Long-only or HF?
In terms of mentality and character, what kind of person tends to do well in HFs? and long-only? Any thoughts?
/HH
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being long only doesn't preclude one from being a HF
Also, mutual funds can take short positions (both via short sales and derivatives.).
Thought MF had way more restrictions on what they are allowed to do.
of course, KP never said otherwise, just stated some of the stuff they can, in certain circumstances, do
many (dare I say the majority) have restricted themselves from short-selling
Yeah I hesitated to say "majority" without any definitive proof, though that's what my instinct tells me based on what I've seen.
Thank you all for your replies.
let me share my 2-cents here...(cuz currently working for a long-only).... yeh we are allowed to take some short position...but, interestingly, as far as I observed, we do not have the expertise/courage in this area.... PM not dare to take any significant short position....
as you know....for those whom made PMs in long-only....most of them spent their entire career to mock Buffet's value investing style... I know it sounds silly...but most of them have no idea about short-selling ...not to mention derivatives....
if one took a short position (based on valuation/ DCF models etc - long-only style to identify buy ideas...), the outcome could end up pretty badly....
Really don't think there are that many great short sellers out there. Takes a whole different skill-set in terms of idea generation and risk management. A lot of it is behavioral so idk if you can necessarily 'learn' to become a David Einhorn either. Also to your point it's ridiculously hard to short a stock based on valuation. For obvious reasons a high multiple can stay high longer than you can stay solvent, and on the other hand if you take an alternative view and short a levered cyclical, then you better be right otherwise the stock can easily double on you. Lastly guess what, sometimes you just don't have that many accounting frauds to go around and a lot of people just end up in the same shorts anyway....what ends up happening is of course some people will make waaaaay more money than others just by being better risk managers (e.g. see the vast difference btw T2 and Greenlight's performance in the same positions).
A really good Jim Chanos interview if anyone's interested http://www4.gsb.columbia.edu/filemgr?file_id=7310995
From what i understand most of the long-only fund such as punsion fund implement passive investment strategies simply because they want a low-risk and stable return. For hedge fund you will definitely need to be able to deal with a lot of risks/pressure. But it's more interesting work i would say even for l/s.
Ability to arbitrage is a main profit/risk thesis for HFs. If you can't short, you can't arbitrage well.
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