Q&A: Finally made PM @ LS fund

Hey everyone

After 7 years of grinding in private and public markets, I finally made a portfolio manager at a small hedge fund.

It's far more difficult than I had ever assumed, and anyone who thinks they could just take over a book and sleep fine at night is in for a wakeup call.

That said, feels great to know Ill never have to be a damn analyst again. Leading the team is a balancing act between motivating people to their best, inspiring the right kind of (thorough) curiosity, and letting peoples' talents shine.

I'm learning to "cowboy" less and coordinate more. This is after 5 years leading a globally distributed team.

Idk, Ask away!

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Comments (45)

  • Intern in HF - EquityHedge
Aug 6, 2020 - 2:40pm

Thanks for the Q&A!

-Do you believe you possess any special soft/technical skill that allowed you to get to be a pm, or would you say it was mainly 'sticking it out'?

-As a PM, what do you look for in hiring ? I'm wrapping up my last semester and networking for FT buy-side roles. I would love to know if there is anything I need to hammer out that would increase my chances of landing a role.

Aug 7, 2020 - 8:43pm
  1. Soft skills are a must. You pick those up over time. I ran a team already so I had decent people mgmt skills, systems in place to make sure things dont fall thru the cracks. Managing upwards is a big portion of getting to pm -- making pms happy along the way. Its also a big portion of being pm, theres always a CEO, chair, or group of investors to answer to.
  2. Something unique -- everyone can model companies, write basic python, understand statistical analysis. That something unique is usually some sort of risk taking or putting yourself out there (side project, etc.) that dovetails into the funds activities.
  • Analyst 3+ in HF - Other
Aug 6, 2020 - 3:00pm

Thanks for doing this. By "LS" I assume long-short equity. I appreciate answers to any of the following.

What is total fund AUM and capital allocation specifically to your book? How many other PMs are there? Do they also pursue LS equity, but in other sectors? What is your sector coverage, and how many analysts do you have?

How concerned are you about job security?

How would you describe your relative involvement in the nitty-gritty of idea generation & modeling versus acting more as gatekeeper of the portfolio--determining what ideas are allowed to enter & exit?

What is the compensation structure for you? How do you determine compensation for your analysts?

Most Helpful
Aug 7, 2020 - 8:51pm
  1. 75% of capital to LS book, 25% to MN book. The names on each side of the book in the fund have a lot of overlap, but we do some extra diversification in the MN fund to minimize vol, skew, kurtosis effects
  2. not very. we have a longer term outlook, so, quarterly performance isn't looming over our heads. that said, if we do not raise more assets we may have to re-examine our approach and have difficult talks with investors.
  3. Yes - this is will very greatly - but our team is very small and the idea generation is never for a specific position but for an additional strategy or "tool in chest". In that regard, our data science team and I work together to discover new correlations and test ideas. Within the context of a model telling us to put on a position, I rarely override, unless there are liquidity concerns. We use models to optimally size and there is an execution trader to worry about timing. Once a position is in the book, then its very hands on from both a risk management perspective and giving our execution trader limits and latitude to trade around news and flows i the names we are in.
  4. Comp structure is really simple: reasonable base, discretionary performance bonus, 5% of all profits (we have some non-hedge fund business lines too that i lead). Analysts are salary, discretion and "phantom" equity (0.1-1% depending on tenure). Analyst pay is probably way below industry, but our asset base kind of dictates that.
Aug 6, 2020 - 4:02pm

will be starting very soon in small LS equity fund. Am coming from Consulting background so will have a lot of knowledge to catch up, but am in my early 20s, so that won't be an issue. Any tips?

To me it seems that best tips would be to : not be afraid of the hours, work hard, and not to make mistakes. Anything else?

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Aug 7, 2020 - 8:54pm

learn markets: market structure, jargony stuff, what the traders are concerned with etc. consulting background means you probably can identify good business, unique opportunities, get the special sauce of certain business models, so the more you can fill in the other side (like how TF to manage short risk, how idiosyncratic vol can really shake up your book, the day to day of actually managing positions) the more everything will click together.

be smart - and by that i mean always connect whatever you are doing to the big picture - how am i adding value, how does this improve the fund, how does this make my bosses lives easier, how does this systematize our activities?

