AMA - I'm an Equity Analyst/PM at an Asset Manager

N164's picture
Rank: Baboon | 122

Mod Note (Andy): this ama is now closed, thanks again to N164 for answering all the q's!

I've been in the Asset Management field for 15+ years, started as an i-banker out of undergrad, moved to AM after b-school when the hours got to me (both at target schools). Fundamental, bottom-up equity research. Have been at firms very large (separate accounts + institutional + mutual funds), and now at a small hedge fund. Happy to answer any questions.

Comments (102)

Nov 10, 2014

Is there any way you can advice regarding job search. currently working as an analyst working at boutique investment management firm dealing with macro research and focus on various ETF strategies in MLP, Commodities, Hedge funds ets. I am looking for a new role next year. If you assist me I would greatly appreciate. Thanks!

Nov 10, 2014

HI, it sounds like you are in a great position, already having a job in the space. May I ask what sort of role you are looking for? You're already at a boutique - where are you looking to go?

Nov 10, 2014

Can you give us the range of your/industry comp from post-mba to portfolio manager?

Nov 10, 2014
Slowpoke:

Can you give us the range of your/industry comp from post-mba to portfolio manager?

Would be interested to hear this as well, thanks.

Nov 10, 2014

Sure. Right out of b-school, the first few years it was more $100K - $150K. It took a few years to get to the $200K range, then post-2000 tech bubble bursting everyone got frozen for a year or two. Around 2002-2003 it got bumped up to $300K, $400 in a good year. My best year I made $650K, and that was post-2008. However, past few years it is really competitive. I'd say $400 is going to be the "new normal".

ETA: My base has been $200-$250K for the past 8 years. It is all about the bonus.

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Nov 13, 2014
N164:

Sure. Right out of b-school, the first few years it was more $100K - $150K. It took a few years to get to the $200K range, then post-2000 tech bubble bursting everyone got frozen for a year or two. Around 2002-2003 it got bumped up to $300K, $400 in a good year. My best year I made $650K, and that was post-2008. However, past few years it is really competitive. I'd say $400 is going to be the "new normal".

ETA: My base has been $200-$250K for the past 8 years. It is all about the bonus.

Your "new normal" number sounds a little on the low side especially for a PM with 15 years experience, given I've heard of analysts not more than 2 years out of banking making that much. You are obviously good at your job or there's no way you would have survived 15 years and be running your own book, but you also say you made a conscious choice to be a comfortable 6-figure guy. Can you explain that a bit more? Like I said, you seem to be good, so how/why did you "choose" to not be comped as much?

Nov 10, 2014

Thanks a lot for doing this. Few questions:

Could you talk a little bit about your career progression from analyst to PM? How did your day to day/mindset change after transitioning to a PM role? What advice would you give to a student interested in working at a bottom up, fundamental shop?

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Best Response
Nov 10, 2014

Career progression. Since the post-bubble burstings of 2000 and 2008, I think most of us think "progression" is more like "where can I find a good job"?

But in all seriousness, my role change was more evolutionary than revolutionary. I consider myself first and foremost an analyst. It was years of visiting companies, doing spreadsheets, monitoring companies and - most importantly - talking to managements and asking questions before I felt confident I understood what drove companies' successes.

If you're a student now, get yourself a subscription to the Wall Street Journal. Read Bloomberg.com. Pick a couple of companies you think do a good job in their field and follow them. Read about them. Maybe look at their annual report at http://www.sec.gov/edgar/searchedgar/companysearch.... Also, every company has an PowerPoint Investor Presentation on their website under the Investor Relations tab. Flip through some. See what they are emphasizing. Try to figure out what they might be ignoring or hiding.

Also - try managing a "model portfolio" - kind of like fantasy football for analysts. Pick a few companies, pretend to "buy" them as of a certain date that you think the stocks look cheap, and keep an Excel spreadsheet. Update the prices every so often and see how you're doing. Are your names doing well? Why? Are they not? What did you miss? Then, when you interview, if you've never owned stocks before, you can say you've been running your own model portfolio, here are the names I have, here's why I bought them, here's how they've done. It also means you can answer the dreaded "what was your biggest mistake" question with: "I bought X at $10 and it fell, or I didn't buy Y at $20 and it went up, and here's what I missed"

Finally, there are MANY asset managers with presentations, etc. online. Look at them. How do they present their product offerings? Are they focused on mutual funds, pension funds, high net worth clients?

The more knowledgeable you sound in an interview, the better off you are. People want "plug and play" - the less training they have to do, the better. Good luck!

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Nov 10, 2014

Do you have your CFA? What kind of value have you seen placed on it from your different experiences?

Nov 10, 2014

I have an MBA, and not a CFA. I haven't found it necessary.

Nov 10, 2014
N164:

I have an MBA, and not a CFA. I haven't found it necessary.

Great, thanks!

Nov 10, 2014

What's a typical day for you?

Nov 10, 2014

Typical day is digesting the WSJ, seeing what is on Bloomberg. I highly advise listening to Bloomberg Radio while you're getting dressed in the morning - great programs and you don't miss the important market-moving info. Then it is a lot of going through the news on the names in the portfolio (seems like someone is always announcing something), updating spreadsheets (I keep quarterly spreadsheets as well as annual forecasting models), looking at what is happening in the macro world.

