So, I thought I'd answer any questions from monkeys about the arcane world of investment strategy.
My career path to date has been: global hf junior pm/strategist ($1bn) => long-only em pm/strategist ($10bn) => partner at em hf ($1bn) => sell-side em strategist at boutique em shop
I focus on equities now, but have done cross-asset in the past. Shoot.
| +81 | Q&A - Buyside Equity Research Analyst/PM | 29 | 6d | |
| +32 | How the heck do you learn all of this stuff? | 10 | 1d | |
| +28 | My experience on the sell side | 20 | 2w | |
| +24 | Clues in Financial Reporting Analysis | 7 | 3d | |
| +17 | Am i fairly compensated? | 9 | 4d | |
| +14 | Data Science to PM | 8 | 1w | |
| +14 | Heard they don’t model at Oppenheimer | 10 | 2w | |
| +12 | ER - Remote Jobs? | 8 | 6d | |
| Equity Research at Bank vs IG, High Yield & Leveraged Loans Research at Asset Manager | 4 | 2d | ||
| +11 | Who uses sell-side Strategists? Are they valuable? | 4 | 1w |
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did you start out at the global hf straight out of college? if so, what was your work/internship experience like prior to that, and how did you get the global hf position?
How do you find being on the sell-side vs your previous buyside jobs? What were the catalysts for your various job-changes? How closely do you work with the sales desks to interface with clients? How "quant" do you find equity strategy to be? Do you feel any pressure to make recommendations in your research along the firm's party line the way coverage analysts sometimes do? What is your educational background? Do you have any advanced degrees/certifications?
what sell side boutique do you work for?
Bookmarked for when im not drinking. How long is this thread open for?
Nice. KPCFA posed some great questions. Do you find any escalation bias with calls that come from greater than normal convictions?
Background/path: 2:1 BA from top uni (quant subject), only additional qual IMC to get FSA approved person status. Hideously good standardised exam results (GCSE/A Level). Penultimate year internship VC (through careers service website), prior work experience media (art, film, journalism). Brief stint (9 months) at strat consultancy before hf.
How I got a hf job: applied direect with the following spiel: Curious chap who thinks a bit different, very solid quant skills (particularly VBA), not a robot due to media stuff (everyone asked me what my favourite movie was in interviews). I also put forward my critique of Swensen's Yale Model that I did during my time at a the VC when learning about asset allocation and VCs role within it. Attitude: confident without being douchy about my ability to do an entry level job without much supervision, acknowledgement of exactly what I didn't know (known unknowns) and what I thought I might not know in future (unknown unknowns?). I got quite a few offers from top hfs and fofs for junior pm roles, analyst roles etc. Also from BB am's and long-onlys. Interestingly during the milk round I got 0 offers from anyone except for strat consultancies and didn't even get first round interviews with bbs despite aforementioned hideously good grades (figured I needed more experience before am). I think a bit of analytical experience and experience interviewing helped a lot.
Sell-side vs buyside: a lot more relaxed, don't need to worry about my portfolio blowing up overnight, stocks dropping really is a buying opportunity. You have the dichotomy (particularly in long-onlys) of having a multiyear investment process if you're a value manager but getting paid on a 1 year basis and having your performance monitored on a monthly (or even daily!) basis. Its very difficult to be fired from a long-only, but most managers end up slight bipolar as a result or risk-averse peeps who shiver in their own shells. Day to day its quite similar to my strat role on the buyside, a bit more emphasis on media and making phonecalls (still haven't got the hang of the latter), bit less daily pressure. Hours are a bit better too, I do 7-5, floor empty by 5.30 (the wonders of working for a boutique). Reckon meet/talk to clients 1/2 time (1/3 of this abroad), read 1/3 time, write 1/6 time. As a sell-sider, getting your calls right will typically account for 25%-30% of your comp max, most of the rest is flows attributable to you and client feedback/internal and external votes (large buyside shops have internal votes for how the commission pool is sliced up as execution is pretty standardised these days).
