What makes a good PM?
I thought the IB thread about what made a great MD was useful, my thoughts below on what makes a great PM. It definitely varies by asset class, but I think some skills are universal.
- Good PM’s know their preferences and communicate them clearly
- A good PM knows what investments or themes they prefer, and communicate them clearly in their portfolio and with junior personnel. This mean a few things:
- The underlying portfolio is “organized” - it may have various bets and themes, but the fundamental portfolio construction is logical and consistent. To an extent, this is a very good form of risk management as you don’t get over your skis
- This doesn’t mean a portfolio can’t have complex bets, volatility, or convexity - it is about making sure the thought process going into each investment is consistent
- Specifically for juniors, this allows them to focus on ideas that are a good fit for the book (and not waste time on long-shots), as well as refine their own personal style in relation to their PM’s and peers
- A good PM knows what investments or themes they prefer, and communicate them clearly in their portfolio and with junior personnel. This mean a few things:
- Good PM’s are mentally flexible and opportunistic
- Every market changes, and good investors change with it. The most talented investors (Ackmans, Sondheims, Rieders) are mentally flexible and able to quickly grasp the fundamentals of a trade or asset class.
- This means the portfolio will pivot during times of underlying cyclicality, and avoid style/asset class bias. This should lead to more alpha
- This also means good PM’s are decisive - we are in a risk business and need to be comfortable taking it quickly. When there is good risk on the table, good PM’s are buyers in size even if they aren’t specialists in the asset class
- Generally, good PM’s are likeable and have a high social EQ
- This is still a people business - you will get more out of people if they like you. This means management, but also your peers, analysts, traders, and anyone else involved in your investment process
- There are some exceptions to this rule, and I don’t think it is strictly necessary for success. That being said, reading the story behind every good trade - it often comes from a peer, sell-side analyst, friend, whatever. Make sure you get that call
Definitely would like to hear what others think
good PMs generate positive PnL on a consistent and risk adjusted basis, nothing else matters. none of the traits you've outlined have any strong correlation, positive or negative, with that ability - there are many ways to make money. a lot of what gets bandied about as good traits to have are more platitudes than anything else. the "theory" and high level concepts is all easy, its actually making the $ that's hard.
Couldn’t agree more and I believe that that is the general feeling capital allocators today. I think what OP outlined is a good outline of those things that may be desirable, but at the end of the day all that matters is your pnl
Being able to communicate clearly and effectively when managing any project or team is a skill that is absolutely essential.
Project leaders must be able to communicate their visions and articulate a project's goal in a way that everyone can grasp for themselves, quickly and easily.
Just make money and perform better than the market. That is what you are there to do.
That's a good list.
I'd add a few things
1) Being a great marketer. Contrary to popular believe, good returns does not equate to aum inflows (or bad returns always outflows). Many of the "best" PMs/fund mangers over the past few decades are really just amazing marketers. Decent enough returns are table stakes, which goes without saying...its those that can sell/market that raise the most money.
2) Not getting emotional. Some PMs have a tendency to freak out over everything - whether big or small moves anything can lead to a fire drill and its always the analysts fault. These environments are not only unnecessarily stressful and toxic, which leads to greater turnover, but often times lead to bad decisions. Working at a place with an overly emotional PM is not fun. Conversely, there are cool handed PMs out there that not only don't make bad decisions in a panic but also don't freak out on an analyst when something goes awry.
3) Focusing on what matters. Good PMs/investors can zero in on what matters quickly and efficiently make a decision. Too many people seem to get way into the weeds on things that dont move the needle - I don't know if its because they think they are smarter for turning over every stone, or believe its necessary - but its often a complete waste of time and energy.
So well said. Thank you.
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