Fired from HF - profitable investments but wrong sizing

Have you heard of stories of HFs (single managers, not just MMs) fire analysts despite positive stock performance because their sizing was off sides (e.g. only 1% position on a stock that was up 50% that year) or because they sold too soon/did not capture the best stock in the industry (e.g. ecommerce or software analyst picked Shopify correctly but sold it at $1,000 instead of $1,500, or they owned Amazon instead of Shopify which was a relative underperformer vs. etsy or another ecommerce name)?

That seems the most worrisome to me as it seems like job security is not just about avoiding drawdowns if someone can get cut for making $ but just not enough 

Comments (4)

  • Investment Analyst in HF - EquityHedge
Nov 29, 2021 - 4:04pm

Sizing ultimately comes down to the PM. If the analyst gets fired due to sizing, that's not a PM you'd like to work for, especially if you're not in a risk-taking seat.

  • Research Analyst in HF - Other
Nov 29, 2021 - 6:26pm

depends on the mandate and index and benchmarks

every year a bunch of LO PM/analysts get fired for being underweight FAANG (or whatever the new acronym is). it's part of the biz.

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  • PM in HF - EquityHedge
Nov 29, 2021 - 6:42pm

Generally speaking, as an investment TEAM, being right on ideas and wrong on sizing is a failure b/c no one gets paid for wins and losses. We all get paid for profits. So slugging percentage matters more than batting average. 
 

It's the reason some funds look at ratio of 10 biggest winners to 10 biggest losses or other similar statistics. 
 

As someone above implied, the difference between being an analyst and PM is that a great analyst can calculate the odds of any poker hand instantly (find a good trade) but a great PM can decide how to read the opponent and know when to lay it down or go all in (sizing the position). 

  • Analyst 2 in PE - LBOs
Dec 11, 2021 - 12:04pm

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