Movement catalysts: global hf was great fun as I could invest in anything top-down/bottom-up and ended up running a good chunk of the fund myself rather rapidly . Shifted after one particularly exceptional year of personal performance (rest of fund didn't do so great) as I wanted to launch and run my own funds (within same company), so over to em long-only I went. Shifted from that as it was getting a bit monotonous running an indexed long-only fund and the pay gap had got a bit extreme compared to hfs. Shifted from that as the managing partner pulled a Druckenmiller after 18 years of ridiculous performance. Had a few offers from hfs, swfs, long-onlys and sell-side bbs, but picked a boutique shop as they said I was free to write whatever I wanted and build my team from scratch having kvetched about the quality/impact of sell-side research as all buysiders do (another 90 page initiation on this major index stock, pssh). As a sidenote, if you genuinely enjoy your job and don't focus on the money/exit opportunities, you'll generally do better, progress faster and the opportunities will come.
Sales desk interface: they arrange the meetings, client calls, give me feedback on if theres anything pressing that clients would like a quick note/written comment on. As you get to know clients you tend to go direct to them as a strategist and stick them on your own list (assuming they like you).
How quant do I find equity strategy: As an EM strategist I find quant analysis pretty useless due to the massive structural shifts in EM over the lat 10 years. Data just isn't there to do some of the common analysis you see to the level of accuracy claimed as too many people take models developed for developed, reasonably "efficient" (in terms of speed of reaction/flows) markets and transpose them to EM. I'm more of a structuralist/behaviouralist and think understanding the incentive profile of various market participants is the key driver of market movements in the short and long-term. I suppose I take a quant approach in building my own mental models for markets, exteremely algorithmic. Its funny some of the assumptions made and correlations/causations people draw from playing with data.
Toeing the party line: I feel no pressure at all to make recommendations in line with the stock analysts, although its always nice when I can refer to them in my notes when recommendations match up (makes the firm look better). Ultimately the job is about franchise building and I build up my own franchise by being independent and saying what I think, but long-term the better light I can put on analysts and draw out their recommendations when appropriate the better the company will do. A more pressing matter is having uniformity on the strategy team, which is a trickier one as we're all pretty opinionated. We hold regular calls to make sure we're roughly on the same page in overlapping areas, particularly on the big calls but have more freedom in our own little fiefdoms.
Escalation bias: not sure exactly what this means, do elaborate.
Which company do I work for: I could tell you, but then you wouldn't get as candid answers.
How long will this thread be around: well, until I'm bored of answering questions of course.
You have an idea or call that is backed by beyond strong convictions, so strong that you are emotionally vested. How long do you stick by it if tanking? Do you vocalize/amplify the idea further when it is clearly off? I guess a Lock-in of a call. Does that help?
An example, Abby Joseph Cohen's call that .SPX was hitting 1600 back in 08. If she would have kept by that call almost to a point of insanity it would have been some idea lock-in or escalation bias.
I haven't been in such a scenario yet, but generally for my calls I have conviction but always ensure to keep an open mind that I could be wrong. Markets will screw you otherwise. I think having a portfolio management background helped, learning when to sell was the hardest (and most important) lesson. Finally, one of the advantages to being a strategist is that you can have a central view (oil going to $200, gold to $5000, S&P to 1600) but have some flexibility to talk around that view if things aren't quite going your way in the short term. Its up to you how much emphasis you put on the long-term/out of consensus views as opposed to shorter term market commentary with relation to how that makes you appear to clients.
are you based in NYC or London?
Would you call yourself a trader or an investor? What is the best trade/investment you have made? Worst? Why? Benefits/Disadvantages of working on buyside before sellside? What was your EM coverage area? How much does knowing the local language help. What do you look for from your analysts when you build a team from scratch? How long did it take you to ascend from a junior analyst to a PM? What is average, and if you deviate from that (positively or negatively), why do you think that was the case?
I'll stop there for now.
How does one know when to sell?
Great thread, enjoy a banana.
