What's the Next Hot Financial Sector/Product?

There is always a hot, desirable field in finance. Asset Management providing ETFs, or passive investing is hot right now. Mortgage backed securities were popular in the '00s before the recession. VCs and tech stocks were the thing in the '90s, before the dot-com bubble bursted. Junk bonds grew a lot and were especially lucrative in the '80s. Meanwhile, algorithm trading and hedge funds have also peaked before the recession and are past their prime.

Passive investing might be peaking, due to an arguably overvalued stock market. What is the next big thing? Is it emerging market equity, or real estate? Do cryptocurrencies have room to grow? Finally, Everyone loves private equity, but the market seems to be becoming saturated with PE funds. So how does the rise and fall phenomena of other sectors and products apply to PE?

Hedge Fund Interview Course

  • 814 questions across 165 hedge funds. Crowdsourced from over 500,000 members.
  • 11 Detailed Sample Pitches and 10+ hours of video.
  • Trusted by over 1,000 aspiring hedge fund professionals just like you.

Comments (43)

Dec 31, 1969

Hmm you're ignoring the relationship-driven part of the business though. Nobody ever does a deal because "the model says its good", that's just one very small indicator that maybe it's worth considering.

Dec 31, 1969

oh my fuching GOD, this is the stupidest post I've ever read

And believe me, I've read some incredibly STUPID posts from people on here

For fuchs sake man, do you REALLY think M&A valuations are going to be driven by automated models

This is truly ONE thing that will never happen

There is just TOO much subjectivity in the process

Not even 10 bankers or sellers or buyers or PE firms with the same information analyzing it with a thousand supercomputers till the end of time would come up with the same valuation or even close. The dispersion would be extremely wide overall and the point of the M&A process with bankers is to get you to the to of the range and above. "In the range" is easy, and you can use comps to do that.

My suggestion would be to take your thesis paper and literally burn it and start over from scratch. Also some of your amazing theories that banking will be changed by micro / macro changes, regulatory and technology is truly novel. You ought to win a nobel prize for that one. Not!

(Note - I'm just being harsh cuz it is fun, not to be mean or act self righteous, although I am the best here)

#

I am the Man. I Have the Plan. Follow Me to the Promised Land.

Dec 31, 1969
BBMMBoutique:

oh my fuching GOD, this is the stupidest post I've ever read

And believe me, I've read some incredibly STUPID posts from people on here

For fuchs sake man, do you REALLY think M&A valuations are going to be driven by automated models

This is truly ONE thing that will never happen

There is just TOO much subjectivity in the process

Not even 10 bankers or sellers or buyers or PE firms with the same information analyzing it with a thousand supercomputers till the end of time would come up with the same valuation or even close. The dispersion would be extremely wide overall and the point of the M&A process with bankers is to get you to the to of the range and above. "In the range" is easy, and you can use comps to do that.

My suggestion would be to take your thesis paper and literally burn it and start over from scratch. Also some of your amazing theories that banking will be changed by micro / macro changes, regulatory and technology is truly novel. You ought to win a nobel prize for that one. Not!

(Note - I'm just being harsh cuz it is fun, not to be mean or act self righteous, although I am the best here)

I don't think they are going to become totally automated. read the last line of my statement you fucking dumb p.o.s. I still think big banks will rule and their expertise will be in demand, but I think they are going to have to lower their fees. I think that technology will give more leverage to companies, which will drive down their prices. Look what happened when Google decided to do a dutch auction for their IPO. Stupid Cocksmokers like yourself where saying that there was no way a company that large could do it, and by trying to cheap out on the investment banks their going to loose their ass. Well what happened? Nothing, they did just fine and managed to only pay the i-bank 2.8% instead of the usual 5-10%. Google claimed it was able to do this because of a software that allowed them to better gage market demand. My point is that if you believe in Moore's law then you know that the capacity of technology is endless. And it is certainly probable that a computer program might be able to do a lot of the bullshit monkey work that currently goes on in i-banking. There will still be a need, as I said earlier, for expertise, but like with anything that becomes more automated the price will go down. Look at stockbrokers over the last 20 years. They are still around even with discount online brokerages, but they have had to change to compete. They do more tasks, hence the term financial planner and not broker, and they charge less fees than they did 20 years ago.

