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

[Groty]

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What do funds you've been around think of prop traders? Scummy or hireable?

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I always had the view they could not make money. We finally tried it, more than once, and confirmed the view. We would ask them how they made money, they would spout some mumbo jumbo about flow or patterns or trend. then they would come in and break even, just like I thought they would.

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You didn't work for Izzy.

[superk114]

Do you need a finance degree to get into the hedge fund game? I'm in college right now double majoring in Information Technology and Economics and I'm wondering if that's going to give me the knowledge I need.

[john kane]

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It sounds like you've been in the industry for a while. Were you able to take advantage of all the perks before the SEC came in and ruined all the fun? Soft dollared trips to Hawaii and strip clubs, hookers on the trading floor, etc.

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im very interested in an answer to this, basically have you had the time/interest to lead the balla lifestyle (vast sums of money at the best clubs, packing a room full of the fittest hookers, going out on yachts with a bunch of mates and hot hot girls, ordering champagne like it's nothing, going out till 7am and going into work at 7.30am still shitfaced from the night before and then making loads of money etc etc etc)

becuase trading may be enjoyable and make you lots of money, but loads of money is meaningless if you cant balla it up.

[Scorpion Man]

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For most of our history, we were global long/short equity. Truly global - half of our assets were outside us, and in places like Brazil, Tokyo, Istanbul.

In later years we added others...credit default swaps and some quants. We did very little with debt and no arb.

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were the quants dealing with the L/S portfolio or the CDS/etc expansion?

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No. In our case, the quants were very late to the game. It was failing of my firm that we took too long to get into alternative asset classes and my founder, in particular, was not quantitatively oriented. That said, he can live about 50 lifetimes without ever working again, so its no so bad.

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so you didn't do arb and they didn't help on the L/S equity or CDS portfolios ... what did your quants actually do?

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The quants are a recent startup..I never even crossed paths with them.

[Scorpion Man]

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It sounds like you've been in the industry for a while. Were you able to take advantage of all the perks before the SEC came in and ruined all the fun? Soft dollared trips to Hawaii and strip clubs, hookers on the trading floor, etc.

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That stuff takes time, and I didn't have any. I was also married when I got into the business. Over a decade most expensive tickets were multiple playoff and world series games when the giants were in them (with the broker..they can't just give them to you). NBA All Star game (total waste of a $2500 ticket). Years ago Skip Barber driving school was fun. I know a guy (nameless) who when he was at Fidelity running a big fun 20 years ago got to go to the Olympics oversease in a private jet. Some of our traders did that thing where you go up in a fighter jet.

I am sure it would not be hard to do the stripper thing, but I never asked.

[Scorpion Man]

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What do you think of the recent private equity activity in tech (NXP, Freescale, and earlier Seagate)?

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Much of tech is just a business like any other business. THose are mature segments. I know the guys (at 2 different firms) who did Seagate and Veritas just gave it to them.When I saw that I thought (1) another example of stupid or uncaring top managers enriching private equity (2) if they are going to give it to someone, why can't it be me?

As tech matures, as buyout money continues to proliferate, I assume we will see more of these. I don't think its a crazy trend at all.

[Scorpion Man]

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How would you suggest someone (me) who is not very knowledgeable about the field go about learning? Preferably, an answer more than just "read".

How did you become a member of 2+2?

If I wanted to look into getting an MBA (I'm a senior majoring in computer science), would you just say "too bad", or would there be some steps I could take to work my way towards that?

Thanks in advance for your time.

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THis question has been asked and answered in this forum many times, I think. The only way to do this seriously is either to read a ton (i dont mean read a book...i mean read teh WSJ and FT every day, and read tons of books, and financial blogs, etc -- there is an enormous amount to learn) or get a job in the industry, which is by far the best way to learn. You don't want the read answer...but unless you know ESP and unless you have a job that gives you exposure...how do you expect to learn?

In terms of 2+2 I play some poker and have a cousin who is a pro and introduced me to the site.

ANyone can get an MBA. I would think the a CS degree might actually be a positive - the schools are loooking for diversity and there are lots of econ/biz degrees. Getting into biz school is about scores, grdaes, demonstrated leadership, quality of work experience, and recs. People often ask me this type of question and I think sometimes its after already spending years not working hard or getting crappy grades or spending summers drinking beer instead of building a resume...then they want the goodies at the end (not saying that about you...but its often true).

[Scorpion Man]

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Scorp,

The OP here is asking a good question. I'm sure you are very qualified. To help focus the questions, please provide some bio info so we know your scope of expertise. I have questions myself about quant trading for you, if you can answer. Help us focus the questions your top areas of expertise.

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By far my experience is centered in long/short global equity. I had a lot of experience both in my primary role of stock picking and also business building. That said, I have two close friends who run black box type funds of different types and we do talk about them so I have some exposure. But if we are talking about ultrahardcore DE Shaw and Renaissance type stuff I am likely not your guy.

What I was very skilled at was reading financial statements and dealing with management teams.

[Scorpion Man]

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What products did you or your traders trade (CDS, CDO, Futures, FX, Converts, etc)? What strategies did you or your traders employ (L/S, Convert Arb, Risk Arb, etc)?

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For most of our history, we were global long/short equity. Truly global - half of our assets were outside us, and in places like Brazil, Tokyo, Istanbul.

In later years we added others...credit default swaps and some quants. We did very little with debt and no arb.

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were the quants dealing with the L/S portfolio or the CDS/etc expansion?

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I should mention I have a close friend who runs a $1b fund who did go this route. Started vanilla long /short like us, then brought on a few phds and started a quant operation that has had modest success. He then backward integrated it, if you will, and uses the quant models as an important screening tool in picking POTENTIAL stocks for the old fundamental based core product.

[Scorpion Man]

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I'm currently a 2nd year at UVA which is a solid school, but definitely doesn't carry the clout that the Ivy League carries. What steps should I take to give myself a better chance at landing a solid job out of college?

Also, this summer, I was late on trying to get a job. I know internships are much more important the summer before your senior year, but what should I do instead? An independent study of financial markets with an extensive reading list? Play poker full time? Work as a camp counselor? Are any of these good choices?

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I am a broken record on this, but you to stand out any way you can. That means great grades, it means great jobs, it means leadership positions in campus organizations, it means buying stocks on your own (this falls under the category of DEMONSTRATING INTEREST, which in my experience gets you very far). Your resume and college experience are like building blocks...build a strong base and keep stacking them up and you will be standing highest at the end.

If you end up being "late" as you say often, then there is no reason to believe you will be successful in finding a job in this area.

I dunno on the summer job thing...I got a really competitive corporate type job my junior summer. Actually, I do know. My sophomore summer I started a business with a good friend...very mundane - we sold advertising, put it on covers for phone books, and dropped them door to door in my home town. Sounds mundane, but I made more money than most of my friends that summer and when it came time to interview I came across as just what I was....a self starting ass kicker who does not take no for an answer (I was selling) and gets things done.