The biggest thing I have to do, now that I'm at a small shop, is keep up with other analysts. It's the thing I miss most about being in a big firm - can't walk down the hall and get different perspectives, you have to dial or email for them.

You also have to go over the company's presentation to clients and potential investors, and keep that updated as well. You also need to monitor the portfolio for risk, concentration, etc.

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Nov 10, 2014

Great. Thanks for the response.

What are your thoughts on the sell side?

Nov 10, 2014

Thank you for taking the time write this post. What advice do you have for somebody recruiting for investment management out of top MBA programs? I have 5 years of investment banking experience and am starting bschool next year. I plan to search for a position in investment management at a value investing shop. Thanks again.

Nov 10, 2014

You already have a great background in i-banking (as I did) - you've done accounting (presumably!) and know your way around a cash flow statement and aren't afraid to stare down the footnotes.

I'd re-frame your resume so that your accounting experience and saw-companies-from-the-inside aspect are emphasized. I worked part-time in b-school not because I needed the money, but because - after investment banking - I already had done accounting and finance, so homework seemed ridiculously easy and my Nintendo skills were getting a little TOO good due to the free time I had. Try to get a job working part-time, if you're starting b school in a top MBA program, you'll be in a city or town big enough to have at least some asset managers, registered investment advisors, etc. Get the experience while you can. You can also hook up with the school's internal endowment people - they often have a small carve-out for the b-school students. Get to know your professors - they will be endless help in hooking you up with people.

Don't be too hung up on "value" versus "growth". Landing the spot is the important thing.

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Nov 10, 2014

Thanks for starting this post. It was good to read your replies to previous queries. My question is about getting a job in equity research and how should I prepare myself. Quick background : I am an MBA graduate with emphasis in corporate finance. I have previous experience in trading stocks, commodities, futures and options. Recently, I was interviewed at Goldman Sachs for equity research position, but unfortunately I couldn't make it past Round 3. I thought my application was pre-mature as I wasn't prepared for the technical questions thoroughly. Now, I have started reading books on equity research methods, DCF DDM valuation models, self-learning excel modelling, following financial news, etc. I wanted to know what specific areas should I focus on to get an edge during the interviews as my experience is not very significant and my knowledge about valuation is from the classes I took during my MBA and the projects. What technical questions should I be prepared for? Also, could you recommend any sources to get market news, analyses, and outlook reports for free? Thanks in advance.

Nov 10, 2014

I wrote above about a lot of sources I use: listen to Bloomberg radio, read the WSJ and Bloomberg.com, I think SeekingAlpha and ZeroHedge are great web sites.

I'd also not be interviewing at Goldman. That is formula for disappointment. Look at smaller shops, or the banks like JP Morgan Chase or Wells Fargo or B of A. You want/need a training program. If you have previous experience, you didn't do Excel modeling? That is very important.

I also wrote above that starting your own "model portfolio" where you pick companies you like, analyze them, follow them, "buy" them - then you can tell an interviewer that you are running a portfolio (and print it out and bring it with you) helps. Even better, spend $1,000 and buy some stocks for real. Everybody loves to interview someone who has "skin in the game" and has made purchases before - especially if you can back up your story with "here's my 3 bullet points of why I bought X; my model says it can go to $80 within 18 months, based on a 12 multiple to EBITDA".

Technical questions - I can't help you there. It's been a while since I've been asked that questions, plus I don't ask it myself. I figure someone who hasn't done Asset Management or i-banking before won't know or - if they think they know - they'll have to be given more detail anyway.

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Nov 10, 2014

Thanks so much for your reply. I will, definitely read up and follow the sources you told me to. One last question. I haven't used Bloomberg terminal or Thomson Reuters Eikon systems as I never had/ have a subscription or access to it. But now, I am trying to learn it myself through one of the books that I am reading. Is it any good to learn about the commands through a book and looking at snapshots?

Nov 10, 2014

Currently a financial analyst (not ib) at a BB wanting to move into AM or HF down the road. Looks like the current path is jump to SS (for ER or IB), wait until B School, or hop to a smaller BS shop. Any advice on which road to take for someone who's only been out of school 1.5yrs? Passed CFA l2, engr degree, taking int/adv acct courses now. Love investing (active PA since high school) and make pitches in my spare time.

Thanks so much!

Nov 10, 2014

You sound like you have a fantastic background, esp if you've taken the courses, had a PA, and passed CFA L2. Most job postings I see want "2+ years experience" so you are very close to that. The big secret is: it's not what you know, it's who you know. Find out if your college's alumni office has some alums willing to talk "informationally" to people like you. Go to JOBS on Bloomberg and find a list of people looking to hire. How about some headhunters - have you tried making contact with some to hear what is best?

B-school is best for the networking and the job opportunities. Given your background, it's not like you will be learning a ton. But the networking/people are the key.

I don't think it matters what path you take (SS, Bschool, smaller BS shop). I know people who've been successful doing each. However, a LOT of places want MBAs. Maybe the quant shops (AQR, Bridgewater) will take you without it. Have you looked into the quant areas of, say, BlackRock or the big shops? They often have a need for junior people with experience and passion. Good luck, I think you'll do great.

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Nov 10, 2014

Whats your normal day?

