70. How to survive and thrive as a buy-side analyst
Oct 25, 2023
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Former portfolio manager Brett Caughran shares his experience in the hedge fund industry and discusses his training program, Fundamental Edge. Topics include the importance of mentors, the influence of multi-manager hedge funds, and the growing impact of buy-side analyst firms.
Buy-side analysts benefit from practical training to navigate their roles effectively and accelerate their learning curve.
Passion, clarity of thought, and effective communication skills are essential for success as a buy-side analyst.
Deep dives
The Value of Training for Buy-Side Analysts
Training for buy-side analysts is essential for their success in the role. Brett Karan, a former portfolio manager at large hedge funds, recognized the need for practical training and established Fundamental Edge. The program offers a six-week course that covers crucial skills for buy-side analysts, including financial modeling, research, meeting management, and idea generation. The aim is to provide a guided roadmap for analysts to navigate their roles more effectively and accelerate their learning curve.
Key Skills for Buy-Side Analysts
Passion, clarity of thought, and communication skills are vital for buy-side analysts. Having a genuine passion for investing is crucial in sustaining a successful career and weathering market ups and downs. Clear thinking and creativity in stock selection and the ability to communicate ideas effectively contribute to an analyst's success. The focus on these soft skills sets apart the good analysts from the great ones.
The Influence of AI on Asset Management
While AI and machine learning are increasingly discussed in the asset management industry, their impact is still being observed and studied. AI tools have potential, particularly in quantitative strategies for pattern recognition and making markets more efficient in the short-term alpha curve. However, when it comes to long-term investing and taking into account qualitative factors, such as management teams and market psychology, AI tools may have limitations. It is crucial to keep an open mind and monitor the development of these tools in the industry.
Competing with Multi-Manager Firms
Multi-manager firms have seen significant growth and are becoming dominant players in the hedge fund industry. These firms offer diversification, leverage, and consistent alpha generation. Single asset managers can compete by being aware of the strategies and footprint of these multi-manager firms. Understanding their focus on minimal drawdowns and consistent P&L allows single managers to identify entry points and potential opportunities in the market. Awareness and differentiation based on long-term investing and time arbitrage can strengthen the position of single managers against the multi-manager trend.
New analysts at hedge funds often have to learn on the job, and fast! One former portfolio manager who went through it the hard way is lowering the ladder to those behind him through an intensive hedge fund boot camp that teaches the fundamental survival skills needed to make it as a buy-side analyst. We hear from Brett Caughran, who brings experience from his time at major hedge funds including Two Sigma, Citadel, and Schonfeld, to his new training firm Fundamental Edge, on how he’s bringing much-needed structure to the buy-side training process.