could anyone provide some insight into what would be some good reasons to want to get into buyside equity trading ? ie.) as a trader at a mutual fund who executes pm’s orders / models, any serisous comments would be greatly appreciated ,thanks
Not to disparage or anything, but a buyside equity trader does not provide any important input to the investment process. So if you want to be on the investment side so this might no be the ideal place. The maximum value addition is related to getting the market feel but at the firm I am in (long only buyside) the avenues are limited. However since my views are prejudiced by the work environment I am currently in, it may be different in other shops… I would advise to choose some other position…
Hell, it’s a job that pays the bill. you get to be in close contact with various brokers for execution of portfolio that PMs delegate to you, given different mkt or exchange have different rules (cross-able size, auction rules, market-on-open). Get mkt information (sentiment, flow) from brokers and your own observation, advise and educate PMs what best action should be taken for any strategic/tactic decision. For large orders it can take days to complete, and it is just not possible for PM to be occupied for execution and focus be diverged. It may appear not the most analytical role, but in essence it is important, as slippage can have a large drawback in performance. Although the quesiton is pertaining to equity trading, but there is more than simply that. PM may have a hedging decision, but there can be different ways to achieve it, say doing it on futures, option, swaps, exotic OTC options. How about FX? Traders can provide insight to the PMs with his/her experience in execution. Trader can also be granted discretion in the order execution in the universe of stocks. To cut it short, the role assists PMs to have the portfolio accurately and properly executed, complements in area where PM not familiar. But to what extent is usually firm specific.
^yeah what this guy said. There are two general types of traders – pure execution and strategy. Execution trading is a commoditized business in my opinion, but strategy trading can add value if the trader really knows his markets.
I’m buyside for a big shop (200B+ aum), mostly involved in hedging using forwards, contracts (fx), futures etc… Nothing better than going to the local pub and have the sales guys pick up your tab! Most of the traders here usually end up being PM…so not a bad deal…
TheTrader Wrote: ------------------------------------------------------- > > Most of the traders here usually end up being > PM…so not a bad deal… That’s kind of scary actually.
Trader (who is knowledge about his market) can certainly add value to PM’s investment process. In its simpliest form, PM’s process, vaulation model (or whatever) assumes a frictionless market, as a trader, you can provide usefull information about the liquidity, trading volume to help the PM to formulate a profit trading stragety. Just because a certain trade is profitable on paper, it doesn’t mean it should be implemented…at this point, a good trader can add value.
traders i know more focus on the hedging aspect of a transaction…and that can be the most important part. i put on a trader hat for a few months…it was weird at first, but heding with swaps, futures, etc isn’t too difficult these days. where traders can add value is with different hedging products that may be more optimal (swaptions, etc)