I have a dog and running with him is the best work out.

Nov 10, 2014

I am not making that much income. I am looking for 90-100K range. Currently looking for a more stable and better role in NYC. My role will be relocating to Atlanta and wanted your suggestion for more buy side types of role. I mainly use LinkedIn to reach out recruiters. As well send cold emails with resume and cover letter to boutique/ regional investment firms. As you must know most of those firms don't post job opening at their websites and sometimes have contact information such as [email protected]. I have huge database with lists of boutique investment banking firms, PE/ Hedge Fund as well Equity Research Firms. In addition may using CFA job board? What is your suggestion regarding Wall Street Oasis. I find the wall street job board jobs outdated? Let me know whether my job search strategy is a good one? I don't find apply to general job boards like Indeed, linkedin or careerbuilder that much effective.?

Nov 10, 2014

I am very new to Wall Street Oasis so can't give you an opinion. I find LinkedIn amazing (job postings, ability to see if you know someone at a hiring firm who can network you in), and between The Ladders, Manhattanjobs.com, Doostang, etc. my inbox is constantly flooded - the key is, when you find an opening somewhere, to see if you know someone who can make the introduction for you and get your resume to the top of the pile. You can also work in the corporate finance/business development part of a non-financial services company and get a look at financials from the inside.

Recruiters are a mixed blessing, I have found. If there is an opening, they will be happy to shepherd you through and be receptive to you. If they don't have anything, they are unlikely to keep you in mind. So you have to go to each recruiter's web page and see what openings they have.

I don't have any other job boards I can suggest, and I can't comment on your job search strategy, except to say that you need to network your way into companies - it is far more effective than emailing a resume to a posting.

Nov 10, 2014

I'm curious what your motivation was in going from large institutional AM (I would guess pretty chilled lifestyle, good comp, stability etc.) to small hedge fund, with (I presume) much higher career risk. Was it simply a case of better bonus prospects or something not related to comp at all? Also, why did you choose to make the move from AM --> HF at this point rather than after just a couple of years as an equity analyst?

Thanks for doing this!

Nov 10, 2014

The large firm I was with was a political minefield, and I was very unhappy. One thing with very large firms, there always seem to be these Machiavellian types who scheme and are political. I am not. At a big firm too, there's less of a "wear many hats" aspect, which I happen to like (looking at futures and options and shorts, rather than long-only). The comp was fairly equal, with potentially more upside at the smaller firm. I liked the direct line into the head of the company, rather than "talk to this person to see if the head guy has time" or cornering him on the trading desk.

There are positives and negatives to large vs small. The smaller firm had brighter, more nimble people; the large firm was more sclerotic.

Nov 10, 2014
N164:

At a big firm too, there's less of a "wear many hats" aspect, which I happen to like (looking at futures and options and shorts, rather than long-only).

On this; Now you're at a smaller place but still with two PMs and a few hundred mil, how much of your time do you spend personally researching companies/ trade ideas of your own (if any) and how much time do you spend actually (co)managing the portfolio, green lighting ideas of your

N164:

brighter, more nimble

research analysts, talking to major investors in the fund etc (an apx. % breakdown would be great!). If it's predominately the latter activities, do you miss the former?

Appreciate all your responses, this site has a lot of junior day in the life type stuff, but less about the nitty gritty of what is entailed when you actually make it up into the rarefied atmosphere of Partner/PM level management.

Great Thread. +1

Nov 10, 2014

Thank you very much for offering to share your experience and advice.

Could you comment on the following?

- What's your thought of working in credit research and then trying to break into equity research (sell-side to buy-side / hedge fund)? Or should one just directly pursue equity research?
- As a CFA level 3 candidate who learned financial modeling on my own and writes pitches outside my day job, should I apply to business school to have a shot at working for a highly rated sell-side analyst and ultimately go to buy-side?

I am looking forward to learning from you.

Nov 10, 2014

Look, my spouse works in credit research and it is a completely different ball game. Once you do credit you will be doing fixed income/loans/etc. The closest you will get, MAYBE, is with convertibles. I think credit is a fine place to be and if you choose to go that route, you should embrace it and not look at it as a way station. Very difficult to make the switch. There is a lot of credit choice too - high grade vs high yield, distressed, etc. The distressed guys always seem to do well, BTW. If you want equity research, then pursue that.

CFA Level 3.... maybe someone would hire you without real-world applied modeling experience. That I don't know - mostly I have hired either experienced people or right out of b-school. I think it is VERY hard to make switches nowadays. Everyone on sell side wants to be on the buy side it seems to me.There are enough buy side people out there that they don't need to recruit sell-side people (whose analysis is often superficial "what did they earn this quarter and what will they earn next quarter" rather than deep-dive). The only exception I have seen is SC Bernstein sell-side, which people really respect.

Nov 10, 2014

Thank you so much. This is very helpful. For b-school, could you comment on which schools have produced the most amount of successful alumni in the investment industry? What are some best practices (things I should start doing) to enhance my marketability for an equity research role?

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Nov 10, 2014

Hi N164,

Let's say that I in a hypothetical universe, networked my way to an interview with BlackRock Fixed Income, and I do not have a great insight into the nitty-gritty aspects of the asset manager industry. Do you have any suggestions in terms of documents, book, websites that I can research to gain a deeper knowledge?

