AMA: 2nd Year Equities L/S HF Analyst in Hong Kong

marketbeater's picture
Rank: Gorilla | 507

About:

WSO has provided tremendous help at the early stage of my career, even though I have always been studying and working in HK (and yes, WSO has good traction in Asia as well). Back then I always wonder it would be even better if someone can provide me more local insights about HK HF market. So years later, I am here.

Background:

- Finance major at local target school (did 2-year deferral for two one-year placement intern, low GPA)
- 1 year on BB Macro Research Team
- 2.5 years on sell-side single stock research
- Currently a 2nd year fundamental equities L/S HF Analyst (close to USD1bn AuM) based in Hong Kong.

For more details please refer to my previous post.

Happy to answer/discuss on anything regarding to Sell-/Buy-side career.

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Member @MarketBeater shares how he broke into Goldman and eventually a buyside hedge fund role in Hong Kong with a 2.8 GPA. How much he's getting paid now and a key piece of advice to our listeners to stay motivated...

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Comments (34)

Jul 12, 2019

Thanks for taking the time to join the podcast. I enjoyed hearing your story. I am very curious about how you integrated your favorite books onto your resume. Would you mind explaining how you presented that? Also, what are some other books you would recommend reading? I'm looking to follow a similar career path as you, and I love reading anything I can get my hands on.

Jul 14, 2019

Hi Buffalolad, I put my favourite reading list at the bottom of my resume, together with stuff like skillsets, interest, etc.

My advice will be:
1) make sure you read the books: interviewers always doubt whether you read these books. When I am being asked about this list during interview, interviewers always start with questions likes "which session do you like the most? What is this session about?" to verify whether you read it. If you just flipped through few pages of these books and said it's your favourite, this favourite reading list session indeed can ruin your interview. So make sure you read them;
2) put something not investment-/career-related: put something not investment-related can prove that you are not a boring person to work with. Books about psychology, history, politics, tech/mega trends globally can be good choice as you can always relate these books back to career if needed, while you got something more interesting to talk about during interview;

Before picking your next favourite reading, I think you have to be clear about which direction you want to head to, say if you are interested in Macro/fx trading, then all books by Bernanke/Greenspan are must reads; if you want something more trading-focused, Market Wizards series are good and easy reads to start with; for value investment you can go for Howard Mark's/Charlie Munger's books (/Intelligent Investors, given its reputation in the value investment space, but I personally find this book is quite difficult to fully understand); All the above are some easy reads to start with. For the others I like Rumsfeld's Rules, 7 Habits of Highly Effective People, Thinking Fast and Slow.

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Jul 14, 2019

Thank you for your help. I asked about the books, in particular, because I read a bunch of books that would be viewed favorably by interviewers in the roles I am targeting. If you have yet to read Red Notice by Bill Browder then I would like to suggest it. I think you would really enjoy it based on the other books you mentioned.

Jul 13, 2019

Hi marketbeater, thanks for the AMA.
i have missed your previous post and sent u a pm afterwards as i wanted to know more about the local HF industry. Maybe just a short question here, from your experience do u think research internship (either Macro / single stock) helps u in your daily work in L/S Equities?
And what do u think on SnT and Asset management internship?

haha just an ordinary kid with enthusiasm in the market
-- market-enthusiast/ Hongkonger

Jul 14, 2019

Hi market enthusiast mind dropping me a pm again?

On your questions, I think whether research internship experience help on LS equities HF largely depends on your fund's/boss's investment style. The more value driven/longer-term focused your fund/boss is, the more useful a research internship experience is to your buyside job. Instead, if your fund is more trading/day trade focused, a S&T internship experience could actually help more. Different styles require different skill sets.

Do you mind elaborating more on your questions about S&T or AM Internship? Do you mean the determining factor of choosing between different internship experience, or how is a S&T or AM internship experience like?

