MultiManager PM (Millenium, Balyasny, Schonfeld) minimum requirements
what are the minimum target requirements (total return %, sharpe, performance history, etc..) for a trader (sellside and independent) to get hired as a PM at these multi-manager shops?
for example, is a 1.6 sharpe for 12 months, generating 18% return with max 5% drawdown "good enough" to get hired as a PM at these shops? What are the bare minimum cutoffs?
I've heard that the avg lifespan for a PM at these funds is less than 1 year...most lose too much too fast and hit their max drawdown limits and get fired. So, it seems that the majority of PMs don't perform....and these funds must be willing to take risk with hiring if so many PMs fail the actual performance test.
While i'm sure the funds would PREFER a PM with great stats (3+ sharpe, market neutral, +20% total return)....that seems to not be what actually happens. So what stats does a potential trader need to hit on order to get a chance as a PM at one of these funds?
I was a sellside trader for a few years running my own book...8-10bln balance sheet on a rates desk where 98% of the book didn't really move...and the balance was essentially a mini hedge fund within the desk run by me...then got pushed out for political reasons and now nobody i worked with will return my calls or texts, so i took some time off and then joined a prop firm as a partner where i had to put in my own money and now trade my own money as a partner at the prop firm. We have an office, but i mostly VPN and work from home.
No issue with scalability (trading liquid futures and us treasuries).
My question is...how much should i scale up (or down) the risk in order to be attractive enough for these platform funds. I have leverage available to me that i am not using, because i fear blowing up and losing MY money.
At the sellside bank, my last year book made 20mm all from tradig prop in liquid stuff, but i was not paid well...so then i took some time off, joined a prop firm as a partner (contributed capital...so i get a K1 and get 60/40 tax treatment for my futures P&L, and my $$ is 1st loss capital).
I'm not the typical rates trader...i don't run a large basis book or trade off the runs (not anymore...you need flow to make this work)...i trade more intra-day macro, but still mostly within the rates space (outright, curve, butterflies), plus equity futures, FX and Gold futures as hedges as part of my strategy (not always, but often). Not HFT scalping..more medium frequency, but still intraday trading. I'm not an analyst...i'm a trader.
So anyway, with the above numbers, i could change my risk metrics by using more or less leverage going forward, and also could be more or less patient and reach for longer trade targets. For example, sometimes i'll take 16/32nds out of bond futures when i could have waited for 24-30 ticks and that was completely reasonable (nothing guaranteed of course), but 16 ticks was enough $$ to make me happy in my more conservative style where its 100% my own money at risk (my money is 1st loss capital). My question is...what target should i be reaching for? If i need to hit a higher % total return, i can increase leverage (plenty available) or increase patience for bigger trade targets. That comes with the danger of larger % drawdown, more volatility of course...not sure how it will affect sharpe...could be either way depending.
Based on the minimum targets that i need to hit, i can adjust the levers in my strategy. Nothing guaranteed of course, but if i don't know what the targets are that i need to hit, i don't know if i should be taking more risk or not.
The more important Q is scaleability. Do you really able to run Sharpe 2 on 1B GMV (assuming equities, not things like basis)?
Also, what do you mean by "independent"?
I suspect "independent" means "pajama trader on his Robinhood PA". Fact he poses a 20% return as conceivable makes it even more likely.
If so, this sort of "track-record" is completely irrelevant almost surely (yet, there is non-zero probability that this guy is genius whos alpha is so strong and PA is so big that he runs at least hundreds millions from robinhood; I am not a robinhood user, so I do not know if it is even possible to leverage any significant money here).
if i was a genius, i would be making 100% returns...that is not the case...or making 20% per year for 10 years straight (also not the case).
So back to my original question...what really are the minimum requirements to get a seat as a PM at a fund. i've added some more detail to the OP for clarity
I am an equitites guy, Ill try to answer from that perspective.
