Would any of you guys work in long/short equity hedge fund? Why or why not?

Got in touch with a headhunter who wants to include me in a couple of processes but I hesitated because I always thought I'd go down the PE route. He said I will like hedge funds just fine but I think it's a risky career path and I hate taking risk. why or why not should I consider this? I like investing like an ape but I don't care for stocks like a hardo

Comments (17)

  • Analyst 2 in IB - Cov
2mo

In a similar stage/state, but different preferences. 

1. Do you have friends in PE and/or HF/LO? What kind of personality do you have? I'm more of a nerdy type, and I hate interacting with PE people who are a bunch of snobbish prestige-chasers from my limited experience.

2. Do you think L/S is fun? I personally think reading, interpreting, trying to solve the market, etc. is a fun game. Private equity is also fun in some sense: you get to know the operations of day-to-day companies. The private sector is more common for households. For me, during my down time in banking, which is plenty atm, I literally spend all that time reading economics and finance related books, think about stuff, and try to connect the dots. I think that speaks HF? Maybe I'm wrong. 

  • Research Analyst in HF - EquityHedge
2mo

If you want to join a L/S fund from banking then I'm going to assume that it's probably fast-money. So the question you have to ask isn't do you like reading, modeling, generating ideas, etc - it's will you enjoy trying to nail quarters, keeping track of every tiny little detail, making sure your model reflects all of the little bits of info that come out, trying to be ahead of everyone else, etc. I love the digging in and generating an idea part of the job but I don't really like the BS of calling quarters. As such I'm prob not too long for the job.

It's definitely not for everyone and I would highly recommend you talk to folks that are in the role and compare it to private markets. The recruiter doesn't know a damn thing about you so they're just talking their book.

  • Associate 1 in IB - Cov
2mo

My view is that quarters tend to be 'noise'. So I'm with you there.

When you say fast money, I hear that money isn't necessarily 'fast.' How true is that? I hear median comp tends to be around $300-400k and some great years after 3-4 YOE, you can make 700K+?

I hear that exit options can be limited to l/s equity once you join a fund. what is your view on that? do you have any thoughts on what you want to do next?

When people don't do well, what tend to be the primary reasons why?

  • Analyst 1 in IB - Cov
2mo

"Fast money" isn't referring to your comp. It's the investment style (trading the quarters, short-term plays, etc).

  • PM in HF - Other
2mo

If you're risk averse, then don't do HF

Have seen so many people (smart ones obviously) cant stay in HF because they cant deal with risk taking nature. They cant pull the trigger. 

Most Helpful
2mo
herzyherzy, what's your opinion? Comment below:

I mean largely if you hate taking risk then any sort of hedge fund probably isn't for you. LO might be a different story as it's much more about portfolio construction and duration than having a thesis play out over a few quarters and finding alpha amongst crowds of investors.

I don't know what you mean by "investing like an ape" as that isn't really investing, that's more so trading (I hesitate to even label it trading). 

L/S from a "personality" standpoint is best for people who both enjoy reading/modeling but also like the interactive side of learning about companies, triangulating other investors and understanding changes in sentiment. You're essentially plugging puzzle pieces to try and connect the dots ahead of other people and then compare that to what matters. There are funds that do this by quarter (where are numbers headed and what will matter that Q) and there are funds who take slightly longer views, betting on changes in regulations, mkt share, unit economics, etc. Essentially alpha is generated across a multitude of ways but your job in HF world is to find the way to harvest it. Is it your ability to notice inflection points in management's commentary? Is it your ability to identify shifts in trends within datasets that other investors might not be paying attention to? A pod guy once told me all alpha is generated within the first month or two of a trade. Not always true, but that's the game some guys are playing for.

I think day-to-day and personality wise, you spend a ton of time reading and modeling. Where are thesis breakers? If everyone is bearish on a stock, why are they going to be wrong? If everyone loves a company, what would make them not love it? Why would they have to sell? It's a giant game of connect the dots mixed with Prisoner's dilemma. You also have to enjoy being right but realizing theses' on a regular basis. Market dgaf if you're right or wrong or how you think so you have to be willing to take & accept pain in moments but learn rapidly.

Day-to-day hours are what you make of it. Most pod guys work ~7a to ~8p. Sometimes more sometimes less. Earnings mimics banking but it's predictable and for ~2-3 weeks a quarter. Yes everyone in this business is stressed out almost constantly but they hide it well, lol. Anyone who says they aren't stressed out either doesn't care or has a 3+ year lockup and is playing for AUM.

  • Investment Analyst in HF - Other
2mo

Keep in mind that the vast majority of L/S equity funds are run by hardos.  The type of people reading industry reports while on Christmas vacation (I'm not exaggerating).  There's a reason why many non trad candidates do well or better in HF world than they would in let's say banking: they love the game-like structure. So if you're somebody who would rather take a *different type of stressful* path in high finance, go for it.  No shame in doing so.

2mo
trying_my_best, what's your opinion? Comment below:

Was wondering if u could clarify the diff between 'investing like an ape' and 'loving stocks like a hardo'? What is your personal skillset and passion for investing and how is that diff from 'loving stocks like a hardo'. And if anyone could explain how differently do HF folk love stocks from other people - and what abt warren buffett & peter lynch for example? They're not HF managers, are they any different from HF bros in terms of mindset

2mo
mtnmaster1, what's your opinion? Comment below:

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