How do you mentally deal with tough stretches of performance at HF?

We're wading through some rough waters at work at my L/S equity fund, where one of our large positions has significantly dragged down our YTD performance (it was a joint effort, so no one to blame). How do you deal with this every time you come in to the office, where your PM is perpetually in a cranky/pissy mood, and you know there is no more room for error. How does one mentally deal with this?

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Comments (19)

Jul 24, 2018 - 11:08pm

Agreed, it's hilarious. I feel bad man but :

How Do You Mentally Deal With Tough Stretches Of Performance At HF?
Annoying Boss During Vacation
What Do You Do When You Make A Bad Investment In Your HF Job?
Would You Quit Your Hedge Fund Gig If Your Boss Has Emotional Mood Swings?

Sounds like a great place to work...

Jul 24, 2018 - 1:20am

How does one mentally deal with this?

Wine, women and song. Not necessarily in that order. Singing is optional.

PS. seriously, it's the core aspect of the business - unless you are an HFT trader, you don't know if you're doing ok for long stretches.

I have a friend who lives in the country, and it's supposed to be an hour from 42nd Street. A lie! The only thing that's an hour from 42nd Street is 43rd Street!
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Jul 24, 2018 - 9:16am

L/S funds don't have a corner on the market for seeking out alpha. Regardless of whether you're talking about a HF or simply portfolio management, when you're getting calls from clients all day long screaming about the fact that the market is up X-amt YTD while their portfolio/HF is lagging the broader indices by Y-amt, it makes for very long days/weeks/months.

Trying to convince a client to stay the course when they see extended periods of poor performance can be impossible. Precisely the reason why L/S funds should typically be reserved for the more sophisticated investor. Most of the clients I dealt with who were invested in L/S funds at my former employer were "qualified investors", meaning they had a min of 2.1M in investable assets..

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Jul 27, 2018 - 8:53pm

before taking positions set rules for what PnL will trigger a take profit/stop loss trade. then just obey rules and feel nothing. if your boss gets antsy, point at the rules and return to your minesweeper game.

Does anyone in LS actually take a stop loss? That sounds like the opposite of disciplined/fundamental investing

Aug 3, 2018 - 10:39pm

Not only that, but you can't do that anymore post Dodd-frank and in the age of algos.

Market can blow thru a stop loss and be a huge winner now in 72 hours.

Now you do have to stop out when proven wrong (paging me Einhorn), but a l/s hedge isn't going to be able to use stops and make money.

Jul 27, 2018 - 6:08pm

for some (many) investing strategies, its not so easy to get in and get out of your size without paying high transaction costs (so the tight rules based stop loss easily goes out the window)...and there is no easy answer when the market moves against you...either things mean revert and you win...or you get blown out and end up broke...and then you start over. That may be an exageration...yet...tis happens often enough that its really not. Eventually, you get a little immune to the adrenaline and it (drawdowns) just becomes part of life, and you try the best you can to answer the question "if i didn't have a position, would i enter here?"

just google're welcome
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Jul 29, 2018 - 7:24am

Working in the same industry:
- If you had discretion, stick to your strategy and focus on the work rather than the outcome in the ST.
- As you seem to be a junior ANL: industry is full with characters. Either you cannot take the emotions of bosses or your boss is an extreme character. Either way, sounds to me time to change the environment.

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Aug 6, 2018 - 7:27pm

imagine if it was your own personal money....however much you have...your life savings...imagine it all invested in the fund....and if the fund is down 20%...then YOU are down 20%

just google're welcome
Aug 6, 2018 - 8:39pm

You see guys with 4 Porsches and 2 Maseratis and kick yourself for only being to afford 2.
You travel to the most remote places on earth (Antarctica, the North Pole, Sahara Desert) to try and escape reality.
You experiment by not speaking (to anyone) for 1 entire week. (Cannot even order takeout).
You scream at your girlfriend for no reason, even though shes an IMG model and your guy friends are telling you to chill.
You have 2 psychiatrists and 1 non-licensed therapist. They sometimes disagree over prognosis.
You hire girls spank you with a wooden plank until your buttcheeks turn red.
You contemplate suicide every day.

Don't ask me how I know.

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