100% returns on couple of 100K s is far away from being genius. Making 20% on couple of Bs is much closer to it though.
Well, there are no hard requirements. It is more like a dialogue. What do you trade? Scalpe? -- not good. What is your turnover? How do you estimate market impact? What are your execution assumptions? If it works only with rebalancing on close -- not good. What is your universe? Are you able to trade Russell 3000? Are you able to trade internationally? Are you able to trade ETFs/futures? If your strategy works only on SP500 tech stocks -- not good. If it works everywhere (assuming coverage in data and economic principles behind the alpha) -- good. What are your risks? Usually, deversifying and hedging only distill a signal and improves Sharpe. If not, you strategy is probably noise enhanced with some beta here and there. How do you manage relatively large drawdown? How many sources of alpha do you have? The more the better. Do you have a process to add new alpha "quickly" if old alphas become crowded? And so on.
Consider a person like you who makes 20-100% on a relatively small account. The first one scalps like crazy and goes home in the first 15 minutes of interview almost surely (with probability --> 1). The second one runs a "diversified" "market neutral" mid freq portfolio with say top-10 signals on each side and benefits from either smaller rebalancing frequency, illiquid stocks or some execution tricks in more liquid ones (like capturing best bid/ask with small size), hence big returns. Leveraged say 6 to 1 (like in one of the most popular retail electronic brokers) it is couple of millions of GMV. All being equal, the second guy could really be a "fit" cuz almost nothing stops him from taking top-200 stocks on each side (assuming there is alpha in that names too), increasing holding period, executing more carefully across some timeframe to minimize impact, hedging more aggressively and probably diversifying internationally (while rebounding some lose in Sharpe). So, the second guy could (theoretically) scale from couple of Ms to at least hundreds of Ms or even Bs without changing his process much. This is what could make him valuable.
Disclaimer: I am not a member of hiring commitee of any firms you mentioned. The answer is based purely on my experience. Actual experience could be completely orthogonal in other cases.
guys...i don't trade in robinhood...i have account with a prime broker..its just a small account.
however, if a robinhood trader could take 200k and turn it into 1 million with good risk management...all the power to them.
lets keep the focus on the important thing. investment talent can theoretically be found anywhere...doesn't take a degree from MIT or Harvard...but it does take a combination of experience, a type of intelligence, and creativity...to be able to synthesize a firehose of information, and distill that information down to the essential components that really drive prices in a subset of securities. That has been my experience. Everyone has their own path...this just happens to be mine.
how do they determine how well a PM or strategy scales?
I would think absolute minimum to even get looked at for senior PM job is 3 years track record, $10mm yearly pnl with potential to scale, 1.5 Sharpe ? The structure of your question is not great. It is much easier to get hired by an existing team and have the team leader take on netting risk. Sellside is not practically possible to get a senior PM deal because your track record gets heavily discounted. If you could, you would already be aware.
while i appreciate your response...you are guessing. i can make a guess myself....i'm looking for a concrete answer from somebody who actually knows
also, for my strategy, there is no benefit to team...i'm more like a PaulTudorJones type trader as opposed to a running a book of equity long/shorts where it would make sense to have a team of analysts coming up with trade ideas.
I am what they refer to as a "lone wolf Trader PM"
i want to join one of these funds for a couple reasons -manage more $$ -make more $$ for myself given the same % performance (make more $$) -no personal risk of loss, so i can take more risk (and make more $$)
Fact is, his guess is very on target. In addition, I'd say you need to have been managing at least $200mm in your most recent gig. On top of that, it's not just a set of numbers that they're after. They're looking for a robust, repeatable, and consistent process over time.
I'm shocked how many people in this forum seem to think you can post good numbers on a $100k book out of your dorm room and Citadel will give you $1bn to manage. Spend some time on Linkedin checking out the background of people who work at all these funds and you will get a serious reality check.