    • 1
Jul 16, 2019

I know you're in fundamental L/S. But could you give us some names in Event-driven L/S or special sits fund in Asia? Who is the biggest/best player in these categories?

Jul 18, 2019

Your question is hard to be answered, because firstly "best player" is hard to be defined, say 2018 return tripling does not mean it is a good HF and is sustainable. It is also hard to say a HF "is the best" if it is the biggest by AuM, because there are also many HFs with AuM<500mn but with very decent track record, and AuM size is more about managers' fund raising capability. Last but not least, sizable HF usually engages in multi-strategy.

Let's just say if you ask me to name some notable HFs engaging in LS based in Asia (i.e. not global ones like p72/Millenium even if their Asia team perform very well) with a longer track record (with no comment on recent years' performance), I will say the following names cannot be missed: Hillhouse, Segantii, Tybourne, Value Partners, Ichigo, Dymon, Platinum (Australia-based), Graticule, Myriad, SPARX Group, etc.

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  • Prospect in AM - Equities
Dec 11, 2019

What about long only funds? Fidelity/blackrock/matthews?

Jul 18, 2019

and for Special sit that's not what I am familiar with so sorry I cannot help on that.

Jul 18, 2019

Thanks for the AMA. Curious to hear what do you think defines your edge aka generating alpha?

Jul 21, 2019

Let's just say the 2 following direction are something I am working on to generate alpha, given I do not have a 15+ year of solid track record to prove that I really master alpha generation like Soros or Buffett: Fundamentals and Solid Mentality

Fundamentals mean having solid industry and company knowledge to interpret information correctly, and foreseeing what could happen next, and decide on what risk-to-reward in each bet you are taking. This still works because of different investment styles (e.g. prefer technical analysis to fundamentals), time horizon (short-term speculation vs long-term bet), and simply lack of enough understanding by different market participants.

Neuroscience suggested human's brain easily block information which is boring (not causing excitement at the moment, but could be important in the future), threatening (i.e. something counter to what you believe (hurting your dignity)), and something countering to your defense mechanism when you face shock (e.g. not to do panic sell) from further processing. Therefore having solid mentality to make decision based on critical thinking and sufficient evidence regardless of emotion and dignity is of upmost important in my opinion.

I also heard interesting source of alpha, mostly from mega funds, such as launching a satellite to the space to track shipment of a listed company, tracking private jet to predict the next mega deal, sending a team to all production sites and office buildings of a company to check if it is a fraud. Other ordinary source of alpha could be 1v1 paid expert calls, hiring industry professionals to cover listed equities of the same industry, etc.

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Jul 25, 2019

Do hong kong based Ls shops still ridiculously underpay analysts compare to their western peers?

Array

Jul 28, 2019

For PM roles I think it varies from shop to shop, largely depending on the pay structure and culture each firm has. So I am not commenting on that.

For global platforms like p72 millenium they are adopting global pay structure so I can only see slight difference when it comes to comparison with their headquarters'.

What is more interesting is analyst roles in boutique/local shops here, that things are actually drastically changing in HK in the past 3 years I think.

Not just LS shops, sell-sides (research only) are also underpaying many staff in HK comparing to US EU by more contract research roles (HK/Singapore, at least 3 BBs using contract role program or satellite office paying half of other banks' 1st-to-2nd-year equity research analyst pay). Besides, there are many mainland Chinese brokers establishing arms in HK and providing new source of research/trading talents here. The thing is mainland Chinese brokers has a different pay structure vs western firms that they pay very low base but very high bonus (It is very normal for juniors in mainland Chinese brokers to receive 12 months+ bonus here and made their pay on par/close to BBs', you do the maths). But both result in a relatively cheap supply of labor to buyside. I think traditional HK buyside firms also underpay vs western peers. So overall I agree that the underpaying is still ongoing.