Dec 31, 1969

" Also some of your amazing theories that banking will be changed by micro / macro changes, regulatory and technology is truly novel. You ought to win a nobel prize for that one."
Of course is not going to be entirely novel, I'm a senior in college, not a phd student. Anal cunts like you are highly educated and intelligent, but so externally motivated that you'll never have the balls to take a risk. My guess is that you are probably an associate at some big firm, which is why your so goddam arrogant.. And another guess is that you got there by taking it in the ass from high school through grad school, which is why your so dam bitter and feel the need to come on here and let off steam. You'll never fail because you will never need to, you just maintain the status quo and grab you ankles tell you reach the top. I on other hand have failed and will continue to fail because i don't like taking it in the ass. I may be totally wrong on this, but i would rather be wrong then like the other students who played it safe and regurgitated a bunch of HBR articles until they reached 60 pages. Guys like you play by the rules, guys like me fail until we eventually succeed and then we get to make the rules.

Dec 31, 1969

Fuckface, when you said: "Anyway, that is just my opinion. I am interested to see what other people think. If they agree or if they think that this is just unsubstantiated bullshit from somebody with no industry experience." Did you actually mean that or are you just fucking retarded. Your assertions are still worthless. Banks still charge SEVEN PERCENT on typical IPOs, not 5-10% you freaking MORON. YOU have NO industry experience. I DO. So, STFU. I wish a computer could figure out when a moron is typing and shock them, as your computer would short circuit upon anything you type. Good luck with your thesis and now you should go shred it immediately before your professor fails you miserably.

#

I am the Man. I Have the Plan. Follow Me to the Promised Land.

Dec 31, 1969

BBMMBoutique, no offense, but you are a dumb fuck. I don't think you are even out of college, let alone have industry experience.

Dec 31, 1969

A couple of issues about using a computer model that is based on an algorithm that uses inputs such as audits and market information is the effect of the choice of parameters within the algorithm, such as: the actual extent of the disclosure (for/of the audit/target company's "private information"); and the fact that the market information captures predominantly noise and precious little by way of a true indication of the company's actual value;

This in mind, it is highly unlikely that corporates would end up choosing "discount firms" or altogether eliminating banks because they ultimately still need the corporate advisory services that the banks provide, since these are the firms that have more information, or "experience" which is worth paying a premium for. Consider this, if you had a brain tumour, wouldn't you choose the best brain surgeon you could afford over the whiz bang new technology that hasn't been in place for the last few decades?

Also, the changes in regulation (though admittedly I do live in Australia, so forgive me for generalising here) won't render these firms obsolete because increased transparency does not equate to no opacity. Also, the regulatory process is usually characterised by lobbying by these large body corporates or banks, so exactly how much the regulation will change is unclear. Case in point: Australia, Canada, the UK and other countries have adopted completely or are harmonising their accounting regulation and standards to that of the IASB. The US Government has not even begun considering a change, most probably due to its effect on the taxation revenue. Now this is relevant because it shows that there is already a resistance to change present. This mindset may have been affected by the GFC, but I do not believe it would be so substantial a shift.

It is highly improbable that increased transparency and audit information (if available) will help this model of yours. Look up the Efficient Markets Hypothesis and Black's Argument (Informational Efficiency and Market Dynamics).

Now I guess I should add that these are all theoretical issues, because I do not have industry experience (yet). This should not really be an issue seeing as this is an Honours thesis, so I do hope it is still helpful.

