Hedge funds and the stock market - ask me anything til i get bored

[Scorpion Man]

[ QUOTE ]
Scorpion,

Are internship interviews a lot less technical than full time ones? Do you have any technical advice (generally what to know) for ibanking jobs of both types?

What school groups were you involved with? This is obviously a matter of personal taste, but it’d be nice to see some ideas since so far I’ve been really uninterested in any group I’ve come across. Since most of my spare time is put into poker, which I’m not listing as a job on resume, I'm worried I might come across as lazy. I'm thinking some sort of volunteering might be my best bet for something I'd actually find meaningful.

My Economics GPA is almost 3.7 but my overall is just above 3.4. I figure I should definitely list them separately. Will the 3.4 overall hurt?

I am in a program here at Northwestern where if my overall GPA ends up above 3.0 (basically automatic) I am given automatic deferred admission after a minimum 3 years of working to the Kellogg School of Management for an MBA. When I'm applying for jobs and internships should I expect this to help (and emphasize it?) or will it only be for my benefit (they might figure if I'm good enough I'd get an MBA from a top tier school anyway)?

[/ QUOTE ]

Ok, the problem with me answering this question is that I got my last internship in 1988. At my firm, we did not hire interns because we felt it was more effort to train them than any value we would receive. The main reason to have interns is to identify people full time and/or up your profile on campus. We did not care about either of those things, so... I don't know why internships are different than other interviews, other than a lower level of expectation of the interviewer.

My primary outlet was involvement in the arts...years of a cappella and theatre. I also did some research for some big profs, which was very low end in terms of content but a good resume builder. Volunteering is fine, But like everything else, working at a soup kitchen will look like exactly what it is...resume padding. Starting something, leading something, and spending a ton of time on something is what gets people's attention.

In terms of the GPA...all depends where you are applying I guess. It would be a demerit at my shop but not an absolute killer. we had the luxury of hiring one or 2 people a year...why would I hire you when I could hire me? That is the question you have to keep asking yourself. NOone cares about your job search except you. THe fact that you want my job is of only marginal relevance to me. You need to make me WANT you. It's like dating. You gotta work out and look your best...

That's great (and sorta lame from a policy standpoint) about the MBA admission thing. I don't know why it would help. In some instances it will hurt if they really don't want you to go back to school, but mostly to me it is no relevant. It does give you an easier story to tell when people ask you what your 5 year plan is, which they often do. Some will like that they have an easy and definite time frame in terms of offloading you.

For all of you guys asking about jobs. You want to be the best. You want to stand out. You want to know things the other guys don't. You want to exude confidence that you will walk through walls to do the job they are talking about. When you are young, that is much of the battle.

[DesertCat]

[ QUOTE ]


Raised funds from a couple of large instituions to start...we had $75m day one which was a reasonable amount back then. He had good track records running a major fund at a major firm and worked for a very very well known guy at that major fund. Then we put up great numbers, had great resumes, hired more guys with great resumes, never had close to a down year in the first 7 years and woke up with $4-5b.

It is exceedingly difficult to raise money in a mon and pop, no experience, stick out a shingle hedge fund even with good numbers, unless they are awesome and sustained.

[/ QUOTE ]

Okay, I can't believe anyone hasn't asked specific performance numbers.

1) What was your funds annualized returns during your tenure, and how much did you beat your benchmarks by? How much less could you have done and still grown the fund?

2) How did your returns change from your first few years when you were small, and your last years when you were running over $1B?

3) How high should my outperformance be if I want to start a small hedge fund? If I have my private accounts audited, will that have much weight with potential clients, or should I just get some small client accounts and use their results?

[hapaboii]

Quick comment on this -

Smaller funds will probably not even have a dedicated trader. The PMs will interact directly with sales traders and do their own position and news monitoring.

The job outlook for a buyside execution trader is a bit disappointing, but by no means is the position going to be eliminated by machines. Traders adapt when necessary. I think floor traders(mainly for equity and futures markets) need to be much more concerned about the future of their jobs.

