Long-term lurker here: I've been reading WSO for a few years now, and found a lot of the advice on here invaluable when I was first exploring moving across to the buy side a few years ago. In the spirit of giving back, I thought I'd host an Q&A - hopefully it might be useful to anyone just starting out or thinking about making the move. ###Background * Undergrad - UK target university. * 3 years sell-side equity research at a top 5 extel/II shop - 2 years as an associate working with the sector head, 1 year as the lead analyst on a sub-sector of my own(~10 stocks). Got my CFA while there but escaped before MIFID 2 started to bite. * Coming up to 2 years in public equities at one of the large sovereign wealth/pension funds that do a lot of its active management in-house - think the likes of Norges / GIC / Mubadala / AP-Fonden. We are very long-term focused & have effectively permanent capital. I explored a number of other options when I decided it was time to quit the sell-side (L/S HFs and traditional long-only AMs like T-Rowe/Fidelity/Capital) but very happy with where I ended up. ###Current Role We have a generalist approach and I am now in what I would describe as a mid-level analyst role - I spend about 50% of my time supporting our PMs on their ideas, and around 50% of my time working on my own ideas and trying to get them into the book. Based in London. Happy to talk about whatever people are interested in - e.g. how the sell side & buy side differ; my experience of making the transition; investment process; what the industry looks like in London (most posts on here seem to be pretty US-centric). I have friends in a variety of other shops in London (sell-side ER/S&T/IBD, long-only, single-manager L/S, pods at the multi-managers) so can do a bit of compare and contrast - will try to be as open as I can on here.
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Hey, thanks for the AMA! I have a few questions..
What is the idea generation and due diligence process like for you at your shop?
Given the capital is probably stickier, what is the portfolio concentration like? I would think that tracking error/active share would be given more leeway since your clientele is different than MF/HF.
What would you say is the biggest factor that makes you like where you are at vs a HF/Long-only? Seems like there are a lot of things than can make a huge difference for someone relatively early in their career. This is more of a general learning experience question.
Thanks again, sounds like you are in a great spot!
Sure - will take these in order.
Idea Generation - impossible to be exhaustive about this as ideas can come from anywhere. However a few ways we like to do this are:
1) Thematic research. One of the advantages of being in a long-term focused organisation is that we can go away and spend a few months working on thematic/industry research with no preconceived ideas around which stocks we are going to be buying off the back of it. We will sometimes do this work in collaboration with teams looking at a sector/issue from the perspective of a different asset class. We try to avoid 'themes' where everyone and his dog has a view (e.g. Electric Vehicles) as it can be pretty difficult to get an edge. We also try to take advantage of being generalists and try to look at the second/third order impacts of structural change that the market isn't thinking about yet. A few examples where we've done some work in the past:
Carbon. Utilities analysts have been on top of the reforms to the European ETS since they were announced, but it took carbon going from €5/tonne to €25/tonne last year for people looking at other sectors to sit up and take notice even though it is a big deal for industries like steel/cement/airlines. We were invested in a couple of European utilities which prompted us to do the work, and we were able to identify a few interesting opportunities in other sectors before the wider market was focused on the topic.
IMO 2020 marine fuel reforms - another issue that has been on the horizon for years but where the market only really started talking about it in 2018. We spent a couple of months looking at the topic in late 2017 which highlighted some relative winners (oil refiners with exposure to middle distillates and no fuel oil; cap goods companies that install Sulphur scrubbers).
Electronic payments - great structural growth story driven by the shift away from cash and a theme we keep finding new ways to play. The sector is well covered in the US but in Europe falls into a bit of a void between financials and technology and is covered abysmally.
The important thing with all of the above is that we went into the research without a shortlist of stocks we were focused on and spent a few months just doing the industry work. Only after we'd done that did we start narrowing down to a few names we wanted to look into in more detail. The ability to devote a few months to this kind of open-ended research is one of the big advantages of our capital base / time horizon so we try to take advantage of it as much as possible.
