded and they’re out or nearly out of a job? Do they ride it out waiting for the trade to work again? Do they change strategies and take a more junior role? Do they change careers completely? If they ride it out, any idea how long until strategies become active again (or do they mostly fizzle out and die)?
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Career Resources
Based on the most helpful WSO content, when a PM or analyst finds that their strategy has become overcrowded and is no longer effective, there are several paths they might take:
Adapt the Strategy: They may look to adapt or evolve their strategy to find new angles or niches within the market that are not as crowded.
Switch Strategies: Some may switch to a different strategy altogether, which could mean taking a more junior role to learn the ropes of this new approach.
Change Roles or Firms: If adapting or switching strategies within their current role isn't viable, they might look for opportunities at other firms or even in different roles that can leverage their experience.
Ride it Out: Some may choose to ride out the period of underperformance, especially if they believe the strategy may become viable again in the future. This can be a risky move as there's no guarantee the strategy will recover.
Career Change: In some cases, if the outlook for their strategy is particularly bleak, a PM or analyst might decide to change careers completely.
As for how long it might take for a strategy to become active again, it's highly variable and depends on market conditions, the specific strategy, and how quickly the overcrowding issue can be resolved. Some strategies may never recover if the market dynamics have permanently shifted, while others might see a resurgence if the factors causing the overcrowding dissipate.
Remember, the public markets are dynamic, and what works today may not work tomorrow. Flexibility, continuous learning, and the ability to adapt are crucial traits for anyone in the hedge fund industry.
Sources: https://www.wallstreetoasis.com/forum/private-equity/why-i-left-pe-switched-to-the-public-markets?customgpt=1, Dealing with PM (equities) who is trying to limit your progress, How did you become a PM?, https://www.wallstreetoasis.com/forums/mm-analyst-comp?customgpt=1, How often do seats open up at multi-managers?
That's why you always have a plan B / exit plan.
He's asking what the plan B could be, genius.
Sorry I have to dumb it down, yes, in such situations it's not wise to sit and hope you are marketable with your old strategy, much better prospects if you are open to new directions. As to what, depends on your skillset and the specifics but generally you should be able to transfer those skills in something somewhat related without having to dramatically change your career path
Guess your plan B will be consulting? Given your obvious skill in writing 10 lines to say nothing.
Concerning to see you post this Axe, are you good?
How would you feel if the SDNY/NYAG Chuck Rhodes had a personal vendetta to settle with you, and Mike Prince was trying to steal your firm just so he could setup his egotistical presidential run? Other than that, couldn’t be betta.
Look Axe I feel for you. Don't hesitate to further lean on Dollar Bill or even Wags. Bill has that dog in him.
Fuck Spyros too, he's a clown.
Always admired your restraint to not hit it when it comes to Wendy. Although I'm not into the whole dom thing, she's absolute smoke.
All the best and hope to see you in the Hamptons this summer.
Best,
Ari
Run several - ideally uncorrelated - strategies at once so that when one is inevitably wetting the bed at any point the others carry the weight.
That, and stop losses.
And hope they stay uncorrelated :
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