Aug 6, 2020 - 6:16pm

"I'll never have to be a damn analyst again"?

Dont know what makes you think that.. unless you perform, nothing guarantees you are a PM for life.

That said, good luck.

Aug 7, 2020 - 1:49am

"I'll never have to be a damn analyst again"?

Dont know what makes you think that.. unless you perform, nothing guarantees you are a PM for life.

That said, good luck.

Exactly. That made me chuckle a bit. I have seen my fair share of ex-PMs going back to being an analyst.

  • Prospect in 
Aug 6, 2020 - 10:46pm

Would you reccomend starting at a HF if possible? Or is is better to start in IB and move over? can you move from HF to pe or IB?

Aug 7, 2020 - 8:57pm

edit misread the question

start where you want to be, if you can. why waste time? BUT, if your choice is between some bumbling pm guy with a startup fund or and a 2 year stint a mid to top tier bank, especially m&a, there is a great argument for doing the bank stint and then jumping over. much easier to break in with a brand name of course. that said, the sooner you can 'get on your path' the better

Aug 8, 2020 - 4:18am

Did you rise up the ranks at the place you work? Or did you leave your old job for the PM opportunity? If the latter, did you move down in AUM.

What is the investing time frame of your fund? What is the investing time frame you prefer and why?

Does the CFA give any sort of edge when recruiting for an analyst position? I have read mixed opinions about the CFA's usefulness. What do you and your peers ( both other PMs and analysts) think of the CFA?

I just read a post claiming that the credit space is better. According to the post, in the credit space it is easier to make money, and it is more protected from automation. What are your thoughts on the credit space?

Aug 8, 2020 - 7:13am

I was at a large investment firm for a few years before making the jump to a fund with about 1/100th the aum, but also 1/100th employees, overhead and nonsense.

We invest for a year or three, at my last gig I was investing on 20-90 day cycles, so a big change

The CFA is great for analysts. I'd like analysts to have general knowledge of most areas of finance and CFA does that well. The quant methods section in level 2 is not even the minimum required to do the job however. You'll need a better understanding of statistics than that..

Aug 8, 2020 - 3:52pm

dealing with down days.. it sounds stupid, but, due to negative skew, a long-short book usually has worse down days than updays. so youre chugging along fine, grinding out 60-80 bps a day, giving 20 to 40 inbetween and then bam, a 200-300 bps down day happens before open and you spend all day trying to minimize it and see where you can cut or add, but its futile. you're trying to save yourself 10-40bps on a day that isn't going to end well no matter what. its tough.

Aug 8, 2020 - 3:54pm

an even worse bimodal distribution than today: there will be a handful of players with systems, track records, change in management transitions already in place, etc. who will gobble up almost all the assets. consolidation and institutionalization of GPs will handle the rest. all that will remain outside of these 20 firms will be niche guys and startupy funds.

Aug 10, 2020 - 3:45pm

Could you elaborate more as to why you think consolidation is where the industry is headed?
Do you think it's more because of the pandemic that blew up a lot of funds? Or is it more long-term/secular with quant funds destroying traditional L/S? Or do you think this is just the cycle swinging along and the place has gotten far too crowded with too many managers who were just lucky riding the super long bull market?

On such a note, do you think a lot of passive investing is now centered on momentum/short-term technical (think HFT or robinhood traders) rather than long-term catalyst-driven horizon? Do you think the L/S fundamentals approach is still valid moving forward, if only for the top few risk-seasoned veterans (Third Point, Pershing, Lone Pine) or is it increasingly necessary to take a more event-driven/activist approach and muddle around with special situations/distressed/illiquid assets where entry/transaction points are restricted to a smaller pool of players?


  • 2
Aug 10, 2020 - 4:26pm

be humble, be kind, offer younger folks perspective as best you can. give to the universe, it will find a way to make things right. younger folks on here might think this stuff is corny and lame but if you've been around the block, and it sounds like it, you know this is the blocking and tackling that makes cooperative engagement, trust, possible..

Aug 12, 2020 - 4:24pm

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Aug 17, 2020 - 10:41pm

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