2) Quant screens for things like sustainably high ROIC vs depressed valuation. I tend to shy away from these and mainly use them to narrow down an industry I've already decided to look at due to some thematic work, but some of my colleagues like thinks like CS Holt as a screening tool.
3) Conferences. We go to a lot of broker conferences and I will usually fill up my schedule around the key 1x1s I am interested in by sitting in on group meetings with companies I don't know. It's surprising how often I hear something in one of these meetings that sparks my interest and leads me to start looking into a company in more detail.
4) Sell side. Everyone's mileage varies but I don't subscribe to the mantra of 'the sell-side is useless' that so many buy-siders seem to hold. Probably because I came from that background... but there are a few analysts I know well where a big call will prompt me to at least take a quick look. Quality of sell-side research varies and in a post-MIFID 2 Europe there are only 3-4 shops that are really worth following (Exane/Redburn/UBS/MS) - research out of most of the BBs is useless and just there to drive IBD business.
5) Special sits. A feature of being at a fund like ours is that you get access to some interesting situations you might not elsewhere. E.g. we often get wall-crossed very early in the IPO process by ECM bankers hoping we might take a cornerstone position. This is a much more reactive type of idea generation, and we only screen a small fraction of the inbounds, but it can occasionally lead to some great opportunities.
Diligence - we do all the same stuff any fundamental investor will do - meeting mgmt and competitors/customers several times, calls with GLG/guidepoint, building out industry and financial models. Super-detailed financial modelling of every line item isn't a big focus - instead we go deep on the 2 or 3 things we think are important to the investment case and where we have a research edge. Opposite of what I see in a lot of sell-side models where they model out things like interest costs in minute detail but revenue growth will be a hardcoded assumption.
We try to be ruthless and kill a lot of our ideas very early in the process if we don't think we can get an edge / the returns don't look attractive enough, but where we do move forward on an idea it's normally a 2-3 months process before putting an initial position on. Every idea will have 2 of us working on it to ensure diversity of thought (e.g. sometimes my PM is the 'supporting analyst' on one of my ideas) and we peer review with someone from outside our direct team (e.g. different geographic coverage or an industry expert covering a different asset class) before putting the trade on.
Portfolio concentration - you are totally right, the nature of our capital allows us to build a very concentrated portfolio which we probably wouldn't be able to create within the risk management framework of a more conventional fund. When you look at our book through the lens of the Barra risk model we have >80% specific risk - although to get there we do employ some hedging to get rid of unwanted market/industry/factor exposures. There is already a lot of passive equity exposure elsewhere in the organisation so our team isn't there to get beta exposure / run a heavily diversified portfolio with an insignificant active share.
Why here? A couple of reasons why I picked the seat I ended up in over long-only/HF. At the point when I was looking to move (3 years of sell-side experience) I found that most of the long-only roles I was getting interviews for would have been a big step down in terms of comp and responsibility - they were mainly associate roles at places like T-Rowe / Capital. For HFs I had one bad experience which made me decide I didn't want to take that level of career risk in my early 20s. I was interviewing at a smallish L/S fund (~$500m AUM) and got a verbal offer from them - but then their seed investor pulled the capital and the fund blew up before I ever saw a written contract or agreed to anything. I took it as a bullet dodged and decided to look elsewhere - would consider a shop like that one day but probably when my personal financial buffers are a bit stronger...
Frankly the main reason I like the seat I'm in now is that it's a great spot to learn how to think like an investor. I get to work with some very smart/experienced colleagues (the senior folk on the team are all from some good value L/S funds) and within a framework that lets me spend 100% of my time trying to identify good and bad companies rather than worrying about things like fund outflows or the portfolio getting blown up by a bad quarter.
Thanks for the detailed answer!
