How do you evaluate teams at MM firms?

Currently, a 1st year Associate at a UMM fund in NYC. I'm interviewing for a team at one of the large MM shops (e.g., Citadel, Millenium, Balyasny, Point72, etc.). I'm far along the process, but I have not had any conversations about the capital base, compensation, etc. As someone that has no real network in the HF / equity research space, how do you get comfortable with the team? I realize each pod is different and they all have different compensation structures / amount of capital to invest, but are there any good questions to ask HR or the analyst I would be working for? For example, if a PM is managing an industrials or TMT book with 3-4 analysts under him (and other junior members underneath the analysts), is that a good sign given it's a fairly built out team? Separately, how do you evaluate PMs that have jumped around different HFs? Should that sound alarm bells or is that a good sign that he has a track record that is good enough to get hired at all these places? Thanks!

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Comments (24)

Apr 28, 2021 - 1:01pm

I would look at the following indicators:

1) Tenure with the current shop. If a PM has been at a MM for a number of years it likely means (i) he knows how to profitably manage money under the MM risk parameters, and (ii) has been generating decent returns that allow him to add analyst headcount.

2) If a PM is jumping around from MM to MM, you need to evaluate how long the tenure is at each MM. Terms (payouts) are not that different between MM's so if a guy is a good PM at one MM he should be able to negotiate terms that he wants. If a PM tells you he is jumping ship every year or 2 for better terms my guess is he is really jumping from one blow up to another.

3) Analyst turnover - where do analysts go: to other MM's or pods as an analyst (sign of bad pay or bad fit) or do they move on to bigger and better things or even become PM's (sign that this PM is a good one to learn from)? 

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  • PM in HF - RelVal
Apr 28, 2021 - 7:56pm

Just going in with the mindset that 3/4 of PMs at MM are trash will get you a long way. I think the only reliable indicator that I've seen is the size of the team. Certainly that doesn't mean that small teams are necessarily bad, but it's very likely that if the PM is running a large team (>10 people) then there is some money being made. Or at the very least management has extreme confidence in the PM.

  • Associate 1 in PE - LBOs
Apr 28, 2021 - 8:03pm

Appreciate it. What is a good size book for a PM at one of the larger shops? Would $1bn be a good benchmark at a place like Citadel, Point72 and Millennium? 

Apr 28, 2021 - 9:51pm

not true....i saw a usd swaps trader at a bank for 3 years get a PM seat at Citadel...and he didn't have his own P&L...the swaps book was shared among 4 traders....this guy left for citadel, and then the swaps desk promoted a quant to fill the empty seat.

just google it...you're welcome
  • PM in HF - Other
Apr 28, 2021 - 11:15pm

Man, you guys are really harsh on here at times. Take a step back at how these firms are setup and think about the "pressure" the pod and PM is under. Basically these teams are judged on a quarter by quarter basis and capital allocation decisions are made annually. Vast majority of those decisions are based solely on performance some of these places have leadership who has no interest/patience to see a team grow/build/thrive and lots of time leadership thinks they know what is best. Aka this sector/area is hot and I am hearing at another fund their fund's sector team is crushing...so why aint you guys. Yes there is bad apples and yes there are people who blow up but sometimes there is things you cannot control. Citadel for instance, their internal HR actually spends time guessing competitor firm's performance and if that performance is repeatable. 

I agree that tenure of the PM/team and size of the team is pretty good indicators. The reason is if the team is bigger, more tenured that means leadership at least has confidence in that area/sector maybe not the personal completely but they still think we need to be in this part of the market. After that entering a pod which you have confidence in can succeed and see the ability for alpha and think the PM shares that vision and thought process would say is pretty key. If you do have that same mindset you will be able to judge if the working relationship with the team and PM is the right fit for you. 

Turnover, in general will be high anywhere. But agree that PMs jumping around is mainly due to blowing up somewhere, performance lacking and wanting a new start, leadership exhausted by current strategy style things. 

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