What is changing in recent years is that in order to acquire talents from BBs, Chinese AMs/HFs are also paying very decent pay to attract talents. They could pay on-par top base pay of sell-side (research or IBD) for a buy-side job, or even with premium for some shops (10-30% premium), and of course, still-decent bonus structure. Therefore things is starting to change, but given the market is real bad, and with recent lay-offs (DB/BNP/many other sell-sides in the past 3 years), the underpaying may still go on for a while.

    • 3
Aug 1, 2019

Thanks a ton for the detailed response, appreciate it

Array

  • Prospect in IB - Ind
Jul 27, 2019

Delete

Most Helpful
Jul 30, 2019

What shapes HK HF industry in the past decade will definitely be fusion with China onshore market: Firstly since 5 years ago Shanghai/Shenzhen-HK Connect were established, where AMs in HK/Shanghai/Shenzhen can invest in one another subject to daily volume quota largely due to still-existent China capital control. The so-called Southbound managers (from Shanghai/Shenzhen)clearly has different investment styles versus HK/global managers, and is a new force to compete for pricing power in HK equities. Meanwhile HK HFs are also accelerating learning and investing in A shares (via Connect program), and to a certain extent make HK HF/AMs more opportunities in China growth. Secondly, WM in HK continues to grow thanks to booming wealth of Chinese entrepreneurs, as most banks are expanding their WM business here, which also benefit HK HFs, because . Thirdly Chinese onshore brokers are also posing serious competition to BBs in HK, and have already taken top spot in the league table for IB (I am talking about top 3 here), and continue to climb up the ladder on trading side with competitive service and commission. However one thing to note is foreign financial institutions are now granted green light to establish majority-owned arm in onshore market. This may be the new event reshaping China AM market. So I think overall fusion with onshore market is reshaping HF market here, and will continue to happen.

I remember there should be around 60 Asia-based USD1bn+ HF, and 30 with USD2bn+. Most are headquartered in HK, followed by Singapore. Most new additions to the billion dollar club are also Great China manager. So I would say there are still plenty of opportunities here and is still growing.

I think HK is still equities LS dominating at the moment. Not sure what exactly the data is.

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Jul 30, 2019

Thanks for the AMA. Do you follow any investment related websites/blogs for your day to day job?

Aug 8, 2019

Yes I do, but now I follow mostly industry bloggers on the IM we use in China called WeChat (basically imagine FB + Whatsapp + IG + mobile payment + many other things). I mean they are quite local. still I think for China related news, you can follow Caixin, or Caijing magazines. They always have some good articles. I gave up my bloomberg magazine subscription for these 2. Caixin should have Eng version. I also read Financial Times' Martin Wolf's column regularly.

Aug 4, 2019

Apologies as you half answered this question already. Which Singapore funds do you think are notable/good? (I noticed you mentioned Dymon) What about GIC/Temasek? Do you think there'll be a move from HK to Singapore given the political situation there right now?

Array

Aug 8, 2019

Interesting question. I am not very familiar with Singapore-based funds, and I think GIC Temasek and Dymon are the 3 I can recall on top of my head. Another one is FengHe.

Potential money flowing from HK to Singapore is something I am monitoring as well. The political chaos happening recently is indeed quite brutal. However so far from what I heard, private banking clients considering moving money out of HK are less of those UHNV, but more of clients with medium to low ranking within private banking (~USD20mn clients), according to my private banker friend. Also, while inquiries increase, actual fund flow to Singapore does not happen at the moment. Still the political chaos is still ongoing here, so who knows what will happen next....

    • 2
Oct 5, 2019

Thanks for the AMA!

  1. Do you hear through the grape vines any HF making plans to move HQ from HK to SG?
  2. How about expat HF / financial talents, have you seen any significant flow out of HK auto SG / back to where they came from?
Dec 12, 2019

Just PM-ed you on this

Dec 13, 2019

Thanks for the AMA! I've heard institutional to retail trading volume is about 1:4 in China. Is this true ? If so does it give you an edge compared to the us where that ratio is flipped and markets are pretty 'efficient'?