Very interesting idea generation process, I think industry vertical stripping can be a very effective way to find ideas. Screens can be helpful too but it seems like the advantages (ease of use, simplicity, etc.) are the same as the disadvantages and it can be hard to gain an edge from screens alone.
Very cool too that you do not have to focus on quarterlies and things like that as much due to the time horizon. I really do believe it is a better use of time trying to make the right call on how an industry will evolve 5-10 years out and who the successful guys will be vs trying to time near-term catalysts.
Based on my (somewhat limited) experience, SS can provide value for sure like you said. All about asking questions the right way rather than just “who is your top pick” from what I have seen.
Thanks again for the answer and I will be sure to let you know if I have any other questions.
Thanks for doing this. Could I ask if you look out the next 3-5 years, do you see yourself staying at the same firm? Moving to another one? If yes, to where? Also, did you find your CFA useful in getting the job? Was it brought up at all?
As long as I am still learning / developing as an investor I am unlikely to move in the next few years. Keen to see out a downturn (and see how I behave when positions start to go bad) at a shop like my current one which is relatively forgiving around short term performance. At the moment it looks like there's a decent pathway to a senior analyst/junior PM type role for me here as well so hopefully won't end up in a situation where I have to think about moving to keep progressing towards eventually running my own book. That said, never say never and there are a small number of HFs I regard highly here in London I would definitely consider should they ever come calling.
On the CFA - it's difficult to prove the counterfactual as I'd finished all the exams nearly a year before I started looking to move. I felt like it helped with getting in the front door at most places (more so on the long-only side) but from that point having a couple of polished stock pitches and being able to talk coherently about how I would approach thinking about a new investment was far more important.
How important is educational brand name in hiring decisions, and does the CFA make up for a non-target background?
Comp progression?
Do you guys lean towards any particular style and how do you think about valuation relative to your style?
You mentioned focusing on 2/3 things where you feel you have an edge. Do you believe your edge is analytical or informational?
+1 for the idea generation/diligence comment, that response and could have been a post on its own.
Educational brand name - it certainly helps and in London you are going to find a few 'traditionalist' hedge funds where an Oxbridge undergrad gives you a massive leg up at the more junior level. Same with some of the asset managers focused more on HNW / PWM type clients. If you want a few examples take a look at the background of people at funds like Ruffer or Odey... Of my grad analyst class across research & S&T among the people who had come from UK institutions it was probably 25% Oxford / 25% Cambridge / 20% LSE then the rest an even split across the likes of Warwick/Durham/Imperial and a couple of other places. There are a few less internationally well-known universities that punch above their weight in the City because of very strong industrial placement programmes for their undergrads - Bath is probably the best example of this but I'm sure there are others I'm forgetting.
The higher up the experience ladder you go however the less relevant all this gets (by 5 years experience is way more important). It's certainly possible to break in by grinding through the CFA and then applying places. One of my old colleagues on the sell-side ('rockstar' analyst and probably the best paid person in the whole department...) went from an extremely 'non-target' university to big-4 accounting, then smallcap broker, then did his CFA and moved across to one of the big-name research houses. I've also known people who started out in what were effectively desk assistant roles grind out their CFA and then move into a buy-side analyst role.
Comp Better than a similar level SS role & more transparent (partly linked to $ performance whereas on the sell-side it is more political/driven by what was going on elsewhere in the organisation). In an 'average year' all-in is not far off to a L/S HF but I don't get the same upside in the case of a 'great year'. Not going to go into more detail than that about my current structure but below are a few benchmarks for what 'street' pay is for junior positions in London at 0-3 years of experience:
SS ER: 1st yr research associate (i.e. straight out of undergrad): £50k base, stub bonus. 2nd yr: £55k base, £30k bonus 3rd yr: £60k base, £40k bonus. On promotion base would usually go to £80k.