Readers: Please ignore this guy, it's all bad info. Reads as though he is drunk trading at home on Robinhood trying to relive the "glory days" of being at a bank. Prop shops are mostly hacks and not the path to a MM.
i can see that you don't actually know the answer to my question. how many traders do you know that got hired to trade as a PM at a multi-manager shop? i'm guessing zero
Over 100 - not exaggerating in the least either
I'm probably not the informed on here, but based on the people I know who became PM's there's definitely not a hard cutoff. Seems like you just need to convince them you can make money- hard independent track record is definitely preferable but I suspect factors like age/years in industry/pedigree/confidence/your description of your signals and risk management and process all matter in some bayesian way to determine how likely you are to make money.
If you were just a robinhood trader, I'd be skeptical. But given you worked at a bank before and are now successfully running a PA, I'd be shocked if they wouldn't at least talk to you.
Is there any harm in just having the conversation? Worst case you sound like a moron for a couple of hours.
my concern is that i get the interview, but my stats aren't good enough...and then that creates a barrier where if i improve over the next 6 months to bump up my stats, they won't be interested in having the conversation. My plan is to keep trading until i hit an upswing that gets into the range of stats where they would say "yes, lets bring him on" vs "ehh....not quite what we are looking for". So, hence the OP...what stats are they looking for?
It's a terrible plan and not how people get jobs. You would be better off pitching an existing team on a system that you had been working on developing to try in small size to start. I'm going to stop responding, but I don't see how you are not an internet troll with the things you are saying.
EDIT: For the younger people reading. It is fine to show off your robinhood etc. But it is not valuable in terms of anyone actually thinking you are good at trading in a repeatable, risk-controlled, scalable, institutional way, so be humble - it is more a great expression of interest that can be channeled into an actual career. Once you get your first investment job, no one will take any of your self proclaimed PA trading seriously at all.
You seem to be unwilling to listen to anyone that talks you down from your grand plan, even though many have given good advice.
As a last try, I'd encourage you to speak to some of the many recruiting firms that place people in the multimanagers, and ask them these same questions. They will give you the same answers you got here, but hopefully you will heed their advice and not waste a year of your life trying to goose up your PA returns.
Oh man, you have connections already. Why not ask the people who were in the same position with you at a dealer and the. got hired as PM? Conversation doesn’t hurt.
I think if you go in with the mentality that its on you to prove that you're good enough, thats not going to come across the right way. If thats some function of your personality (as opposed to your trading ability) I'd do my best to suppress it for your interviews...
Sorry to barge in with an irrelevant comment but I read a fair bit of the responses to this thread and so much of this sounds foreign to me. I’m a fundamental value HF guy, and I have friends at MMs who do fundamental long/short equities (analyst-level) none of them have ever brought this up. Some of the stuff you guys are talking about with the signals and sources of alpha and all that stuff - is this more like trading vs investing?
yes, exactly that. Long/Short and value equity investing is completely different from medium term macro trading.
The multi-manager pod funds have both....but they operate completely separately
However, the only difference between "trading" and "investing" is your holding time.
This is an interesting point. I would highly recommend that you try to learn/ think about investing from the multimanager perspective, as I believe it is probably the purest form of managing capital.
This may be a controversial opinion, but a lot of fundamental, "long term" investors I don't think understand the ins and outs of how to manage a portfolio. They use being "long term" as an excuse to be long beta, be recklessly concentrated, and to explain away huge drawdowns. People at tiger cubs/ value hedge funds seem to look down upon the MM platforms, saying that they are too short-term and too focused on earnings when in reality there's really no difference between being long term and short term. There is a difference in understanding risk, having a consistent repeatable process, and charging fees for providing alpha, not beta.
For you, coming from a place which probably doesn't emphasize many of those things above, I think it's worth learning. If you look at the returns of l/s equity single manager, value oriented, traditional funds, the majority of them have very high beta (>.4) and low Sharpe (<.6 and="" huge="" drawdowns.="" how="" they="" charge="" is="" baffling="" to="" me.="" this="" the="" fat="" in="" industry="" that="" will="" get="" trimmed="" first="" as="" allocators="" more="" sophisticated=""></.6>
so yeah. I want to learn and you seem to know exactly what I’m thinking.