I have been attending several networking events recently, and ended up in some very interesting conversations with rather senior people at BlackRock, and they urged me to come for an interview based on my experience, market interests and current endeavors. This thread couldn't have showed up at a greater time, and I thank you very much for your willingness to assist.

Nov 10, 2014

Well, first of all the easy stuff - do you follow BlackRock on LinkedIn? Have you perused their web site (it has a ton of information). Jeffrey Rosenberg, their chief investment strategist for fixed income, seems to write a lot. Read all of his work.

Mostly what I have found on interviews is that it is like dating. Mostly they want to talk about themselves. Don't try to be all "I know this and this and this and I'm interested in this". Ask how THEY got their start. Ask what THEY want to see happen to their business - or what they think will happen. Be sure to know how rising interest rates might affect their business. Have an opinion on whether rates will rise (and how quickly) - but don't be too firm about it, make sure you can nod sagely and agree when they say what THEY think.

There is no magic source on the asset manager industry. Ben Graham's "Intelligent Investor" is a classic. Google the big money managers and see how they got their start - Ray Dalio, Paul Tudor Jones, Lee Cooperman, Shelby Davis, Peter Lynch, etc. etc. Read Warren Buffett's last 3-5 years' worth of Letters to Shareholders in the Berkshire Hathaway annual report.

Having an educated opinion that you can defend, while still allowing for adjustments when times/events change - that is the key. The #1 thing you can say to an asset manager is: "I'm not looking to match an index on the upside - I'm looking to protect investors on the downside". Clients HATE losing money. They're OK if you only make 10% and the market's up 15%. But they HAAAAAATTTTTEEEE losing money. You beat the market by not being down as much as the market in bad times.

It is about listening, as much as it is about talking. Oh, and have a couple of buy ideas - give them a couple of ideas that they can potentially make money on. I don't know how it works in the fixed income world, in the equity world it's "I like IBM because their sales are growing at X%, margins are expanding, competitors don't have the depth of product line, and the real upside is their China business is going to explode because of their contract with Y government agency. EPS will grow from $2 to $4 with no acquisitions and no leveraging of the balance sheet, and people are missing that". That is what people want - a few good ideas.

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Nov 10, 2014

Going from an engineer in my late 20s to an finance MBA, how hard will it be to crack into banking? I already have trading/modeling/finance experience.

Thanks.

Nov 10, 2014

I cannot tel you for certain. The people who have been successful have networked, networked, networked. Use your school's career office. Call on alums who are willing to talk "informationally" - they can often keep you in mind. Your professors are another source. There are part-time jobs available in the field. That summer between first and second year - get the best job you can in the field you want. Get your resume in tip-top shape for the job you want - hire a professional to review it. Make sure your LinkedIn profile reads well - lots of recruiters use LinkedIn. The quant shops always want people with engineering degrees - make a list of them and network your way in (or see if on their Careers page they have an opening).

Nov 10, 2014

How do you feel about quantitative research? Do you see that field growing? Have you worked with any quantitative teams and how would you view their skillsets against yours? Thanks!

Nov 10, 2014

One interesting fact I learned is that 80% of NYSE volume is from "black box" traders. It is the future (or, the future is already here). We have a quant team where I am now. It is just a different set of interests. I want to know a company's customers and competitors, what their margins will do, new avenues of business, etc. The quant guys want to know "will earnings grow?" (who cares why or how), "is the company's price correlated with GDP/housing starts/personal income?" (so, can it be programmed to generate a buy or sell trigger). I would argue that the macro side is more important to them and the micro, firm-specific side a lot less important. They're not looking to know company managements.

Quants have a more "trading" mentality than a "long-term relationship, get to know this company and its industry inside and out" mentality. They need volatility and price changes. I need a company's intrinsic value to be recognized by the market.

Nov 10, 2014

Thanks for the AMA.....
What about having an MBA sets those people apart (vs. CFA).
Is age a factor for someone with a few years s/side ER experience looking for a b/side analyst role?
Also who makes the best analyst in your opinion? Passion for investing, GPA or money motivated...(or something else).
And finally, how is your performance measured or is it purely a function of how well the fund did. What pressure are you under to find consistent returns in your investment ideas?

Thanks!

Nov 10, 2014

I have no idea what sets the MBA apart from the CFA except better contacts and perhaps greater family wealth (a lot of CFA's I know couldn't afford to take time off to go to B-school). No judgment, JMO. I know people want to equate them. But the honest answer is: some hiring people consider them equal, some people prefer MBAs, some people CFAs. There is no one answer.

Is age a factor? I just don't know. If you're 40 and looking to make the move, maybe. But I think having some years of analytic experience helps. THe problem is that so MANY sell-side people are looking to make that move, so it is about getting your resume to the top of the pile and networking your way into a place.

Who makes the best analyst? Someone who loves investing, loves people, is a bit competitive. Some of the most brilliant investors can be jerks (read up on Gabelli or Steinberg or Pickens or Icahn). I knew I wasn't going to be like that. I wasn't going to make 7 or 8 figures. I was happy with mid-to-high 6 figures and quality of life.

GPA is ridiculous. I haven't been asked about my GPA for years. I think that is for first 5 years out of school (undergrad) and maybe 1 year out of B-school.

