I'm in macro and in my previous fund I couldn't touch single stocks, but in my new one I'm allowed to and a few punts did well. This makes me wonder, is it worth investing time in figuring out stonk PA trading? What do actual L/S people do with their PAs? Do you think there's value in picking top themes or single stock expression of themes or should I just keep it all in SPY and QQQ and not waste time on something that's not my day job?
A couple of rational arguments for investing some time in it that I thought of are:
- When you're younger and have more liquidity than the average retail person it's probably suboptimal to follow investment advice directed at the average person - your likely optimal beta is more than 1 and if you don't want to suffer from volatility drag or paying excess option premium, the only way to get extra beta is to focus on higher beta themes you believe in
- L/S is hypercompetitive in the high sharpe chasing pod model but if you have a 10-year horizon you can handle lower sharpe but ultimately higher returns and it can potentially be easier to find some extra alpha if you don't care how you do next 1-2 years
Arguments against that I thought of:
- If it was easy to provably get that longer time horizon alpha, asset allocators with long time horizon (SWFs, FOs) would pump all their cash in the funds who do this as their day job so it's either impossible to do it in your spare time or it's improvably doable which is the same as impossible when making a decision on whether you should do it
- If I spend the 2-3 hours a week I am willing to spend doing it in looking for more trades at my day job, I can probably generate more PNL
- I'm also a moron when it comes to stocks and a few punts doing well is likely a function of high beta momo + retail favourites doing well recently and my punts being correlated with those
My take: a few punts doing well is fun and educational, but unless stock picking is actually part of your day job, the opportunity cost might be high. Those 2–3 hours per week could be better spent improving your macro edge or generating ideas for your fund.
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