Right now everyone is pushing algos hard. I believe the use of execution algos(VWAP, I/S, TWAP, participate, etc) will continue to grow but you will always have someone there, as Scorp suggested, to manage the processes.

But I will say that this role is pretty limited in terms of skillset and exit opps. In my case, I could stay in my current role on the buyside or move to an equity sales or equity trading(flow) desk. In terms of pay, buyside equity traders aren't going to be breaking the bank. Good comp, but not 7 figures(or at least, I don't know anyone that is). Range is probably like $75,000 - $500,000. Equity sales traders with a few years under their belts probably saw like 150-350 all in last year.

In my case, I am 3 years out of undergrad, with 2 years under my belt. I know Scorp mentioned it would be devistating for someone right out of undergrad to join a hedge fund(fundamental). I am pretty sure Scorp is referring to research analyst/PM roles, and to this, I'd strongly agree. For trading/programming/quant roles, I think it's a bit more doable. But I think in general it's better to start on the sell-side. More formal training, structure, etc.

[Scorpion Man]

[ QUOTE ]
Quick comment on this -

Smaller funds will probably not even have a dedicated trader. The PMs will interact directly with sales traders and do their own position and news monitoring.

The job outlook for a buyside execution trader is a bit disappointing, but by no means is the position going to be eliminated by machines. Traders adapt when necessary. I think floor traders(mainly for equity and futures markets) need to be much more concerned about the future of their jobs.

Right now everyone is pushing algos hard. I believe the use of execution algos(VWAP, I/S, TWAP, participate, etc) will continue to grow but you will always have someone there, as Scorp suggested, to manage the processes.

But I will say that this role is pretty limited in terms of skillset and exit opps. In my case, I could stay in my current role on the buyside or move to an equity sales or equity trading(flow) desk. In terms of pay, buyside equity traders aren't going to be breaking the bank. Good comp, but not 7 figures(or at least, I don't know anyone that is). Range is probably like $75,000 - $500,000. Equity sales traders with a few years under their belts probably saw like 150-350 all in last year.

In my case, I am 3 years out of undergrad, with 2 years under my belt. I know Scorp mentioned it would be devistating for someone right out of undergrad to join a hedge fund(fundamental). I am pretty sure Scorp is referring to research analyst/PM roles, and to this, I'd strongly agree. For trading/programming/quant roles, I think it's a bit more doable. But I think in general it's better to start on the sell-side. More formal training, structure, etc.

[/ QUOTE ]

There were years where our head trader made more than you cite. But not multiples. I am sure the current head trader made over this last yr. But not the other guys.

[Scorpion Man]

[ QUOTE ]
[ QUOTE ]


Raised funds from a couple of large instituions to start...we had $75m day one which was a reasonable amount back then. He had good track records running a major fund at a major firm and worked for a very very well known guy at that major fund. Then we put up great numbers, had great resumes, hired more guys with great resumes, never had close to a down year in the first 7 years and woke up with $4-5b.

It is exceedingly difficult to raise money in a mon and pop, no experience, stick out a shingle hedge fund even with good numbers, unless they are awesome and sustained.

[/ QUOTE ]

Okay, I can't believe anyone hasn't asked specific performance numbers.

1) What was your funds annualized returns during your tenure, and how much did you beat your benchmarks by? How much less could you have done and still grown the fund?

2) How did your returns change from your first few years when you were small, and your last years when you were running over $1B?

3) How high should my outperformance be if I want to start a small hedge fund? If I have my private accounts audited, will that have much weight with potential clients, or should I just get some small client accounts and use their results?

[/ QUOTE ]

DC -- you may not believe this but it would take real research for me to get exact nums and I don't have a compound...I met with many investors but I was not the primary marketer and we did not talk about 5 year compounding around the firm...we talked about individual years.

