what is the most alpha area of finance to work in?

definitely quant. ripping off the world and no one even notices

Global arms trade

Maxing out your credit cards on bitcoin is the most alpha investment decision you can make.

Hedge funds. This is a place where your boss can make you cry with tears when/if they yell at you

Imagine wanting to focus on an asset class not because it is intrinsically interesting, but because it's perceivably "alpha"

I definitely lean towards thinking that shareholder activism is seriously alpha - there's a particular psychology and balancing act to being an investment manager and also a potential activist shareholder, because of that nervousness that occurs in a company when they observe someone buying sizable quantities of shares in their company – “are they stockpiling our stock to force our hand about something in the near future or are they simply investing in us?”

While most might think that alpha relates to always being "on" and aggressive and assertive, I think that being alpha means knowing and understanding what any particular situation requires.

In activism, there are so many moving parts, and numbers are only one part of it.

The potential value a targeted company has, winning the votes of shareholders to your side of a particular proposal and plotting out the varied dynamics of whether you step softly or aggressively into a situation. The issues of contending with boards as well as shareholders, there is often a very delicate balancing act when one is engaged in talks. You don’t want to tip your hand sooner than you want or give away too much in regards to your plans and intentions. All the while, however, you’re also having to be aware that especially and, in particular, when confidentiality agreements and/or standstill agreements are signed - you must be prepared to publicly disclose all items after these agreements expire. Activism is like playing poker on steroids.

Which Alpha?

Like fratty macho alpha? If so, nothing. Look around you. Finance is like revenge of the nerds. The days or swashbuckling bros slinging bonds, being super levered with little to no risk limits and yelling at the turret are generally over (said guys are probably in sales now or have gone onto another corner or have moved up/out). Stress/hours/pressure (peer and work) aside, there is a reason there is so much arrogance and bad attitude in the industry. And if one looks deeper, it's because most people in the industry are nerds that certainly were not popular with others/opposite sex in school/college and now they are in a job/industry that pays them very well. Better than most of their school peers and by far.

If we are talking Returns Alpha (which was my original assumption) which is active returns on investment above a benchmark/index (without cheating...ie changing benchmarks/indices, making up benchmarks etc), there are very few who consistently do it, and most of them are not at big shops.

Most are either in niches or areas where there is less competition or liquidity or places where they are doing something new/different. Most of the mega funds were in the past, unique in that they were few and far between when they started. Now they are the biggest and most stuff they do is auction based. Same with hedge funds.

At a certain size everyone can see what you are doing and will quickly move to copy/compete which will then bring down returns. Of course some of the big PE shops are consistently first quartile, but let's also not forget that leverage availability and rates have been low for a long long time. We have also been in a bull market for 11 years now (and this goes for both PE and HF)... So many have not been tested, or tested in a long time.

Even think about Citadel. Crushed it pre crisis and has done so since. But was down, erm... 53% in 2008. Not very "hedge" fundy (levered long, sure)... For those who might argue that PE can withstand a crisis and buy on the cheap, this is theoretically true, but I have been around when LPs have been begging GPs not to make capital calls since the former were liquidity strapped and have seen the latter actively negotiate with banks to be more flexible with covenants with portfolio companies etc (as they would want as equity holders).. All crisis based but true Alpha should be able to survive a crisis... Else you are just beta and (probably) levered.

Good Luck

Guys at mortgage desks in the 70s-80s for sure

famejranc:

What Is The Most Alpha Area Of Finance To Work In?

Too easy. M&A.

Just keep buying and buying companies. Become a big chonk of a company and then swallow your competition.

Seriously - how do you think it feels walking into a competitor's HQ and your nemesis in the business world and having enough capital to buy their whole operation?

famejranc:

seems to me like real estate is the most alpha (donald trump, etc.), which is why i think i will go into real estate.

but, if there is truly an industry more alpha than real estate, please enlighten me.

Trump is definition of Beta

BDSM

Accounting

Bail Bondsmen