Thanks for the detailed and thoughtful answers. Some follow-ups: Do you want to manage money again (ie go back to the buyside)? Where do you see your career going if you stay on the sell-side? (MD, head of research, current shop vs move to a bigger bank, start your own research boutique, etc)
great thread.
What were the main differences between life at a long-only firm and at HFs? Are the compensation differences really that extreme? Did you find absolute return investing more interesting than relative return?
Investor vs trader: More investor than trader but if there's money to be made.. I like structural shifts but sometimes markets are just stupid, particularly in EM
Best trade/worst trade/where I work/coverage area: Not telling
Lingual aptitude: not that important unless you're a country specialist, particularly as a strategist. Most people you meet in countries (central banks etc) speak English.
What do I look for in analysts: Excel proficiency/diligence and willingness to think out of the box on occasion/be able to have a conversation about anything. Always tough as you get lots of robots. Also spunkiness is good.
Junior analyst => pm: I was never an analyst, was running risk from day 1 as the senior pm was feeling generous/liked me and my thoughts on asset allocation. That's how I define being a pm'y person and the length of time varies dramatically between roles/institutions. For example, in a small hedge fund you might get a small book to work on your risk management/portfolio construction after a year. Other times you'll be an analyst for a decade and then get a chance to run some positions. I'd say average is 4-5 years for pm (running part of book), 8-10 years for senior pm (running whole book), less for niche/hot areas.
Return to the buyside: Maybe in 4 or 5 years after I'm world renowned (fingers crossed). I can't see myself working for any other funds as most hf managers are rampant egomaniacs (maybe I am too..), so would have to set up on my own, probably global macro/free fund. I respect a number of other fund managers immensely, but that doesn't mean I'd enjoy working with them and to be honest have my own investment style now. Mrs somebody has also banned me from launching a fund for 3 years, soo... Handily, my current shop also has a well-funded Asset Management arm and they'll be rolling out equity funds in 3-4 years..
Staying on the sellside: stay as a strategist, maybe go back to being global with an EM bias. I had plenty of offers from larger banks, but you get significantly more freedom in a boutique and better hours. Who wants to do maintenance research? Once you have street cred, setting up on your own can be a nice steady source of income, particularly if you write intriguing/differentiated stuff (no idea how ISI get away with charging so much though..). Head of research is a funny position, I don't think anyone on the street has as sticky employment and is paid as much for so little responsibility. Happy to manage and train up analysts, but managing egos and managing bonus expectations sounds like a drag. Strategising is much more fun.
How does one know when to sell: Your back starts hurting.
sounds like you are the new strategist at ISI...
Who knows. I was just kidding though, very good shop and there's a reason Mr Hyman has been number 1 ranked for a three decades (aside from being a lovely chap of course).
Mobility within sell side groups vs buyside groups: Up or across? Generally you'll focus on one area at the start of your career and add more bits on as you move along. If you're in a more quant group its easier to do this as the statistical analytic techniques are reasonably easily transferable. Some groups are very generalist too. On the buyside if you get a pot of money people will generally want you to do what you said you would when they gave you that pot, but the more junior you are the more you can hop.
Background in quanty types: Well, its usually people are who are solid on econometrics, although you do still get some qual type people with more of an economics tilt depending on the group (just like you get some heavy duty quants in EM/commodites, particularly desk strategists). Having an masters in quant is very handy, as are Eviews and Matlab (although I reckon R is much handier). The folks at wilmott forums would probably be the most help if you're looking to go very quant (as highlighted previously I think a lot of quant analysis is stupid, particularly in my area (or maybe I'm just lazy and can't be bothered to debug any more)).
Sombody, this thread is the most relevant thread/information I have found to date. I'm trying to take your path, but in reverse. I plan on starting within a sell side strategy research group and move to global macro on the buyside. I would love to ask some more specific questions, but without revealing even more about my identity.
Q: How is mobility within sell side strategist groups compared to the buyside?
Q: I'm interested in global macro topics, but have a very strong attraction to more quantitative, fixed income groups (i.e., interest rates, derivatives, FX). What kind of mix in backgrounds did you see with people with more quant backgrounds (as listed) compared to those with more qualitative ones (commodities, EM)?