Buy Side: Research associate at a Capital/T Rowe/Henderson type place - usually up to £60k salary and bonus capped at 30%. This is why people often end up initially taking a pay cut to switch to the Buy Side in London. Equation is much better at a more senior level. Junior analyst at a L/S HF with 2-3 years SS experience - salary anywhere from £70-100k; usually a discretionary bonus structure for the first few years. More likely to get early P&L linkage at a smaller fund.
Some of these numbers may be a bit out of date as I don't know exactly what MIFID 2 has done to the sell-side. My sense is that generally salaries have been creeping up and variable comp down. For those translating these into US$ remember that the pound has devalued 25% since Brexit and comp has not generally moved upwards to compensate.
Style long time horizon means we end up with a bias towards growth. We like stocks that will compound earnings at >15% p.a. for a long period of time and are willing to pay a premium multiple for that. With the amount of DD we do on every name, investing the time for a 'value' stock that will re-rate and give us 20-25% in one year but then just perform in line with the market often isn't worth it. We very, very rarely bake multiple expansion into an investment case .
Edge - varies a lot and frankly I think every analyst thinks they have 'analytical edge' which is impossible in aggregate. I'm not sure it fits neatly into 'analytical' vs 'informational' but a few ways we think we can get it are:
Research budget - we're taking large concentrated positions so 'research costs' don't have much of an impact on % returns. This means we can spend a lot of time and resource on expert calls, research trips / site visits and the like. If you're running a more diversified portfolio that you are turning over more frequently it's harder to justify this. Alternative data comes into this bucket as well - though I would emphasise we're not doing stuff like scraping credit card data to try and get an edge on next quarter's sales line like Citadel/Millennium/Point 72 are. We're using it to try and get more insight into what's driving the numbers - e.g. where a company just gives us 'revenue' we might try to find a creative way to decompose this into price and volume using some alternative data sets to give us a better idea of whether our thesis is playing out.
Time horizon/permanent capital - this is important and lets us ride out / double down on positions that are going against us where we think the thesis is intact without getting stopped out.
'Analytical' - I think we have some pretty smart & experienced people on the team who are good at cutting through the noise and identifying what actually matters for an investment case. I've certainly sat in group meetings with less impressive people who focus on stuff that is basically irrelevant (the kind of stuff you hear on any quarterly call). So there may be some edge here - but as I said everyone thinks they have this.
What is the asset allocation of your fund? Do you give money to outside managers or is it all managed in house? AUM?
Any disadvantages that you see to being an equity analyst at a SWF versus a traditional long only? Comp differences over time maybe?
Thanks
I’m reluctant to say too much about size / allocation of the overall fund in the interest of staying anonymous on here. In broad brush terms >$100bn aum, we use external managers, internal active management and passive.
In terms of disadvantages vs traditional long-only - comp progression is probably one long term but it’s very competitive at the junior/mid level. You’re not going to be a ‘superstar’ PM pulling in new money and getting compensated for it like a top performer at a traditional fund manager could be. Reputational concern / political constraints affecting investment decision making in rare circumstances can be another one - look at things like Norges deciding to divest from all E&P assets for an example.
Hello there, Thank you very much for doing this. Understand that you’re an equity analyst. However I was hoping to find out if you would mind shedding some light on opportunities within the SWF / Pension Funds Space for Fixed Income as well.
Could you also share some of the exit opportunities from such funds to say a L/S Hedge Fund (if you come from their equities division) and also to Global Macro Hedge Funds (if you were in a Fixed Income role instead).
Appreciate it!
Fixed income - varies. Some funds have a big focus on this, others don't. As a rule of thumb if you are looking at a 'fully funded' DB pension scheme there the mandate is ensuring there is no funding shortfall, so there is going to be a heavy focus on fixed income due to the liability matching requirements. If you are looking at 'partially funded' DB schemes (like a lot of the big state pension schemes) or a SWF where the mandate is more along the lines of 'maximise returns' there will be a heavier focus on equities (public & private).
