The dillema - a good one
The dilemma in brief. A good one I realise. Im 32yo btw. Target school etc. did couple of years of IB and jumped into AM as stocks are what I love, East coast based.
1. Stick – Fundamental, concentrated (35 stocks), unconstrained L-Only Global at a Trad Asset Manager. $100bn AUM. Within that team of 6 generalists running $2bn unconstrained Global best ideas. Aim is to scale up multiple times as global conviction fund should appeal to asset allocators wanting to index their diversified managers and then allocate to alpha generating active managers. Like many having a challenging year (to say the least) but v good 2013 to net off against. Will need another 2-3 years of good performance to scale up (consultants etc etc) and hence get paid with no guarantee.Need a) performance and b) consultants to rate that performance. Personally going well. launched a sub-strategy 30 stock fund with me as Co-PM . So on a path to building a track record myself and am well rated. Lots of freedom to invest albeit we sometimes go up the risk curve and I question if that always makes sense in a institutional framework gathering AUM at 60-70bps and essentially success is geared to a rising market - beta can swamp the alpha
2. Twist – Option 1. $800m TMT L/S Fund (even though a generalist is where I fish for most ideas now). Mainly focused on the M and T bit i.e. less Tech but would be analyst no 4 + Founder PM and v.senior analyst. Very smart bunch of guys. Low net / gross aiming to compound steady low vol returns LT which has been done over last 8 years....say low vol 5-10% p.a. returns consistently.
Pros: Working with some smart guys that know sector inside out – specialism in a L/S context appeals (not convinced I would enjoy being a specialist in a L-only context but feel its good for generating relative alpha if you know a sector with clear winners and losers inside out). Fund up every year since inception (8 years – maybe down small this yr). Financially can do very well in a good year given the maths….capped by me not calling the shots / analyst but fine I dont need crazy money. Enough to have a good life and enjoy it!
Cons: Higher risk of it not being there in 5 years. Going from generalist to specialist – will that cap Exit opps? Sector going out of vogue / Bit of sector I am covering quite efficiently priced etc. Im Now pigeonholded?……or will 6-7 years as a generalist always mean I have options esp as still doing fundamental L/S as a generalist. Very much an analyst albeit can still have an influence on portfolio but its PM calling shots
3. Twist – Option 2. $4bn multi-strat fund launching first fundamental global L/S strategy. Hired 1x Pm (albeit he also from L-only). No 2 could be me + maybe couple others down the line. Start out with small aum but could scale to say $300m-$500m if good (capital is there just need to prove to powers that be that possible to generate Alpha). V concentrated with say 20-30 total positions. Looking for real mispricings so will be S/Mid biased. Leeway to invest LT (in theory at least), stomach some volatility and invest sensibly…..i.e. a proper framework to make money in if you are any good
Pros: Blank sheet of paper to really build something. Co-PM essentially. Capital is there if you do well. Extension of what I do now i.e. global generalist. Essentially if it works its amazing. If it doesnt can be explained as to why took that role.
Cons: Backing a PM who hasn’t got a track record / much shorting experience. Great guy but no idea if he is a great stockpicker (few of the ones hes told me he has been in have gone down a fair bit albeit tricky market right now) . Global generalist L/S with 20-30 positions = high risk and how do you hedge out all the unintended risks and bets in that type of portfolio (easier to get my head around how the alpha shines through in a sector L/S fund). Generalist a blessing and a curse in terms of focusing, having an edge vs. a specialist etc (my track record is good where I am but generating 8-10% consistently im less sure about) to generate best ideas albeit in theory only need 5-6 good ideas a year. Higher stress as live and die by portfolio and highest risk of the 3 but highest potential reward I guess (albeit the maths of the $800m fund is still compelling even if main guys keep a large chunk)
Thoughts.....Thanks
what do you think yourself?
How do you feel about short selling?
What the hell did I just read. Also, your ability to receive these offers (if you did) with your poor spelling is beyond me
Thanks dude. Actually there was a spelling bee as part of the case study. Must have just got lucky right!
ur a twat - how is t'at for spelling?
To OP - don't know as don't know your experience. You clarified a bit lower that you have 4 years investing, that's low. 2 & 3 strikingly different - one you are an analyst the other you are a PM
I would stay clear from #2 big time though - while you were working in IB, i've been working in markets and I have seen my fair share of clever funds going bust. 2 is a no brainer NO, unless you did not have any other options
I'd go for option 3 if you feel you are clever and don't need to learn a lot more and have the skills to perform. If you are still learning and being challenged in your current job I'd stick with that - if you feel you have plateaued a bit 3 looks interesting.