Sombody, this thread is the most relevant thread/information I have found to date. I'm trying to take your path, but in reverse. I plan on starting within a sell side strategy research group and move to global macro on the buyside. I would love to ask some more specific questions, but without revealing even more about my identity.
Q: How is mobility within sell side strategist groups compared to the buyside?
Q: I'm interested in global macro topics, but have a very strong attraction to more quantitative, fixed income groups (i.e., interest rates, derivatives, FX). What kind of mix in backgrounds did you see with people with more quant backgrounds (as listed) compared to those with more qualitative ones (commodities, EM)?
What is your view on trying to become a diversified, multi-asset portfolio strategist - specifically do you think you can build a career as a strategist across asset classes, or do you need to specialize in one (or at least one at a time) in order to establish your value within a firm.
It seems that diversified portfolios are the ultimate consumer of all of the component asset class strategies - but aside from CIO roles, my sense is that portfolio strategy tends to be more of a collaboration amongst individual strategists with specific areas of expertise, rather than an area in which one can really build a specific, unique skill-set & (perhaps as importantly) a lucrative career.
Any thoughts on this?
Multi-asset pm career: Perfectly doable, just look at BlackRock careers website and you should find an indication of the type of background you need for bmacs and suchlike. It's actually a bit harder to diversify away from one asset class to multiple ones as the mindset is different.. With LDI and suchlike maybe one day taking hold multi-asset skills will become increasingly in demand, tis hard to do it right. Sometimes the multi-asset career path can go through fund of funds..
Keynes vs. Hayek, who wins? What do your colleagues think? Biggest macro dislocation right now in your opinion? About how long should it take to learn vba to be effective as an intern? How do you feel about bill gross taking treasuries net short in the TRF? Favorite strategist other than yourself? Will you start a blog related to macro finance careers/news if it doesn't compromise your identity?
Hayek. A couple of keynsians about, they get everywhere.
Biggest dislocation is clearly ZIRP. Stupid policy that delays the pain. Let the market free, take yer lumps.. I can't make the US numbers add up with basic arithmetic at 5% base rates, even excluding healthcare liabilities etc. Should be fun.
VBA is pretty easy, took me four days to go through this: http://www.Amazon.com/VBA-Nutshell-Languages-Paul-Lomax/dp/1565923588 (well, a much (much) older edition). It's not rocket science.
Mr Gross: may be early (as per Jap) but probably not a bad bet. TRF is a lumbering beastie of a fund though.
Fave strategist: Toss up between JP Smith at Deutsche, Grantham at GMO and the elder Drobny. Teun Draaisma was one of the few more quanty strategists I liked (although he's now gone over to TT International) and for something a bit different Andy Lees (macro sales UBS) comes up with some interesting ideas, even if I don't agree with all he says.
Blog related to macro careers/news: nah, will answer questions here until bored and don't really see much value in being a newsbot. Detailed analysis needs to go through compliance as it should, so those on my mailing list can read it. For macro careers on an economic bent little can match the insanity that is econjobrumors (.com)
I like you already.
I think it is a toss up between that and Chinese FX policy, but both will be a joy to watch that is for sure.
VBA is pretty easy, took me four days to go through this: http://www.Amazon.com/VBA-Nutshell-Languages-Paul-Lomax/dp/1565923588 (well, a much (much) older edition). It's not rocket science.
I have been short TYs for a few almost a week now with success, but every time I find out that a fund the size of the TRF is on the same side as me on a trade I get worried.
Fave strategist: Toss up between JP Smith at Deutsche, Grantham at GMO and the elder Drobny. Teun Draaisma was one of the few more quanty strategists I liked (although he's now gone over to TT International) and for something a bit different Andy Lees (macro sales UBS) comes up with some interesting ideas, even if I don't agree with all he says.
I have never read an econ website that brutal before. Awesome.
Interested thread. I dont have time to read everything now. So i'll will read later before posting questions that have been answered. One question though: you started your career as a strategist after an internship in VC? Did you network a lot?
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