Exit ops - L/S equity or traditional AM is common. Generally to longer-term / more fundamental focused funds as the process is more similar, but I have seen people go to multi-managers. Despite my total lack of interest in moving there I still keep getting hit up by headhunters trying to persuade me to go cover my old sector at Citadel/Millennium etc - they seem to be constantly recruiting... Fixed income I can't say as much about I'm afraid as I honestly don't know.
When you decided to leave the sell side, what avenues did you explore for finding new opportunities?
I started getting approached by headhunters 2 years into my stint on the sell-side (mainly recruiting for other sell-side jobs and multi-managers) which prompted me to think about looking elsewhere.
I would say my leads that led to interviews were 20% word-of-mouth (clients I covered who mentioned they were hiring), 40% direct applications to things I saw on job boards (efinancialcareers / linkedin), the rest through headhunters. Often my initial contact with a headhunter would be through a specific job posting but that would lead to a longer conversation and several other leads.
What is lifestyle like at one of these funds?
Pay really is in the shitter in London compared to the US....even more so when you consider cost of living!
Quality of life is pretty high - a normal day would be ~8:30am - 6:30pm. I'll usually wake up just before 7 to check for any morning press releases and on the rare occasion there is something I need to get on top of quickly will remote in from home. On results days where I am particularly nervous about a position we hold I'll be in the office earlier, but with the nature of our portfolio (ultra concentrated & typically a top-10 shareholder where we are invested) we're never going to be able to trade in reaction to newsflow so the team aren't in for for the open.
As with any finance role there'll be busier periods where that day extends but a 'late night' for me would be 8-9pm. Never been into the office on a weekend although I will sometimes take a bit of reading home. There'll also be quieter days and if I need to leave at 4:30 one day to get to a flight or something then nobody bats an eyelid.
I also spend a lot of time out of the office visiting companies / attending conferences / doing field research / working out of one of our other global offices. My boss has the view (which I am increasingly coming to agree with) that there's an inverse correlation between the amount of hours spent at your desk and success as an investor so we're encouraged to get out as much as possible.
This all contrasts with my old SS ER role where I was in 6:30 am every day and would be out at 7pm on a quiet day / 9-10pm during earnings / occasionally the early hours of the morning if trying to get a big note out ahead of a deadline I'd agreed. That's the top end of ER hours in London though - if you work for a team determined to preserve #1 II/extel status and/or exposed to a lot of ECM related work (writing investor education docs) then it can be gruelling. If you're at a lower pressure shop the hours can look a lot better.
On comp - three points. 1) At the junior level ER comp is structurally lower than IBD. This is especially true post MIFID 2) Not sure where you are getting the idea that cost of living is higher in London... my experience is that it is ~20% lower than NY, possibly more now the housing market has turned over. All-in SS ER comp for 1st year after your first promotion (equivalent of 1st Associate year in IBD but the titles can vary a bit in ER - i.e. 3rd full year out of undergrad) could hit £150k for a good performer on a top-3 ranked team. That puts you in the top 1% of the UK income distribution which frankly is pretty nuts for a 24-25 year old. Not sure what the equivalent figures are in the US. 3) Ultimately there's no point spending too much time thinking about comp in the first few years of your career in the ER or AM/HF world. The curve ramps up pretty dramatically after you either a) start getting lead stock coverage and votes in broker reviews on the SS or b) get a few years of buy-side experience and start getting your ideas into the book. This is why so many people I know have been willing to 'take a pay cut' to move into a junior AM role...
Looks like ER pays on par with IBD in London. £150k is good for associates1 in BB IBD - its usually 90k base + 60k for mean bonuses.
This sounds like a really fantastic gig, and thanks for the AMA! I am curious about a few things: 1. What was the interview process like for your fund (steps, types of questions, timing, etc.), and how do you think that might differ for traditional HFs? 2. How competitive was it to get your current role? 2. How much time do you spend between covering and monitoring current book, versus idea generation and research? 3. How are your models compared to a typically sell-side model? Traditional DCF/cash flow build? What about compared to say, PE ones, if you have an idea? 4. Do you only invest in European equities? Any company cap limit?
