What skills do you actually need in MM HF pods?
I’ve started an internship at a LO (with the agreement that a ft conversion isn’t happening), and so far nothing seems complicated. The basic analysis, forecasting, modelling, etc are done and then portfolio integration and then back testing with some time series analysis. All of these steps are done with little to medium degree of complexity. Nothing extraordinary. At school it was ungodly complicated - all AM courses were very difficult and had the most complicated models to teach. I’m wondering if hedge funds are that difficult.
For example, are HF analysts math & coding gurus or was my school reeking of academic vanity?
Overall what technical skills really cut it for hedge funds? And here I’m talking specifically about L/S strategies, knowing things like global macro or fixed income RV are complex by design.
l/s equity strategies (in most cases) are completely fundamentally driven. Maybe a little bit of simple technical analysis built in as support but never primary driver. This means u need to be good at Excel, not necessarily python. Many of MM l/s equity funds (which I would consider the most rigorous from a math/risk mgmt perspective) are centered around trading quarters and predicting earnings based on calls with mgmt
Glad that as an IB Intern you know that’s all what HFs do.
It was written like a regurgitation of what was read on this forum
And IB is investing in banking ig😂
What would you all say the skills that are necessary for MM HF instead of just criticisizing my response? The one thing I was mostly saying is that it is rare for analysts in fundamentally-driven pods to need python. Happy to hear what you all think you need over and above what I said. critical thinking and how to turn information into actionable advice is number one in my opinion but that's not really a hard skill. Seems like OP was asking whether you need to be a math and science god to be good at the job and I was just saying that's not necessary
Reading comprehension and good people skills are undervalued traits in analysts. In discretionary long/short equity, the job is more akin to detective or journalist work in addition to financial models.
The skills needed overlap a ton. What varies more is the focus on relative value, which means idea generation often comes differently. And obviously the time horizon is usually shorter, which means more attention paid to potential catalysts, sentiment, etc.
Maybe not a "skill", but given the focus on short-term performance, you need to be ready to own that and accept responsibility that "being early is being wrong" and there will be no hiding behind "I'm a long-term investor" and such.
The word we like to use is “entrepreneurial” or “ability to work on a thesis on your own”. But agree this skill is learned over time but always helps if the person wired that way from start.
Well put. Different level of intensity.
I get that. My question is more about what tools are used to make this difference a reality? Super complex math models? Lots of coding? Just similar theory with different approaches?
Just yolo any crap that gets out an AI presser and buy puts to bring down your net and you're golden /s
If everyone is asserting that you need to be extremely good at building investment theses as a main skill, then how do HFs recruit bankers in good conscience lmao. As a banker, I’ve no direct exposure to making good investment thesis and it will take special training outside of my day to day tasks to learn that.
Or… am I missing something?
You’re probably not going to end up at a MM then. It’s not like PE recruiting where everyone just winds up at a fund even if they know very little about the space. You do have to be able to come up with a quality pitch and show you can relatively quickly understand what really drives a business, general SWOT type analysis and then the trickier bit about what drives the stock. Depending on the PM, you might be able to get into the seat with good fundamental analysis and some thoughts around what you think could be driving the stock (even if you’re mostly wrong) as long as it’s logical/has some thought to it. But definitely varies.
You can hone those skills in IB but it takes some work. Next sellside you’re on, think about the space - what is general sentiment, is it cyclical, how do rates impact, etc. Then understand your company - where is growth coming from, how do new products perform, are they capturing margin when they should be and giving back some at other times, are they generating a return on their investment, is mgmt able to lay out a plan and execute to create value, has past M&A created value, is the b/s in a good spot, has the b/s been in a bad spot in the past because of bad decisions, is that relevant or is there a new mgmt team/bk risk is no longer there, etc. Then place your company in context - how are they doing relative to the space, are others growing 2% while they’re growing 5% or vice versa, are they capturing more margin, are new products outperforming their peers, are the space consolidating, are they more likely an acquirer or a seller, is their b/s in a better/worse place than peers, etc. That can be mostly qualitative and you can arrive to a pretty simple l/s type recommendation. Even if it’s a private co you can just say you’d be a net buyer or seller and then you can think about competitors and match it up so you have a pair (I don’t really love pairs but for the sake of the thought exercise, it’s worth having a counterbalance). That will give you an idea of how to think about an investment without a ton of extra time outside of the office.
Of course translating all that into a model and then layering in the short-term framework (which is probably what you care about at a MM) is a ton of work, but if you like thinking through all that, then you might find working at a HF interesting.
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