The value guys definitely view the multi-managers with disdain regarding the ‘short term calling quarters nature of the trading’ and “not real investing” etc. but to be honest, for me it stems from the fact that I’m absolutely terrified of a citadel or millennium because I have no idea how to successfully trade in that environment and would be spit out within 6 months. similarly I know my citadel global equities friends look down on us and our strategy as well (and then even more knowing for us there’s zero path to PM and managing money).
100% it’s a good excuse for explaining high beta and large drawdowns lol but I feel as though that’s a nice safety crutch so I don’t lose my job if there’s a 5% portfolio drop.
I have a friend much more senior whose been in the long/short equity game at single managers for a long time and he says that all the new equity HF AUM is really being captured by the large multi-managers and that’s the steady trend.
when you say creating a repeatable, verifiable process to investing, that sounds sort of algorithmic in a way. Is there like an easy indicative example you can provide for color?
I want to learn more about this because while I can look at single names all day long I have no clue on how to actually manage a portfolio and price risk etc. are there primers or presentations that these MMS give you to teach you how to think when you get there? anything public online by chance?
Those terms refer to Quant/Systematic Investing (as opposed to Fundamental/Macro Investing).
...now nobody i worked with will return my calls or texts
This is a pretty big red flag lol
This thread raises my blood pressure, but I still find myself reading it. It’s like how I sometimes find myself angrily watching clips of the View on YouTube.
I've spoken to a few traders from the Schonfeld pod and similar firms.
Think very small teams and all traders have years of experience.
The only thing I don't understand is that not everyone is running a complex quant strategy nor pays attention to any metrics other than PnL
One of the traders I spoke with said he's allowed a line of about 20m, and takes mostly intraday trades in a handful of big names.
Sometimes a few swing positions and nothing special... No bs about algos killing the markets.
The only thing I question is how much can you really make out of this.
I like thinking in percentages because that's a big deal for many other places when looking at drawdown, and most definitely when trading private capital since you have to claw your way back up. I'm assuming this 20M is a fixed buying power and could get reduced only in the worst and extreme circumstances.
MM PM hiring is a fairly idiot-proof system. Assuming you can earn a minimum PnL of about $10M/year, they look at whether you made $ at your last job and what sharpe ratio. Then they apply premium/discounts to that number to reflect the environmental difference between your last job and next job. Afterwards they see if you continue making money at your current job. You get your AUM halved when you hit the drawdown limit and you get fired when you hit 2x that limit. If you spend 2 years without turning a profit you also get fired. On the other hand, if you make more money, the fund will give you even more AUM.
For example, if you trade global macro you can be hired with lower sharpe (<1) than if you were a softs volatility trader (~2) because making money in global macro is harder, less negative skewness, and the strategy scales better. Someone from another MM gets more respect than someone from a SM, and people from banks/market making desks get the biggest discount. This is because often people from sell-side/market-makers are just scalping small amounts of money from their customers order flow and they can't make their strategies work after leaving the flow behind. ex-SM often are long beta and struggle to adapt to a world with much tighter risk limits. Will the fund take a chance on a SM/market-maker? Yes they hire a ton of them, but they also won't give you a long leash. if you can't prove yourself after 1 full year of trading you're out.
False, tons of idiots run books at MM. In fact, majority of MM PMs I would say are idiots. The reality is less than 5-10% of total books at MM make consistent money. The rest of the books just cancel each other out and get churned and burned through the system.
That sounds idiot proof to me - you can afford to hire a bunch of idiots and still make money.
minimum requirements include having a pulse
I think you should talk to HH or their business development. I skimmed through the comments here and a lot of them did not seem to know what they are talking about.
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