Appreciate your time and responses!
Interview process: Round one - two short interviews with two of the PMs. Covers a lot of the 'obvious' questions like 'why do you want to move to the buy side; why this fund; can you walk me through how you would think about investing in an industry you've never looked at before' and discussed two brief pitches in each. If you're coming from the SS it's important to have at least one stock outside of your sector you can talk about. Also important to make sure the stock pitches are relevant for the organisation you're interviewing at - I nearly got dinged for pitching a microcap & had to pivot pretty quickly to something that was more relevant. I think they filtered out a lot of people at this stage as there are a huge number of junior SS people who can't pitch anything outside their sector - which is important if you're going for a generalist role.
Round two - a bunch of 'fit' interviews, I met a few more junior members of the team I was interviewing for along with a bunch of people from other teams in the organisation.
Round 3 - 'case study' type interview where I was asked to go away and prepare a new pitch that fit certain criteria and then discuss/defend this for 60 mins with all the PMs.
The process was pretty similar at the L/S HFs I was interviewing at at the same time. An initial 'screening' interview where you talk with the hiring PM about a few stocks & motivation followed by 'fit' interviews with the wider team and then case study interviews where I was given a name to go away and work on for a couple of days then pitch.
Competitiveness: I think they interviewed ~20 people for my current role although most didn't go any further than the initial screening interview. No idea on how many applicants there were overall.
Time split: this has varied. There have been times where we've been in 'growth mode' where we've been given more capital and told to get invested - this was the case when I first joined and 90% of my time was spend on idea generation/researching new ideas. Here the process for getting something into the book was working out whether it cleared a hurdle IRR we were looking for.
At the moment we're fully invested so I am spending a lot more time monitoring current positions & refreshing the thesis on names that have performed well to work out whether we should be kicking them out of the book to make space for something new. During results season (like now) the balance always shifts more towards monitoring. E.g. we have a couple of semis names in the book so the analyst covering them basically has a full time job keeping up with what the peer group is reporting at the moment.
Models: more detailed than a SS model on the key drivers of our investment thesis, much less detailed elsewhere. I'll try and explain this with an example.
We owned a couple of merchant acquiring / payment processing type businesses - companies that help merchants accept card payments and take a small % cut of the volume they process. Our thesis was based around strong growth in the end markets they were exposed to (e-commerce); market share gains from a long tail of sleepy banks that offered a much worse version of the service; and an ability to increase pricing as they bundled in additional functionality (fraud protection / AI software to help improve payment authorisation rates).
Most of the companies just reported 'revenue growth', and most of the SS models just took mgmt guidance at face value / extrapolated recent trends and plugged in some hard coded assumptions around % growth rates. Our model built up from a bunch of 3rd party / alternative data sets to break this revenue growth rate down into market growth, market share gains and pricing, which let us see that the headline revenue growth rate was about to inflect upwards.
On the flip side most of the SS models went into loads of detail on CF / balance sheet. We initially didn't even really bother with these other than tracking the history - it's an industry where the cash conversion is great & there's nothing funny going on in the cashflows you need to be aware of, and the companies we were looking at had very low financial leverage so there weren't any risks around that side of the business. We spent all of our time building out the detail on the P&L as that's what would actually drive the stock.
Over time once a position gets into the book and I monitor it through a few reporting periods, my model naturally tends to get a bit more detailed on the factors which I thought weren't relevant on day 1. A company will start giving a new bit of disclosure / I'll spot something interesting buried in the notes one quarter and so will start adding bits of analysis into the model.
Investment universe: My team just does European equities although there are equivalent teams elsewhere in the organisation that cover other geographies. No hard and fast rules on market cap but we need to be able to take a >$200m position for it make any difference at the portfolio level so that naturally rules out a lot of the smallcap end of the spectrum.
