Questions for those at MM funds
How do you realistically cover 50-100 names (well)? Are you leveraging the sellside a lot?
What are some best practices you can recommend to those on this forum?
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I used to work at a large multi-manager (ie. Citadel / Point72 / Millennium / Surveyor). It is extremely tough to manage 50-100 names initially, although once you know your names after following them for some time it does get a little easier.
I covered 60 companies during my time there and I felt overwhelmed the entire time. Given the investing style is very short term (say 3-9 months), you constantly have to be on top of all the information that comes out and all the quarters. We used sellside research a ton and sellside guys would come by our offices to talk about their best ideas.
Would say best practices is to start off with a subset of those companies (say 15 or so that are in the same industry) and know them cold. Then start adding more and more companies to that list that you cover. This way you do not feel overwhelmed from the get go.
I described my experience in depth here if you are interested I learning more about my time at multimanagers:
* Life on the Buyside at a Multi-Manager Hedge Fund
* The Basics of Working at a Multi-Manager Hedge Fund
Thanks a lot for the feedback. I've read your blog posts and they're all very helpful.
A follow-up would be how you'd generally prepare for quarters? My background is more akin to long-term value so I never really got how one could accurately predict the quarter for tens of companies. Were you using a lot of 3rd party data (yipit, 7park, etc.) and basing your calls off of that?
Yeah we would use credit card data from providers like 1010 / earnest to gauge where topline sales were coming in for the quarter. However, you don't really have much of an edge with this data anymore since everyone has it nowadays.
We would spend a ton of time talking to management teams and investor relations each quarter. Go to a bunch of conferences, call up franchisees, look at industry data, commodity prices, etc and compare the commentary that we hear to guidance / expectations.
You can never accurately guess where the quarter is going to be. You can just make your best guess and hope you are right 55% of the time.
At one of the multimanagers names. Styles can vary pretty wide. We cover 25-30 names, in similar depth/methods to when I worked at a concentrated/value fund. The trick is surviving long enough to build a team large enough to focus more narrowly, at least in my view. There are a lot of synergies due to industry focus, read throughs etc. We mostly rely on the sell side to gauge sentiment and arrange mgmt access. We make significant use of data science/automation to cut out the ‘manual labor’ I.e. typing things in. Even then, 25-30 takes a while to build out and get to level where I feel like I’m really covering them all at sufficient depth. We probably have smaller coverage lists than most pods, but still I think when you say 100 names that’s not one guy doing the research, modeling and investment decisions. You likely have 2-4 senior analyst types covering a portion of those and then a pm handling the portfolio management to varying degrees of involvement. I briefly worked on a 2 man team covering 90ish and I don’t really think it can be done. As in, you’re not meeting with mgmt, building detailed models and updating them every quarter. More likely you’re doing a ‘hover not cover’ approach and focusing on groups of names depending on where theses arise.
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