Give our take to the best of my recollection our years while I was there were, net of fees:
95 +30%
96 +25%
97 +18%
98 +10%
99 +20%
00 +29%
01 +8%
02 +2%
03 -1%
04 +8%

We broke $1b in early 1999. I believe we broke $3b in 2002.
Bigger was harder. Also, there were 2 of us in 2005/06 and 3 of us after that and closer to 7-8 at the end. Obviously you get diluted in your impact over time.

I don't know on your last question. I have said this many times...RISK is really important in starting a hedge fund. The reason we grew so fast is that from 1995 to 2002 I would say our worst down month was maybe 2-3%. I don't remember having 2 months like that in a row ever. We were never in spitting distance of scaring people or losing money. In addition, we were way underleveraged. Those numbers should all be much higher...we did not use enough of capital.
We had terrific pedigrees, fancy offices, etc. IF you are doing this out of your bedroom its very different, regardless of you numbers. And for me and savvy investors, if you numbers have been achieved on like $1m fund, i am not willing to extrapolate very much from them. To whom do you plan to market? If its just individuals, its probably more about your selling skills and network than anything. From what I can tell you will not be able to attract institutional $ for a long time...but that is a guess because I have never seen specifics around the amounts you are dealing with, your concentrations in single positions, etc.

I dont want to write in a public forum about the last few years...there were significant differences in opinion within my firm...a few of us had great years, for example, in 03...but if you are tied to a perma bear it is very difficult.

[junglewarfare]

I'm a freshman at upenn, I'm thinking of doing an internal transfer into wharton from the college. Right now my GPA is on the edge of eligibility, and I am seriously considering dropping the varsity sport I play for the semester to help me make it. Doing both that and pledging I don't think its humanly possible to get the 3.8 I need, and I am definitely not dropping my fraternity stuff.

Anyways the real question is, if I want to eventually want to work in trading or finance, how much will the wharton name add to my resume vs a regular arts and science econ degree? I'm going to end up taking a bunch of finance and accounting classes there anyway fwiw. If I did drop the sport I would pick it up again, I know the 4 year varsity athlete (possible captain) would be a large boost to my resume. I realize that the answer is up to me and will probably be "it doesn't really make that much of a difference in the long run", but its something I've been thinking about a lot and I don't really know whats best. Any input you have on the value added by doing wharton would be appreciated. Thanks a lot for the great thread

[Jeffmet3]

hey, thanks for doing this.

I have a question regarding whether you think it's better to go with a more well-rounded path when it comes to internships during college, or to stick specifically with one field.

For instance, after my freshman year I had a great internship with a vice president in the wealth management division at ubs, and I'm trying to decide whether it's worth it to pursue another finance related internship this summer (when most of the good finance firms in ny are looking for juniors/seniors) or possibly go with a marketing or even human resources internship this summer.

thanks,

jeff

[alekhine8]

[ QUOTE ]
Give our take to the best of my recollection our years while I was there were, net of fees:
95 +30%
96 +25%
97 +18%
98 +10%
99 +20%
00 +29%
01 +8%
02 +2%
03 -1%
04 +8%

[/ QUOTE ]

So.. you didn't even outperform the S&P 500?

[chisness]

jungle,
wharton is baller

[DesertCat]

[ QUOTE ]
[ QUOTE ]
Give our take to the best of my recollection our years while I was there were, net of fees:
95 +30%
96 +25%
97 +18%
98 +10%
99 +20%
00 +29%
01 +8%
02 +2%
03 -1%
04 +8%

[/ QUOTE ]

So.. you didn't even outperform the S&P 500?

[/ QUOTE ]

If it was a long/short fund, they probably weren't promising outperform on the upside. They were saying they would keep your money safe during a bear market.

And here is the S&P from 2000 on

00 -9.1
01 -11.9
02 -22.1

During that three year period his fund was +42% while the S&P was down 38%. Which would you have rather owned from 1995 through 2002?


And the only real question left is, do you know any of the featured "cast members" on the Wall Street Warriors reality show?