Hey, thank you very much for doing this AMA! A couple of questions: - Who are the fundamental investors in London that you admire the most? Why? - What advises would you give to somebody who just started in the buy-side? How can he become a better investor?
Investors in London - will break down the ones I know / rate highly by type Single manager L/S HFs - there are a few long running ones I rate highly as everyone I've met from there has been very smart. Lansdowne Partners, Egerton Capital and AKO Capital are the three that come to mind at the larger end of the AUM spectrum.
Activists - TCI and Cevian. European activism is generally a bit different to the US activist funds and more focused on working with mgmt to turn around a business rather than fighting public proxy battles.
Multistrat / multimanagers - there are a bunch of places that do long-only and a range of alternative strategies within equities and sometimes other asset classes that I respect and would definitely pick over a Citadel/Millenium/Point 72 because they are generally a bit more long-term oriented but you still get the experience of working in a small/decentralised team with its own PM. These would be places like Man GLG, Polar Capital, Marshall Wace, TT International.
Long-only: there are a few small/midcap specialists like Highclere that I was always impressed with back when I used to interact with them more on the sell side. All the big US shops are present in London (I would put Capital & Wellington at the top end of this list) and there are some more local players I rate highly. Pioneer (pre Amundi takeover), Henderson (pre Janus) and Schroders would be 3 of them.
How to become a better investor
Be humble & accept that you don't know as much as your PM with 20 years of experience in the markets. You will get calls wrong in your first few years (and the rest of your career...) but the trick here is to be transparent about where you went wrong, own the mistake and work out what you can take away from the experience to avoid ending up in a similar situation in future - our team like to do 'lessons learned' exercises once a year with investments that went pear shaped. Sit in mgmt meetings with experienced investors and listen to the kind of things they are asking management. If you work at a shop that has investment committees - sit in on as many of these meetings as you can to get a sense for how different investors approach thinking about risk-reward. Lastly - read voraciously. Not investing books per se but industry/scientific journals for the sectors you are interested in, investor letters from funds you respect - anything to exposure you to new sources of ideas.
In case you're still around Monkey_47 , I just ran across this well written post. How many portfolios would your investment recommendations go into (eg. Europe/Global Thematic, Sector portfolios, Factor/Quantamental portfolios)?
And how do your PMs get assets under management? Do they start with a sector or strategy they need to pitch to the investment committee? Or as associate PMs for a more senior PM and then take over?
By the way, I co-manage a global thematic portfolio at a large pension fund in Europe. Since 2 of my themes are carbon and payments, we might have been going to the same conferences (I see you use some of the same brokers) :)
Hi SReaper - have been travelling a lot the past couple of weeks so only just spotted this.
The way our teams are structured - generally each analyst works for a specific fund. We don't have the Fidelity/T-Rowe type model with a central pool of analysts that can pitch ideas to each of the different PMs. E.g. I work for the EMEA equity book - at the moment we are a team of 5 (4 analysts and a PM; one of the analysts has junior PM type responsibilities) and in theory any ideas that the analysts on our team pitch would go solely into this portfolio. In reality I will help out on some of the other strategies from time to time if they are looking at something in a sector I know very well (maybe a different asset class) and vice versa.
AUM is mainly allocated top-down. The CIO office at the top of the fund allocate capital down to the different strategies - this is a bit of a black box process that I don't really understand but given the fund as a whole is growing AUM all the strategies are still growing so this has never been a big issue for my day to day. When new strategies get started sometimes it is very top down (e.g. - the fund needs more active exposure to xyz emerging market that is growing like crazy, let's start a new equity strategy focused there) and sometimes it is pitched by someone with a good idea for a new strategy the fund is lacking. In the cases where the latter has happened it will usually be a #2 on a book / junior PM looking to carve out their own space.
Highly likely that we are going to some of the same conferences then! Happy to connect offline / chat in DMs if you want to talk shop in more detail.
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