Hedge Fund Interview Course

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Comments (9)

Oct 3, 2021 - 1:32pm

I have interviewed with them over the years and thought highly each time. My understanding is that it is technically like a MM but has much more of a "boutique" chiller feel like some of the SMs. I understand the firm is by far a quant shop and has this L/S team to do some fundamental investing. I think at the end of the day they may still be factored/limited/hedged by quant factors as far as I understand in my limited knowledge but do make like fundamental picks (even had some activist investing at times) for like 12 month horizons or whatever. Seems like they have sector heads / PMs that cover sectors/companies and make calls to invest long or short in those stocks. It might be like a MM in that sense where those people can kinda run their own PnL but idk for sure. Some other helpful info that I remember is culturally very much like a tech firm as compared to a bank. I think one analyst there said they are the google of finance (I think former google CEO Eric Schmidt is a big investor in desco potentially). Seemed like a chill place and if you have some good ideas of stocks you want to go long or short on it coulD be a good place to do that as they seem to have a good amount of capital to invest. But again I don't know for sure. Just trying to share some helpful info for you hopefully. In comparison to Citadel and Millenoum I'm not too sure if it is that different. Maybe a bit more laid back / techs but I don't know for sure. I think I saw one of the DESCO L/S sector heads/PMs move over to citadel one time. I think some of the desco PMs/analysts came from like well-regarded SMs (like Perry, Senator maybe), PE, asset managers and I was being recruited out of college and then again out of banking if that helps in your understanding.  Best wishes and good luck :)

Oct 3, 2021 - 2:43pm

Thanks for the info. Appreciate it.

To your point on comparison with MM platforms, do you think that the pms there ran market neutral portfolios or were they mostly long biased?

Oct 3, 2021 - 3:46pm

You are welcome :)

I'm not sure. I would venture to say it may err on the side of being market neutral but I didn't get such a strict / intense market neutral / pure vibe from DESCO as compared to Millenium/Citadel from what I know about each of those places

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Oct 3, 2021 - 3:32pm

They run market neutral but aren't as short-term focused as MM. Best way to summarize team is a combination of MM + SM. 

The group has 1 sector head per vertical (unlike MM where you can have 4-5 TMT PM's). Each PM is given a discretionary amount of $ they can invest (amount depends on tenure) and holding periods are usually 6-18 months. Team mainly invest in large-cap companies and has occasionally done activist campaign (although not common). 

All positions are market neutral though, even if the company decides to do an activist campaign they will hedge themselves by trying to find a comparable short shorting an index, if needed.

Feel free to PM for more questions, have a few friends in the group.  

Oct 4, 2021 - 3:03am

Thanks for the color. Really appreciate it.

I've thought about pming you but i only have a few more questions and thought it wouldnt hurt if everyone else got to see the answer as well.

Do you happen to have an idea about returns on the different verticals? I know that you can have 3-4% returns at a pod at a platform and that would be considered a really good year for that pod since they're running market neutral. Is this similar at DE shaw and since pms are responsible for their own sectors i'm guessing they also run sector neutral?

Also what would you say the book sizes are for the pms/sector heads there,on average and do they have full discretion over investment decisions or is there a committee that has to approve each trade?

Most Helpful
Oct 4, 2021 - 7:53pm

Sort of... At a MM, a PM will be allocated a fixed amount at the beginning of the year (i.e. $100m) and outside of performance, that number will largely remain flat until the next review session (if they are up 3-4% they might get an additional $50m, but if they are down 3-4% their capital might get cut).

At DE Shaw, PM's don't have a "fixed known amount" of capital like MM's since investments are done on a best ideas basis and fluctuate depending on how the market environment. The group is not afraid to hold concentrated positions if needed.

In regards to book sizes, they vary as I said above. However, you won't be constrained by capital. If you have a high conviction bet the firm will provide/find the money (one of the perks of being at a large, multi-strat firm).

PM's have discretion on investment decisions under a specific amount (i.e., $50m, amount varies depending on tenure and track record). For any amounts over your allocated discretionary amount, you need to bring the idea to the investment committee.

Lastly, returns are good. The firm's bread and butter biz is their quant department, but L/S has put up solid returns that speak for themselves. They fly a little under the radar given firm culture.

Oct 5, 2021 - 3:34am

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