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

famejranc's picture
Rank: Almost Human | 6,099

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.

Comments (29)

Jun 26, 2019

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

Array

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Jun 27, 2019

famejranc exits his IB search in defeat; decided to enter Real Estate at the behest of WSO RE; immediately decided that Real Estate, with DJT, is the MOST ALPHA sector in finance.

Classic. Perhaps we could buy famejranc a diaper and binky

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Jun 26, 2019

Global arms trade

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Most Helpful
Jun 26, 2019

Seriously? Trump is your North Star for alpha?

The Henry Kravis from the late 80s to early 90s. (Case to consider - KKR & RJR Nabisco)

The Carl Icahn in the 90s. (Case to consider - pretty much every deal where he made a buck)

The George Soros from the 80s and 90s. (Soros vs Bank of England)

I believe activist investing, where the specific mandate is to change the management from the outset, is more 'alpha' than other areas. Imagine - sending out a letter to a career business operator (usually a CEO who has been in the industry for several decades), that you plan to increase your stake in their business and want to make changes, even if you don't have majority.

Single manager hedge funds, buyout equity funds, turnaround investment/distressed investment funds and even these activist funds (some of 'em) - these are areas where you'll see real-time 'alphas'. Maybe, real estate will also be a part of the cohort, but you can do better than Trump because 'alpha' does not mean 'absence of logic'.

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Jun 26, 2019

Would nominate Jeff Gundlach to the list as well

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Jun 26, 2019

Would add Marc Rich to this historical list of "alphas" - at least until the early 2000s when things started to go a little pear-shaped for him...

Jun 26, 2019

You are right letters are very ALPHA

Jun 28, 2019

You should read King Icahn, I think you'll like it. It's quite small but gives you some insight into his character and intellect.

Funniest
Jun 26, 2019

Trump is to Real Estate like Tai Lopez is to wealth management.

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Jun 27, 2019

Nice

Jun 26, 2019

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

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Jun 26, 2019

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

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Jun 26, 2019
Pizz:

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

Crying is alpha AF bro

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Jun 26, 2019

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

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Jun 26, 2019

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.

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Jun 27, 2019

Wonderfully said.

Jun 27, 2019
InfoDominatrix:

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.

This is probably the best definition I've ever come across. +1,000 if I could

Jun 27, 2019

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

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Jun 27, 2019

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

Jun 27, 2019
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?

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

Jun 27, 2019

chonk

https://i.redd.it/fhpukv61oxn11.jpg

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee

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Jun 27, 2019
Isaiah_53_5:

Become a big chonk of a company and then swallow your competition

fat

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Jun 27, 2019
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

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Jun 28, 2019

you take that back! don't talk bad about mistah trump

Jun 27, 2019

BDSM

Jun 27, 2019

Accounting

  • Associate 2 in CorpFin
Jun 28, 2019

Bail Bondsmen

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Jun 28, 2019
Comment

just google it...you're welcome

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