*edit: Also, in regards to the belief that "the capacity for technology is endless...", well I don't dispute that, but models based on algorithms cannot capture information that the designers have not thought to create parameters for. Check out:
http://www.theaustralian.com.au/news/opinion/smart...
There simply is little to no reason an IB would lower its fees because it has the expertise and resources that a "discount firm" lacks. That and the whole idea of "you get what you pay for".

Dec 31, 1969

Next big thing in banking - Derivatives actually regulated by people who understand them?

Dec 31, 1969

BBMMBoutique, no offense, but you are a dumb fuck. I don't think you are even out of college, let alone have industry experience.

Yea dude, you suck.

Dec 31, 1969

My energy fund ;)

Dec 31, 1969
alexpasch:

My energy fund ;)

haha Can I join? ;)

The one who does not fall, does not stand up

Dec 31, 1969
ProdigyOfZen:
alexpasch:

My energy fund ;)

haha Can I join? ;)

Haha hopefully in a year or two I'll be looking to hire people. :)

Dec 31, 1969
alexpasch:
ProdigyOfZen:
alexpasch:

My energy fund ;)

haha Can I join? ;)

Haha hopefully in a year or two I'll be looking to hire people. :)

Fair enough ;) I have game :)

The one who does not fall, does not stand up

Dec 31, 1969

I'd be interested in hearing some thoughts.

Dec 31, 1969

If after Steve Jobs dies Apple creates some limited edition Apple products.

Dec 31, 1969

casey anthonys book!

Dec 31, 1969

cleantech! its being peddled like crack....

Dec 31, 1969

My convertibles for a trio of sizzling IPO's in social media coming out. Nuff' said.

Dec 31, 1969

hedge fund strategy ETNs for retail investors

Dec 31, 1969

just look at Jim Simons from Renaissance Technologies. The guy is a math phd and his firm employs tons of scientists and stat guys. Their returns are amazing. Modeling and math are the future.

Dec 31, 1969

Simons' firm got its start in the mid-80s. since then, we've seen a huge surge in quantitative strategies on wall street and in hedge funds. its not "the future." returns are already not as impressive as they once were

Dec 31, 1969

Quant strategies in the broad sense are the present and will be the future (on the basis of what else are you going to trade?event-driven?technical analysis?fundamentals?instinct:)?)....
But e.g. in the 90's the hot thing was relative value arbitrage...or as far as instruments are concerned, for example, convertibles were hot. now I guess we are moving more towards algorithmic and high frequency trading...this is what I suggested.
As far as rentec is concerned things are quite obscure as to what techniques they employ...i've read somewhere that some of their employees neuroscientists...so they should be using some kind of behavioral finance techniques in conjunction with signal analysis...

Dec 31, 1969

neuroscientists, i would wager, are probably for developing trading systems based on neural networks. also, i believe they have hired computational linguists as well.. likely some machine learning going on as well.

Dec 31, 1969

hm....but there's also the fact that rentec is trading on CBOT and CBOE directly, and they have set up microphones on the pitch..maybe they can extract some alpha by analyzing who knows what...the traders' screams?

Dec 31, 1969

sometimes after a significant silence the whats being traded at the pits have been seen to make a significant gain

Dec 31, 1969

NatRes, without a doubt. Already is.

Dec 31, 1969

Tech and Retail

Dec 31, 1969

Healthcare

Dec 31, 1969

I hope you got a clear answer lol.

Dec 31, 1969

Studies show that the hottest M&A sector for the next 2 days will be my weiner and your mom's anus.

Dec 31, 1969

Very clear lol. Energy seems like it's picking up like crazy now. But, the acquisitions seem to come from tactical shifts on the part of firms (i.e. natural gas --> oil, etc), and do not seem to make up a long term trend.
Tech is getting hot too, though.

Dec 31, 1969

ETFs

I have to return some video tapes.

Dec 31, 1969

go out and get laid while you're still in high school dude

Dec 31, 1969

Agriculture

Dec 31, 1969
Dec 31, 1969
Dec 31, 1969