More and more smaller shops are shutting down (poor risk mgt, poor performance, scaled too quickly and so on). Some second generation pods are blowing up.
Which pods should be avoided from that perspective?
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I asked the inverse of this awhile ago, and based on the feedback I think avoiding O&G focused pods (if there are any left) is probably a good bet. Equities in the space are generally just betas to the underlying commodity (nat gas or oil) and not enough of the generalists do the work to differentiate meaningfully (i.e. difference between Delaware basin operators vs. Eagle Ford) so your opportunity to capture a spread L/S is going to be minimal.
Yes, I’m also thinking 1) low AuM, 2) irrational payouts that usually attract the worst and not just the best, 3) little diversification across strategies that correlates with performance (citadel done well in that regard), 4) poor risk mgt - this is a tricky one as every pod claims to have prop systems that no one really can explain. When I see junior PMs with short track getting a lot of capital, that makes a pod look bad as well.
I’m not in it but have been in industrials+energy teams. Maybe I’m misguided but it seems there are upshot’s to o&g MM:
- specialist knowledge is a big help
- lots of granular data
- low visibility & torquey so trade on relative beats misses more so than runaway tech dreamer animal spirits
- mgmt teams seem HF friendly
Does seem periods of generalist presence evaporate and it’s a knife fight between sophisticated pods
This is just so categorically wrong that it’s almost worth not even responding to.
I wrote out a thoughtful response, posted it, and deleted it because the last time you posted on this, I gave you a real response and you obviously didn’t pay attention to it (hint: there’s plenty of O&G teams and more coming). The irony is that your post is why you shouldn’t be in O&G L/S, if you can’t figure out how to generate alpha when generalists aren’t doing the work to differentiate asset quality then you really shouldn’t spend time in the space.
I'm not in the space? Never said I was? I'm on the private side. Different strokes for different folks on a forum, who would've thought? But no reason to be a dick. I'm happy to learn what I'm missing and be corrected, but if you want to throw stones quit posting as an Anon or PM me so we can have a conversation like adults.
Sorry bro but the data just doesn't support at all what you're saying.
Question wasn't whether it's possible to be profitable in the space. Question was which are lower risk of blowing up, which it's just categorically wrong to suggest isn't a risk in the oil and gas space.
TBH, you speak just like every dinosaur experienced PM right before they blow up
Avoid pods with too much personnel. In the end, the most money you will make (regardless of seniority) is via the bonus. If a fund has 5b and the other has 60b AUM, you may think: damn, the 60b is better. But if the 60b has 500 people while 5b has 20 people, it is a no-brainer. 60/500 5/20.
Regardless though, if young/junior, I’d stick with just assessing the fund’s historical performance and its culture. There are places who live off their past glory that, were they to change names, would just be average or bad. Find somewhere full of smart people (smarter than yourself), with a dynamic culture (you output as much as you can input), and hungry. Worst thing for a junior is perhaps to just be at a place that the senior personnel have taken their foot of the gas
As pod you require min level of AuM. You see the trend now that small pods shut down mostly driven by tier 2 talent and inferior performance vs top pods. I’m a PM, different perspective than analysts.
I disagree here, lotta personnel probably correlates to a lot of trust from the mothership, not churning juniors, established pod. Look for ones where people have been promoted internally or otherwise left for promotions elsewhere. More people means each sleeve can run higher vol. Look for ones where younger people have PnL attribution and payouts. Ask if factor/sector tilts are determined at PM or sleeve level. Look for a well oiled process that people from multiple shops have integrated into. Look up the analysts houses and see if they’re big. Ask to see some examples of write ups or research notes. Look for defined path to % cut. Ask sell siders. Ask former analysts. Assess vibes.
my pod
Bump - hearing some smaller platforms struggling massively this year, especially in equities. Some stopped hiring PMs.
Any names that stand out on the negative side, both in terms of performance and AuM development?
Schonfeld but I believe this is now well known due to the Millennium news
Verition - less sure on this one
Baly is not a smaller platform but I think we are looking at the big 4 becoming the big 3 again. Not the first time it’s happened
Curious why you say that about Baly. Currently interviewing so any insights / experience about the firm would be appreciated.
A majority of the small and tier 1 pod shops have been in touch with me about allocating to my operation. Can’t say much more but they definitely still have a massive appetite to deploy capital to capable PM’s.
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