My performance is measured by a benchmark, but at the end of the day the clients want to know how you did vs the S&P or the Dow, they're not looking at anything else. Consistent returns are less important than NOT LOSING MONEY when the market goes down. Clients are a LOT happier if you're down 5% when the market is down 15% than they are upset if you're up 5% when the market is up 15%.

Nov 10, 2014

Thanks a lot for that.

Quick follow up on the comp.. Is your benchmark the fund's return? Or an individual performance measure?
And what does an Analyst have to do to get fired? Is it gross underperformance or lack of investment ideas or something else? Just curious. Or is being let go a rarity on the buy-side? Thanks again.

Nov 10, 2014

I am an international student from Nigeria, living in Canada hoping to get into Asset Management. However, I find that I am more interested in researching companies on the Nigerian stock exchange, as opposed to companies in the Canadian capital markets. Do you think this will affect my chances of getting an asset management internship in Canada?

Nov 10, 2014

I don't know if you're for real, or perhaps a Nigerian prince, but why would you want an internship in Canada with Canadian companies when your interests lie elsewhere?

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Nov 10, 2014

Yes, I am for real and I can't possibly be a Nigerian prince because I am most definitely female. Maybe a princess perhaps... I plan to get an mba in Canada and I want to try to get an internship during or after grad school....to get some Canadian work experience before going back home. From your reply, I imagine the same question may pop up during an interview...

Nov 10, 2014

Thanks for the AMA! You're providing great insight.

I am graduating this year and just broke into equity research at a MM bank.

1. I'm reading "Best Practices of Equity Research" by James Valentine. In it he says that the biggest mistake young analysts make is getting too buried in their cube and their spreadsheets, when they should be talking to other analysts, networking with institutional clients, and making industry contacts in the sector they cover. Would you agree with this?

2. What is your advice on how I can "stand out" as a young analyst? Is it in quality of research? Having great people skills? Non-stop thirst for knowledge? For now, I'm thinking my long-term goal is to get to the buy-side in equities at a hedge fund or an asset manager.

Nov 10, 2014

It is simplistic to say you get "too buried in their cube and their spreadsheets", especially if the senior analyst or PM dictates what you do, but I absolutely agree with the concept. My best ideas and insights have come from speaking with others. If you're researching a company, its competitors, its customers, its suppliers - all of them will have excellent insights. I'm also a big fan of talking with other analysts. Maybe they've come up with an insight or know of a development you don't. Institutional clients I am mixed about - they can help with "what is the big money looking at right now" aspect.

I've written at length above on how you can stand out (so - part of being a research analyst is asking the RIGHT question, and not the SAME question). Have your own PA (or a model portfolio). Listen to Bloomberg radio (they have awesome guests - just heard Abby Joseph Cohen this am), read Bloomberg.com - find a Bloomberg terminal and play around and get to know it. Have 2 or 3 stock ideas that are a "buy" that you can pitch at an interview. I've said this multiple times, and the answer doesn't change. Love what you do, be articulate about what names you like and why, and be easy to get along with.

Nov 10, 2014

Thanks for doing the AMA.

What is the best career path to break into hedge funds? IBanking?
Is it hard to break into hedge funds after 2 years of IBanking experience?

Thanks in advance.

Nov 10, 2014

What I wish people understood is - there is no "best path". It really is about your personality, networking, etc. It is competitive out there. You are one of a stack of resumes. To stand out you need people to help your resume get to the top of the pile, and have good grades from a good school.

My path happened to be investment banking to B-school to Asset Management. My spouse's was working in publishing to B-school to Credit Analysis. My best friend's was investment banking to B-School to executive recruiting. There's no one path, people! You can spin your story and resume any way you want.

Work hard, have good grades, be easy to get along with, have a PA, have a few stock ideas, be spreadsheet-savvy, be willing to learn and make the boss look good. That's the "path".

Nov 10, 2014

Thanks man!

Nov 10, 2014

If I as a student wrote an ER report, would that be something I could show to potential employers or would that just backfire?

Thanks for the AMA by the way, I'm learning a lot.

Nov 10, 2014

Sure, if you wrote one, why is that any different from having a couple of ideas to "pitch" during an interview? You just happened to write it down. Make sure it is current, make sure your investment thesis still holds, make sure you think it's still a "buy".

Nov 10, 2014
N164:

Sure, if you wrote one, why is that any different from having a couple of ideas to "pitch" during an interview? You just happened to write it down. Make sure it is current, make sure your investment thesis still holds, make sure you think it's still a "buy".

Thank you. I will do. Just started listening to Bloomberg radio, its great.

Nov 10, 2014

Thanks for this. How large is the portfolio you manage? Do you have sole discretion over your trades or do you have to clear them with the fund manager before executing? You said you have been at large AM's, mutual funds, etc. what prompted the switch?

Nov 10, 2014

I don't mean to sound annoyed, but I've answered "why the switch" above.

The portfolio I manage with another PM is a few hundred million. We both can trade (each have a portion of the fund). As a courtesy I discuss what I am doing with him. We are long-term investors so it's not like anything is hugely time-sensitive, there's 5 minutes to tell him what I want to buy/sell. We talk all the time so he is aware of what I'm thinking before I pull the trigger anyway.

