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April 30, 2024
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You get to prove the EMH wrong
False. Markets are efficient. Everything is priced into the market. Your opinion, rather the possibility of it, was priced into the market the second you were born. In fact, universal constant is efficient markets. The fourth dimension of the universe is market efficiency. The entire galaxy and beyond is one giant feed of information injecting straight into the motherfucking markets while your sorry ass tries to buy low and sell high.
The market knows all, the market sees all, the market loves all. The market saw you wanking your willy at work yesterday. Everytime you shoot a load the s&p moves down 5 bps.
Any other suggestions?
I have worked in PE and am working in the public equity/credit domain. My $0.02 is that they both can be interesting and frustrating.
PE - you have more interaction with boards and mgmt teams. A career in PE allows you to build deeper relationships with these figures and you can have a real network of operators later in your career. I always thought that was a nice quality. The frustrating part is the hours are mostly still somewhat brutal and there is a lot traveling (i hate traveling for work) and honestly doing deals can get sort of monotonous after your first handful. I also don't find PE guys (absent those who work at megafunds) really understand capital structure as well as they should. They're too programmed to do the same 10 tasks they need to do to execute a platform deal, do a few add-ons (mgmt mostly does this), then exit to get their 20% levered return w/o adding much real value.
Public domain - You get to think much more dynamically and put on interesting trades, especially if you can go across the capital structure. However, people can be somewhat myopic, you're essentially using an issuer as a platform to take positions against other investors (some don't find this fulfilling) and I think most ppl who work in public equity don't appreciate the fact that there is still a high level of speculating that goes into decisions (some think they are smart when they are just lucky) as you are not in those board discussions and don't have a perfect view of what a company can do to basically screw your side of the trade. I also don't find the relationships that I've built (mostly other finance bros like myself) to be that rewarding.
Interesting, thank you very much for this feedback.
Very true but.... to be fair a lot of PE firms are moving more and more towards adding fundamental value instead of financial alchemy. One of the groups I've been working with lately has a ton of accomplished ex-operators on-hand that 100% add value beyond what you mentioned.
One of the guys I work with closely used to work for a PE firm with ~$1B AUM and I was surprised by how much he knew about the operating side of the D2C consumer brands/eCommerce co's we look at especially given his role at the PE fund had relatively little to do with operations. For example, he was able to help refine one of our company's PPC strategies fairly significantly which was surprising. He said he learned it all while @ that fund. Maybe they are an outlier but it definitely changed my view on PE guys. I have more respect for them now.
Thank you! but I am already in Private equity... I am trying to figure out the difference with public equities and why make a move to this sector.
Thanks for the insight.
How do you view activist investors? Investing in public companies, but also talking to management and trying to improve (or restructure/split) the company. I feel that it is less betting against other investors.
I am one of those people that doesn't like to 'bet' against other investors, nor the irrationality the market sometimes has. So I was always more inclined to PE, but recently I have been seeing some activist funds and I think I would like that as well.
Also, how do you think a headhunter would react if I would say that I like PE and activist investing. I know you're written off when you say you like both HF and PE.
bump
Why do you say " I know you're written off when you say you like both HF and PE"?
Idk anything about PE but I like the fact that there is so much data out there available for public markets.
I have had conversations with people that work in both Public & Private Equity. I wouldn't necessarily say that public equity is more interesting that private equity. Public markets are more dynamic because information is publicly available : investors can easily get their scorecards and feedback through the stock exchanges; geopolitical events and public policies can have quick and observable impact on the public markets. In addition, public investing exists on a spectrum. Active managers are obviously more involved than passive and quantitative managers. Developing relationships with management obviously depends on a money manager's investing style. Activists and some value investors can have a significant impact on the direction of a public company.
Private markets are more opaque and secretive. Although people in PE can get to develop relationships with managements, often they can't even tell their friends what makes them excited about a particular company (especially if its going public soon).
Well you are supposed to tell why you are excited about a target in PE... as an investor you also have access to a lot of information. The difference is that this information is not available to the public...
https://www.wallstreetoasis.com/forums/do-you-consider-your-private-equ…
This is probably worth reading.
Comes down to whether you're a performer or a deal maker. With public securities it's really the markets against your own brain and you have to step up to the plate to show the markets what you've got whereas PE is far more about relationships, process, deal making etc.. It's just a very different style of doing business.
Great insight
There's a lot more versatility in what you can trade within the public markets. Private Equity is pretty restricted to long-only investments and there's not really a way to hedge your trades or use quantitative methods. It's a bit more fast paced too, depending on what size positions you take.
The ability to hedge, availability of liquidity, and option of sizing/diversification. This is also why I believe the buy-and-hold forever approach is much inferior in public than private. You are essentially crippling yourself from all the benefits of public markets while also getting in to deals with a higher multiple.
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Private equity guys have lower risk tolerances. The joy in their lives is getting ducks in a row and watching their nest eggs build.
Public equity guys are risk takers. The joy in their lives is the thrill of being right when most others thought they were wrong. They don't care as much about the nest egg.
These are generalizations. As a public guy I work with guys who should be in PE. I am sure that there are PE guys who love the thrill of the deal making.
You are saying that public equity is more short term?
Would you say it is the difference between a sprinter and a marathoner?
That is probably fair in the sense that payoffs take longer. As a public guy I have stocks going up every day and really big moves multiple times per quarter (ideally).
But I guess I see your analogy as one that emphasizes ability more than personality, to the extent that they can diverge. My point is that differences in personality, just raw levels of anxiety tolerance irrespective of brain power, are more relevant.
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