Currently on the SS covering a very technical industry. I’ve always been most interested in value investing, which is how I’ve historically run my personal portfolio.
In the long run, I’d like to be a generalist. What’s the best way to get into a spot like that? Should I continue focusing intently on my sector, find a specialist spot, and move up to a portfolio manager? Or should I focus my time outside work on my own portfolio and have a couple stocks ready to pitch from various sectors where I think there is undervaluation to get hired as a generalist, since my names are more growth? Or something else?
Is it even a good decision to go down this route if I could find it with the shifts from active to passive investing?
Already looking for the door, huh? Anyway, you need some kind of “in factor”. The best case is you become a full analyst and get your name on top of research reports that people read. Maybe you will have a bunch of buy side clients who call you during earnings. If they believe your research and think you are good, it should not be hard to move over. If you can’t be the lead analyst, you still get your name on the research and hopefully, can become famous by association.
I think it’s good to have your own investments, but work product is more valuable. Your own research is not going to be as comprehensive or presentable as work research, and you shouldn’t have a lot of time to do personal stuff anyway.
Whether moving to buy side is a good move depends on the place. What I can say though, is that buy side has generally perceived to be less attractive than before over the past couple of years. Funds have not performed well relative to indexes, and customers are increasingly sensitive to fees. In the past, all bank people wanted to go to buy side. In 2017, there was probably a net inflow to banks, or somewhat balanced flows.
interesting. I am a generalist - started my career at a macro hedge fund in nyc straight outta college. interned at San Fran based investment manger but it was an internship so i was merely excel monkey - plugging in numbers, making charts look pretty and updating some assumptions. Although I did focus on couple sectors as directed by CIO, I cannot say I am a sector specific analyst. However, I’ve always wanted to focus on a specific sector hoping to run my own portfolio at a fund that specializes my sector.
Today, i work for PE fund. In a way, this was possible because well i was a generalist and therefore briefly touched on lots of different firms of all sizes and shapes.
Not sure how to answer your question…I think generalists are less useful than sector specific analysts…BUT I do think generalists have more sense in portfolio management. Portfolio management in whether to invest or not and how much to invest and when to sell or double up…This might also be the case b/c I was in buyside exposed to higher up dudes - CIO - who have not touched a model in 20 years but look at it with a holistic view. Holistic view I think is the key.
actually worse in some hedge funds - gut feeling. Then when you have huge losses and investors want to meet up why we invested in Y company…the CIO (ask his minions) will present a detailed analysis of why he/she allocated X amount with fancy graphs/charts and statistics that we made after the fact…Of course we will also touch up on research reports too although this is not shared but just in case crap hits the fan.
Generalist is much better prep for PM role. Most of the guys I know that specialized in a sector that used to run their sector books did poorly once they transitioned to a more general PM role. You gotta be able to look at the portfolio from a more holistic view like mentioned above and decide very quickly which sectors are interesting. Specialists don’t get to practice that much.
my former and current CIO always says the same line that there are too many analysts caught up in fancy statistics and really deep research but fail to quickly make up a decision whether to invest or not and when and how much…also importantly, which sectors to focus is almost a foreign language to most analysts…
There aren’t that many sector specialist funds with big AUM, you end up running at most couple hundred million book, not bad but very hard to get above the billion mark running sector portfolio as far as I know.
you know klaudnine…that is my goal right there - manage couple hundred million dollar fund. Just a few institutional investors and total of 6 people - myself, 2 analysts, cfo, ir, and office manager (fund accountant). Using 1.2/15. This would bring in $2.4mm in mgmt fees every year. I won’t be buying a 4 bedroom at 15CPW anytime soon but I would be taking home anywhere from $1M per year to $5M in solid years placing me well inside the top 0.1% range. Nice little cozy office in midtown west with no office politics and no drama. One big desk with 3 monitors each for all six of us.
problem with specialist sectors is some tend to be heavily dependent on business cycle. ie. if you cover mining you could be bleeding AUM and clients for 1-3 years at a stretch. Maybe the MER keeps the shop afloat but psychologically it would be difficult to sail without wind for that long.
I think it’s really hard to be a good trader or PM if you only work with a particular sector, since you miss all the opportunities outside your field. Most of the time, there is no actionable opportunity in any particular thing. Let’s be honest. So, the more things you watch, the more potential you have to be exposed to opportunities.
From what I have seen, a lot of people who only deal with specific products just try hard to be busy, envision some effects that don’t exist, then end up sabotaging themselves. It’s better if you look at more things and build a better perception of relative value.
Let’s not give any credit or respect to “traders.” For overwhelming majority of cases, traders and portfolio managers, analyst, and CIO should never be in the same sentence. Of course back in the day traders ie prop traders were indeed PMs but today’s traders are tusk-less, toothless, drunk wild boar tied to a tree.
Analyst: after a short presentation with fancy excel to back up his/her claims
PM: great I like it. Let’s do it. Yo trader buy some of X company shares at Y price.
Trader: Ok…I will talk to some traders (salesmen/brokers no different than brokers that show you apartments in real estate) to see what they have.
7 min later.
Trader: ok order filled.
The life of execution traders at buyside funds. Unfortunately, these dudes think they are analysts and/or PMs. Very annoying. Not really front office if you ask me because well when the trader is out, our Director of Ops takes over lol…waiting for automation to wipe out this section of the desk out.
The world is bigger than your point of view. Not everyone on a trading desk holds the sort of role that you are describing, especially once you consider all the different sort of financial institutions.
Plus, if you really want to characterize those people in your company as adding questionable value, the same can be said for many analysts or PMs, who underperform the stock market, and are mostly just salespeople for their strategy.
Don’t let your head grow larger than it should be. That’s how finance people get into all sorts of trouble.
Oh i am one of the posters on AF that says analysts, PMs, economists are more or less useless…This is why i wear really nice suits, shoes, and try to look smart but say very little in real life.
On a side note, are there traders that literally trade like put in orders on BBG or prime broker sites or make calls to sell side traders who also manage, analyze and have full discretion?
The closest “trader” who meet with the above are dudes at quant funds who code stuff in. But these dudes don’t trade or call brokers to trade…
Look at the profiles on SumZero …I have not seen titles “trader” who manage and/or analyze with discretion. Most of today’s Traders are execution traders at least it is the case at large mutual funds, hedge funds. Maybe at some mom and pop targeting asset manager firms, the trader is also the PM or CIO and planner.
Gabelli is a leading proponent of the Graham-Dodd school of security analysis and pioneered the application of Graham and Dodd’s principles to the analysis of domestic, cash generating, franchise companies in a very wide range of industries. His proprietary Private Market Value methodology is now an analytical standard in the value investing community.[7]