Nov 11, 2014

What's your record?

Nov 11, 2014

Thanks for doing this.

Did you ever own LEH?

Nov 10, 2014

Given that the CEO's first name was indicative of his personality and capabilities as a leader, no.

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Nov 11, 2014
N164:

Given that the CEO's first name was indicative of his personality and capabilities as a leader, no.

I was definitely forceful and penetrating, if that's what you meant. Thanks for the response.

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Nov 11, 2014

Thanks for taking the time to do this AMA. Would love your advice on my situation.

My goal is to work for a small hedge fund or boutique asset manager doing ER but I'm not sure if I should start looking for a (buy side or sell side) position now or wait until after I go back to b-school.

Here's some info about me:

- Graduated 2.5 years ago from a non-target (though target for accounting)
- Work for my family's healthcare consulting company as a financial/business analyst
- CFA Level 2 Candidate
- Have been managing my own personal portfolio since 2009, current value is in the high five figure / low six figure range. Strategy is LS value-oriented with a focus on misunderstood and misvalued small caps with catalysts in the next 6-12 months
- Have experience with Bloomberg from using a terminal with a friend currently getting a master's degree

I also recently published an article on SeekingAlpha which received 'pro' status and will be looking to publish future ideas.

Given that I'm not currently working in finance and have a very limited network of people in positions where they could put my resume on the top of the pile for a position, what steps could I take to best optimize my chances of landing a buyside ER role?

Lastly, you mentioned SC Bernstein was a great ER shop--are there any others you respect or know have quality research teams?

Thanks!

Nov 10, 2014

Focus on firms that specialize in healthcare, and network your way into them. William Blair, Piper Jaffray, Raymond James, JP Morgan. Here are what are called "League Tables" showing the leaders in each sector: http://markets.ft.com/investmentBanking/bankingLea...

If you focus on what you HAVE (specialized, unique insight into the healthcare space) you will do well.

There is no magic answer as to "how to get to" these firms. You're not eligible for right-out-of-college training programs. I'd think about going to business school and spending the time there networking, working part-time in the field you want, and meeting with professors and the career office to be introduced to alums in places you want to work in, who will speak to you informationally. Have you been in touch with Career Services from your undergrad alma mater, and asked if they have a job board, or a list of alums who will speak to you? That is often a good place to start. They're there for you even after you've graduated.

You can keep looking at each firm's Careers section (I know Credit Suisse has a really comprehensive Careers page, for example) and see if they are recruiting for their healthcare team. Then you need to have a compelling cover letter you can send in, and a resume which focuses on your healthcare background. Have a few healthcare ideas to pitch.

Good luck!

Nov 11, 2014

Thanks a lot for doing this. My question is specifically to MBA -> AM path. Since you've worked in both large AM shop and small HF, do you recommend MBA student directly pursue opportunities small AM/HF shops instead of large AM institution? Do you think the resource/industry connection of large shop would benefit junior post-MBA analyst?

I will be doing MBA in one of target schools you mentioned above and want to do fundamental investing (equity/distressed etc). I'm debating whether I should stick to large AM shop recruiting. Coming from non-direct investing background with little fundamental modeling skills (semi-quant in well-known HF), I'm worried about my chance to small shops as well as the training provided in small shops. My own comparison:

Large AM shops pros: established recruiting programs (better chance, less surprise and last minute anxiety). good training. good connection to industry

Large AM shops cons: office politics, less upside potential, may limit to one sector

Small/medium AM/HF pros: cover many different things, more upside potential, better working environment (assume good fit), work could be more "interesting"

Small/medium AM/HF cons: adhoc recruiting (may get nothing in the end). may risk career outlook if company performs poorly. may lead to really bad hours.

(for small/medium AM/HF I'm not talking about those prestigious names like Pershing Square or Third Point. I'm realistic on this)

Nov 10, 2014

You have the pros and cons. If you're starting out, go where you think there's better training. Then you can move on to where you have less of a safety net and can fly solo safely. A lot of the "hot" hedge funds prefer people with some experience.

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Nov 11, 2014
N164:

You have the pros and cons. If you're starting out, go where you think there's better training. Then you can move on to where you have less of a safety net and can fly solo safely. A lot of the "hot" hedge funds prefer people with some experience.

Thanks for the reply.

Regarding "A lot of the "hot" hedge funds prefer people with some experience", I heard another prospective that HF (just mean fundamental equity fund here) doesn't like large AM shop people since their mindsets are different. AM like fidelity/state street/wellington may look at long term only and ignore the short to mid term catalyst and also focus heavily on book balancing and sector rotation. In contrast, HF (specially those event drive/special situation ones) focus more on individual names with short/mid term catalyst or huge discount that not due to fundamental reason. Therefore not many AM people go to HF.

Do you think it is true? I know you switch to a small HF from large AM but is ur experience common? I'm not saying AM is worse or better than HF (either in terms of pay or life style) but just want to weight my options. Appreciate your time!

Nov 12, 2014

- What would you say is the most interesting part of your job and which area has the steepest learning curve for a new guy?

- What kind of path would you recommend for someone currently working at a Big4 accounting firm in an advisory role? Have an internship at a bulge bracket in IBD, CPA equivalent qualified and on Level 3 of CFA. Spend at least half my time at work investigating companies, building models, consideration valuations and investing in them for 3+ years with my own money.