Dec 17, 2019

I assume you are talking about A share (Shanghai/Shenzhen, not HK), yes I give it a 3:7, and this results in 2 things: very expensive small mid cap which has stories and themes (e.g. reform, cutting edge technology, etc), and very cheap for large caps in boring sector, such as home appliance national champion trading at 4x PE with well run factories. I would not say institutional money certainly has edge, after all, value discovery is one thing, re-rating is another thing, it takes time and actual fund flow into undervalued name. So in terms of value discovery, yes, institutional money has edge in a sense that retail money price in near term catalyst while institution price in 5Y growth. But retail flow make the market trending less with macro, and stocks often trading at expensive range. A little chatter somewhere can put a stock shooting up to sky high. That's another headache for many institutions trading in A share market.

    • 1
Jan 6, 2020

How do you break into bottom-up from top-down macro research? Do you think the skill is transferable? I would have thought it is almost impossible to break into bottom-up with your back ground. I am currently working at a multi-asset boutique AM that has a pretty long track record (>a decade), would you have any tips if my goal is to break into global macro HF or L/S Equity eventually? Many thanks in advance for your time!

Jan 14, 2020

You are right it is tough to transit from top-down to bottom up, that's why I didn't take the return offer to Macro research team, and instead opt for equity research role, since my passion has always been in equity, and ultimately equity LS.

Global Macro and equity LS have very different skillset requirement: Global Macro's being more quantitative and top-down driven (securities pricing, econ model, monetary policy knowledge, technical analysis, etc), while equity LS's being more fundamental driven (e.g. industry knowledge, HF industry connection, equity valuation skill, edge in specific sector by either knowledge or connection within your covered industry, etc). There is not much overlapping between the 2 skillsets. You need to choose one from the beginning.

Given you already have some years of exp in AM, I think you can first ask yourself what is of your interest, macro or equity LS. Then you can ask yourself if you have already developed your edge which fits into either of the style by the years of exp you have. These questions should be asked on a relative basis, i.e. if you can really convince people in the industry that you can perform better than people already working in the HF industry, such as your current job, your PA, your connections' feedback, but not being blindly confident and thinking you are good enough by taking some online courses, reading some books and that's it (or in simpler terms, understand your competition in the job market). We are talking about HF, one of the most competitive industries globally.

If not, go take a master or something, build connection in the industry, get exposed, and getting better equipped with technical, connections, more track record and exp by trading, more knowledge by reading, and make sure when chances really come, you can impress people with what you have.

If you are young enough, moving to sell-side is also a choice: equity research if you are into equity LS or macro trading if you are into macro.

Hope this helps.

    • 3
Jan 15, 2020

Hi marketbeater thanks for the highly relevant thread.

I was wondering how familiar you are with the multi-manager HFs (P72, Millennium , etc.) in HK. In the US, they are known to be high-risk high-reward places but it seems it is hard to do well because the equity market there is so saturated. I heard that in HK, teams in general are doing quite well, and bonuses of US$1mm+ are common for analysts. Any insights on this?

Jan 17, 2020

MMHF to my knowledge should have very similar pay and bonus system across the globe. However whether it is common for analysts to earn USD1mn per annum is really determined by your PM's performance. In 2017, it is common for analysts to earn very good bonus since it is a bull market in HK, but whether USD1mn is common depends. I know analyst in MMHF earning bonus higher than that in that year, but I only heard of a few. On the contrary i know some PMs in MMHF do not perform well in HK in the past 2 years. It's all about performance.

The downside on a career perspective is that some selective MMHF has a system to let go analysts who underperform the market in a period of time. Therefore once you are let go, the whole street knows that you are let go because of underperforming. This is quite bad for your career.

I think in short it is quite similar with MMHF in US. After all it is a global platform. What differentiates is still PM's performance.

    • 2
Jan 17, 2020
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