Ha no - sorry meant. 4 years in current role. 6 years total investing (from 08) plus 2.5 years in IB before. As you say though still not a huge amount of experience. Now a co-pm on a new fund albeit long only but we have the infrstructure in 2-3 years if numbers are good that it will scale.
Yes Option 2 I was thinking as the most stable one as it has 7-8 years good track record albeit down a bit this yr. My issue is the real narrow focus on stocks vs current breadth albeit economics of a HF stack up (albeit as pointed out I will be no 6 in-line)
3 is the riskiest I think but highest reward. But I do feel I have a lot to learn still - the ideal would be this option if it had a real seasoned PM
Interesting insight. I wouldn't have thought about the learning part but makes sense. Less risky to be in more of a PM role once you feel like you've plateaued.
If you have a passion for all of it, I'd probably look soley at comp v risk
Can't believe someone just pointed out spelling mistakes. The user is probably jealous or never come across some top people who still make ridiculous spelling and grammar mistakes and don't give a damn because it doesn't matter unless you're dealing with clients.
To the OP, definitely not experienced to answer in detail or even understand a few things you mentioned. But I would prefer to be a generalist because: - I will get to have a global and the ability to 'read between sectors' which helps as there is always some overlap - generalists is always challenging as you know you can't be the best at everything - but that fear in itself kept me more focused
Long only I'm really not sure because it would make me feel so restricted, seriously. A lot of these big managers from what I've been told have so called 'long-term' investments so they definitely care about short term performance via quarterly reporting season, consensus and the rest. They try to be flexible in terms of going in and out of positions. I guess you see how long only will restrict.
With regards to completely new funds or fund managers I know that if they have a solid track record and brands to back them up, they can fly really high. But there is still this 'but' with tons of reasons to pull me back.
I guess it will have to be a balance of comfort, future career prospects and money.
Good luck.
I agree with above, get comfortable with shortselling. also, have you done smid before? if you're mainly large cap it won't be like switching to european convertibles, but it will be a change, make sure you're comfortable with that.
also, what's the impetus for the move? your current gig sounds good and with a little room to grow. if you're unhappy or feel like you've topped out, I'd bolt, but if you're happy I'd stay.
I just have to say that running low net while focused on TMT and a track record of low vol just seems like waiting for the other shoe to drop.
I am reminded of this: http://www.gurufocus.com/news/802/joel-greenblatt-speaking-at-nyssa
EDIT: Wow. I didn't even get to this part when I initially wrote the above:
those are great options. out of curiosity how long have you been at #1? I think I'd be most interested in 1 or 3. If you think the long-only fund can scale to $6-10B over the next few years that could be a very sweet spot for you. It will be a focus for your marketing team and on the radar for the consultants so could grow pretty well given your infrastructure there.
3 also sounds really interesting. Chance to be the number 2 guy on a global L/S product could be awesome just from an opportunity set perspective. I'd worry that aum would scale more slowly there given you're lead doesn't have any reputation and one 3-6 month period of underperformance could kill your chances of getting it off the ground. Economics in the upside case obviously sound very attractive.
Idea #2 just sounds ok. Team of five analysts, most will have better rep than you initially so you might be making calls on ~$50mm aum. Might be a good stepping stone role into another fund but I wouldn't want to make a career there.
Thanks for the response. Agreed on most counts.
Been here 4 years. Few changes along the way so current strategy only really in place under this PM for 2 years. One good year offset by a bad 2014. So 2015 and probably 16 crucial to chances of success. Agreed could very well be a sweet spot but have some concerns that some bets like investing in Europe wont pay off and makes it a tricky call
Agreed. Should be the most interesting on paper but the lack of track record worries me. Gut feeling is mixed re how it will pan out. Would be much more confident if I knew the guy had great shorting skills etc (which I think is a very difficult skill). Probably the one I will regret most passing up but same with a stock the gut instinct is often right.
Agreed - kind of feels a bit too crowded to be covering a tight niche. In theory I will cover a sub-set of stocks which makes it even narrower - 20-30 stocks vs. the whole worls right now. Main thing here is the PMs are quality, a sector L/S means in theory can isolate the alpha vs. Beta, macro etc and comp near term at least materially higher in a good yr vs. current house
kind of leaning towards sticking it out where I am and being patient
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