Nov 10, 2014

I have a young relative who majored in accounting, worked for an accounting firm, and now does valuation work for a hedge fund. Lots of HFs have a need for people to do valuation/accounting work. That is what I would do. If it is a small enough shop maybe they bring you out as a full on research analyst.

Look, you can spin your resume (you should have multiple versions, depending on what you're applying to) and your background (have different bullet points depending on where you're interviewing) any way you want. So many of the questions here are: "Hi. Here is my very specific background. How can I get to a HF?"

People - there is NO ONE WAY. It is all in your hands. You network, you go over and over your story with your friends, parents, spouses, mentors until it sounds crisp and plausible. Be prepared for multiple firms to ding you. Maybe 1 in 10 or 1 in 20 will take a chance. That means 9-19 dings per lead.

Know your way around a balance sheet. Know different methods of valuation. Have stock ideas. Have a PA you can talk about. Know what is going on in the markets.

Nov 13, 2014

Recently, various media outlets have suggested that the AM industry (specifically actively managed funds) may be facing an existential threat. Fees are shrinking, competition is growing, and consumers are becoming wary of being overcharged for subpar relative performance.

Source:

http://online.wsj.com/articles/investors-pour-into...

http://www.economist.com/news/briefing/21601500-bo...

Do you agree with these criticisms? How do you envision the future of the actively managed AM industry and the employees within it? If you were in b-school considering entering the industry today, would you be hesitant?

Thanks

Nov 10, 2014

You must be young. The actively managed world isn't going anywhere, not when they're minting billionaires and people are looking for returns. There's a huge amount of money in the space. It's not going to 0. If you feel so hesitant about it, go look at Vanguard or work at a place that does ETFs. Or go into consulting or to industry if you feel that way. I'm not here to opine on the future of the industry.

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Nov 13, 2014

@N164, do you have any advice for someone with a non-finance background looking to get into ER? Would an MSF be helpful? Thanks

Nov 10, 2014

"MSF"?? No idea what that is.

If you have a non-finance background, you can look for funds that specialize in what you do (if you work in healthcare, look for a fund that specializes in that, etc. etc.)

Nov 14, 2014

N164 is right on with his advice. If you want to work on the buy side, heed it carefully. When I interview guys, the two biggest things I want to see are 1) can the candidate build a detailed, coherent investment case with solid facts and logic, and 2) has the candidate taken the time to either invest his own money or build out a "paper" portfolio. Tracking your investments is critical. For long-only, having two or three names is super important. For the HF set, have some shorts, and prepare a few pairs trades just in case.

By way of background/introduction, I'm a senior analyst at a boutique small cap shop. My last two jobs have come through getting to know good people in firms where I wanted to work.

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Nov 14, 2014

Hey N164,

Thanks for doing the AMA. Would you mind taking a look at a couple of the stock pitches I've done and give feedback offline? Thanks!

Nov 14, 2014

N164, thanks for answering all these questions. I have been a management consultant with a Big 4 firm for 3 years. I am sitting for CFA L2 next summer, own a mock portfolio (looking to invest real cash), and have a basic understanding of financial modeling. Given that I pass L2 and L3 of the CFA in the next 2 years, as well as pick up additional knowledge around equity research and modeling, is there a chance for me to break into ER and what salary would I be the approximate pay that first year?

Nov 10, 2014

There is a chance for anyone to do anything. I don't decide that. I've also broken out pay. Again - it is all about networking, being willing to make the boss look smart, and perhaps doing internal operations/valuation work for a small fund and hoping they'll give you the opportunity to be a full-fledged analyst.

There are LOTS OF PEOPLE who want these jobs. They all have a passion for it. That will not distinguish you. Go back to school and excel, or work long enough and do well enough that it won't matter.

People - I am NOT A RECRUITER - I have no idea what everyone else is looking for, or what pay will be.

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Nov 15, 2014

Hi N164. Thank you so much for your previous posts. I am new to this Asset Management field. I am curious what is the difference between valuation work and research analyst work, and what are the chances of transition?
Thank you so much for your time.

Nov 16, 2014
N164:

People - I am NOT A RECRUITER - I have no idea what everyone else is looking for, or what pay will be.

Saw this, so maybe you won't want to/be able to answer this question - but thought I'd give it a shot anyway.

So many people on here do IB just to move to the buy-side, with the pot of gold at the end of the rainbow ($$$) one reason why. However, I have a theory that someone who builds a career in IB and becomes a good MD (assuming the "average" career banker) will make a comparable amount of money to the "average" good PM on the buy-side. Obviously this is extremely generic, but do you think there's truth to that? Or do you also believe that a career on the buy-side will pay more than a career in sell-side IB?

