Differences between working at a short bias firm vs. a long bias firm?

I currently work at a small concentrated shop with a 3+ year time horizon as the sole junior analyst working almost entirely on longs. I'm in the late stages of the interview process to join a great $2-5B firm with great branding and recognition where I'd be spending 80-90% of my time on shorts instead. 

I'm not sure how I feel about this - it'd be a great step up in brand name, comp, trajectory, but I am unsure how I feel about shorting. During the interview process, they've stressed that I need to think about how I feel about shorting since I'd be doing it so much.

I think I'd be just as good at it, but I also feel like it would be punishing to do shorting almost all the time. I'm good at digging, I have a journalist mindset sometimes, but I'm not entirely sure though since I've only worked on a couple of shorts in my entire career.


Is it a totally different feeling? I think I'd have no qualms about working at a place where it was say 50/50, but idk if I could handle 90/10.

I feel like the long skillset I've developed would not be put to use in the same way, but on the other hand, it's really difficult to turn down the comp and prestige.

I also have great, great work life balance at my current fund.

 

You mind expanding why it sucks? I'm ofc familiar with the practice but have not ever been a "shorting" guy I suppose. I think I'd be just as good at shorting honestly, but would likely enjoy it less, though honestly I don't know.

 
Most Helpful

1. The churn is extremely high on the short side. So you are constantly under pressure to generate new ideas. This is extremely stressful. I feel like I am constantly working on shorts while my longs can just sit there. It is a terrible return on time.

2. I think it's much harder to generate short ideas. If you think about how you generate long ideas, a lot of it is probably seeing what other investors are in (maybe that is mining 13Fs, reading fund letters, speaking to sellside,  speaking to friends in the industry, etc.). People talk openly about their long positions, but are generally very secretive about their shorts. For every ten long ideas that gets thrown my way, I come across one short idea. So you are pretty much on your own when it comes to generating short ideas. 

3. You have to have a high threshold for pain. On the long side, if a position goes down 50%, there is something seriously wrong fundamentally. But on the short side, things can go up on you 50% easily especially in this environment. Any idea what a short squeeze feels like? It feels like getting kicked in the nuts. Related to that, if your shorts go up, your problems get bigger. A 100bps position becomes 150bps. It keeps moving against you and the position continues to get bigger and the losses get bigger. Fun stuff. 

4. You can never be happy when other people are happy. Truly. Market is up 100bps, the fund is doing well, everyone is rejoicing and a general sense of happiness. You are in misery. Market is down 100bps, your shorts might be working but the your boss is pissed. He takes out his stress on everyone including you. Let's not even talk about what happens if your shorts are not doing what it is supposed to be doing on down days. It's literally a no-win situation.

5. You have to make sure it matches up with your personality. You have to be kind of a cynical person. Most people are optimists. It's really hard to be good at short selling if you are fundamentally an optimist. It is going against your natural personality. That's why most people suck at it and hate it. It's not natural for most people.

6. This is more fluff but some people care about what society thinks of them. Non-finance people truly think that short sellers are evil. That bothers some people. 

7. You should get clarity on how your short book will get comped, if it is not already clear.

In the end, the most important question I would ask if I were in your shoes is....does this suit my personality? If it goes against the natural grain of your personality, I would stay away (assuming you have other offers or are happy to stay at your current fund). 

 

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