Most Interesting HF Strategy

Hey guys.

I've been learning about different HF strategies recently and I wanted to ask the wider HF community, which strategy provides the most interesting/rewarding work?


For me personally, I'm very interested in pure Activist funds(Value based) as well as Special Situations, but I also love the idea of fundamental value based l/s funds.

I also question why there aren't as many hybrid HF/PE funds that do vanilla LBOs as well as Value based Special Sits and Activist Investing? Logically PE guys have operational and buyout experience to make very effective activists without having to take the whole company private.

I'd love to hear your thoughts on this as well as the following questions:

Which personality/traits suits which strategy best?

What are the skills and knowledge needed to be successful for each strategy

Which funds are the top performers for their respective strategies?

Are there hybrid funds that allow you more than one strategy (e.g. Value l/s + Special Sits, PE + Activism, etc)

Thank you for your responses.

 
Most Helpful

a couple of points re activist managers and PE:

- PE has locked up capital, only some "activist" funds have i.e. their structure isn't set up for LBOs in the first place

- LPs investing in activist managers do not want to have more PE exposure i.e. most activist funds fall under the public market umbrella in the LP world. This results in a difference in lock ups, leverage appetite, appetite for exposure to overall direction of economy, exposure to multiples paid in private markets, etc. 

- PE professionals have operational skills but a lot of the returns of the industry are leverage driven/ (enhanced), most activist returns are without leverage i.e. the cases are not always comparable. More importantly however, affecting change as a minority owner is very different than changing a company as a majority owner

- Public market asset are valued daily - very different from the PE world

- Building positions / exiting positions is very different in both strategies (esp. relevant when investing in public small or mid caps

Taking stakes in public companies (in addition to take privates) is not that uncommon in the PE world but not a core strategy in itself. I think there have been PE funds starting public market initiatives. This has worked for some, esp. when there is a sector angle involved or the PE firm truly became a multi strategy house. Most of the time it has not worked, I believe. There are also some HFs doing levered deals directly or via SPVs, SPACs and whatnot but again, not core strategy.

Regarding your other hybrid question: there are a ton of L/S + special sit funds, so I don't fully understand the question

 

Thanks for the detailed reply. I didn't consider the leverage factor too much so that definitely makes more sense. 

What are some of the Multi strategy PE firms out there that do public market/activist work as well?

Regarding the hybrid question; I was specifically interested if there were funds out there that allow analysts and PMs to work on different strategies (L/s, spec sits, activist, distressed) or if the funds that do use the multi strategy approach separate their teams by strategy and consequently, analysts and PMs would need to specialise?

 
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