Nov 15, 2014

hi, thank you very much for your post.
Let me explain my profile.
I'm 24 years old, I have a degree in bank, finance and financial markets.
I have a part of a website online,where I provide investment advice.
I did an intership in Middle office in London for a period of 3 months.
But i am also an indipendent traders and i invest the savings of my family .
My dream is to work in a large asset managment firms.
I have a great passion and technical knowledge (I like to read books about macroeconomic issues) but I can not get into a asset management firms
This is because I have a low grade.
I can not get an interview because due to my low grade and then I can not show my skills
Now I ask you, what can I do to have a chance to have an interview with a recruitment to show my true value, passion and potential that can be an additional value?
Thanks so much

Nov 10, 2014

I have said this before. There is no ONE PATH. I can't tell you what will happen. You have lousy grades? you need years of good experience. Or you go back to school and completely buckle down and get A's. If I was a PM looking to hire, and I have 25 resumes, and 20 of them have good grades - why would i look at the 5 who didn't? If the guy couldn't knuckle down during school, who's to say he will now? So to overcome that - work long enough so the grades don't matter (at least 5-7 years), or go to B-school and ace it and prove that you just were immature then and know what is necessary now.

ETA: to the poster I'm replying to - if you do want to get taken seriously, you HAVE to do better on your typos. No one will hire you if you're sloppy.

Nov 10, 2014

N164 - thank you very much for taking the time to answer my questions. Very much appreciated!

Nov 16, 2014

I am not sure if you are familiar with the two firms....but could you explain the difference between working in Wellington and Fidelity if you happen to know about the firms?

Nov 16, 2014

Some of the most insightful posts I've seen on this site so far, will definitely be incorporating this into my investing learning regime

I know you touched on this briefly, but what are some resources that you use in your research that a typical retail investor like myself could use? j(journals, blogs, sites, books etc)

What would you consider a great peformance/ superior performance for a fund? Taking into account longevity of the fund, AUM, consistent performance, annualized returns etc.

Thanks for doing this btw, really have learned a lot!

Nov 10, 2014

Sources: Go to the SEC's EDGAR system and get 10Ks, 10Qs and proxy materials (the latter will give you info on management, the Board, who owns how many shares, who got paid what and how they determined that, and everyone's background). Go find trade magazines for the industry you're looking at. Find out who the major customers/suppliers are (in the 10k, this is disclosed) and see what sort of shape THEY are in (you don't want to lose a major customer or a major supplier if they're financially troubled; you also can be happy if the customers are growing and successful).

I really don't go to blogs or sites. Maybe ZeroHedge every so often. You can also Google earnings estimates and get an idea of what is being forecast, so when a company announces you can tell if it's good or bad versus what analysts think. You can read Peter Lynch's book; Benjamin Graham; Warren Buffet's Annual Letter to Shareholders (decades of interesting investment advice and insights).

And seriously "what is great performance"??? That depends, of course. Versus - what? Great performance for a bond fund is different from great performance from an equity fund. A long-short fund has different benchmarks, so does a quant fund or a market neutral fund. You can, I am sure, research these on your own. Use Morningstar or CBS' Marketwatch site. There is no one global universal "This Is Great Performance For A Fund" measure.

And frankly - this is stuff you should be researching if you care enough about the job, not for me to research and type down for you based on all the parameters you mentioned - you won't get a job expecting people to do that for you - you should be able to, and WANT to, do it yourself.

Nov 16, 2014

edit: sorry for double post, new to the posting side of this site and don't know how to delete!

Nov 16, 2014

I am trying to do some Vertical and Horizontal analysis on the financial statements of a company I want to further investigate . Since I didn't have a template layout in excel of the company's financial statements I am creating one from scratch. The problem I am running to is it seem that the company doesn't keep a consistent format(2014 vs prior years) in term of how and what account titles are listed quarter over quarter. Below I have linked some examples of the company's income statement (quarterly) as to what I am talking about . As you can see the account titles on the income statement are not consistent across the links listed. This posses a problem because in order to have an accurate analysis I need account names to be consistent across quarters.Would you mind making a suggestion on this?

http://www.sec.gov/cgi-bin/viewer?action=view&cik=...

http://www.sec.gov/cgi-bin/viewer?action=view&cik=...

http://www.sec.gov/cgi-bin/viewer?action=view&cik=...

Nov 18, 2014

Hi N164 Thanks for doing this! Can you talk more about the specifics of owning a PA? I am only a sophomore in college without too much time to check my account too often and only have $1500-2000 to trade. How many stocks do you think would be proper to invest in? What about the time horizon?

Nov 19, 2014

Hi N164,

I was wondering if there is any value to learning VBA Macros if I want to work in research (sell side or buy side). Do you think it would help me "make the boss's life easier" or should I use the time to learn something else.

Thanks for doing this.

Nov 14, 2014

I don't think it would hurt to learn some basic macros - that said, I don't expect our young guys to walk through the door being fluent in that.

Nov 19, 2014

Thanks. So let's say I had a finite amount of time as a new associate, do you think it would be valuable to spend it learning macros or is it much better to use that time to try and understand the industry/companies so I can take more off my analyst's plate quicker.

Nov 19, 2014

@n164: Thanks for the post. How are traders comped on the equity buyside on average? Also, you rec the WSJ, but isn't FT a better paper for all around Finance? Thanks.

Nov 19, 2014

@n164: Thanks for doing this post. Could you comment on traders' pay on the Asset Management side please? Thanks.

Nov 21, 2014

How did you decide what school to go to for your MBA? Did you have a school in mind while still in undergrad or once you were in IB?

" I am a strong believer in luck and I find the harder I work the more I have of it." Benjamin Franklin