Wanted to ask both generally to the industry and both personally for my own career path - what is the best time to move to a pod and at what stage of your career makes the most sense, if at all? Will provide additional details but wanted to open a dialogue for those who either moved to MMs or stayed at their SM, why did you make that decision and at what point did you feel it made sense to do that?
My own personal route is > 5 years straight out of school at a mid/high 9-figure SM. Smaller team < 6 folks, great economics, have done extraordinarily well on returns, and act more as a "generalist" I'd say vs. pod-style having more definitive coverage. PM is strong and I enjoy the work A LOT. Still in late 20's so not at point of no return (yet) but in reality I've grown to be a pretty strong contributor, the fund has done well and so therefore my pay/net worth has followed, and I simply like the work we do.
What more information do I need to answer for to know if/when I should ever move to a pod? Personally my disdain largely has to do with the style of investing - I don't think I'd enjoy having to run extremely tight and trade excessively week to week, I prefer taking larger longer bets over a few quarters obviously being thoughtful about earnings and such but not trading in and out of a list of names. I do understand pods are a tremendous training ground for analyst/PMs from a risk mgmt perspective. I do love keeping the wide approach from a sector coverage standpoint, but there are probably 2 sectors I could comfortably cover as a specialist.
LT goal would be to run $. There's a small chance I can eventually run the SM one day but this is > 10 years out, and requires visibility I won't likely have. Skepticism about moving to pods at this juncture is I'm in "no man's land" in typical pod hierarchy - I have > 5-6 years of L/S experience but haven't outright managed risk. I am accountable for > 2/3 of our total positions but am not executing trades. A lot of pods that have reached out tend to bucket me slightly more junior than I would've expected, which is OK but just seems like a slightly downgrade in responsibility.
I know timing is a bit of a nuanced question and happy to answer any additional personal-related questions to help foster the right advice but would be interested to hear what those of you with MM or SM career paths think about moving and/or when the best time in one's career would be to move? My thought is I'd do as many more years here as I possibly can and eventually try to leap to a senior analyst/PM type role in a few years time, but don't know the feasibility of jumping directly to that sort of seat.
Apologies for the rambling / less concise thoughts just thinking out loud both generally and specific to my own path.
Reconciling this: “I don't think I'd enjoy having to run extremely tight and trade excessively week to week, I prefer taking larger longer bets over a few quarters obviously being thoughtful about earnings and such but not trading in and out of a list of names”
with wanting to run a book one day is probably the bigger issue…otherwise the best time to jump to a pod is as soon as possible. If you’re going to be running a book at a pod, you might as well train up to that role at a pod too.
if you don’t think you’re going to enjoy what you do at a pod, how are you going to perform would be my question tbh.
Wanting to run capital /= wanting to run a book at a pod. Understand these may be mutually exclusive and/or inter-changeable but I'd essentially love to be where my PM is now if that makes sense - naturally most guys get their training at pods so the question becomes can I eventually make the move at a more senior level or must I move sooner to develop into a PM seat?
I'd also imagine some pod folks perform well but don't love the style and understand that being there has more value than solely enjoying that style of trading/investing. Could just be me speculating but if pods have a ~50% hit rate of success beyond 2-3 years at large I don't know if enjoyment is inextricably linked to performance.
That makes a ton of sense, but small firms don't transition CIO roles. And big ones fail trying. Realistically that option isn't available to you.
It gets exponentially harder, and impossible for a good number. I know people with the best pedigrees, resumes, and success but takes 2+ years to find a job b/c they didn't manage risk, don't have sector coverage, and/or haven't been in a market-neutral model. I wish it were otherwise but the MM did very well the last 5-10 years and SM did not. Industry has shifted.
Based on your comp trajectory in comment history, seems like you’ve been paid well for your seat and are responsible for a significant chunk of your fund’s very good returns - congrats. On the pod question, feel like the most important consideration is how repeatable do you think this performance is under a low net setup? The unconditional average comp at a pod is probably lower than where you are now at high 6 figs but that comp as you said has been on the back of consistent DD% returns - if that includes consistent MSD% alpha, will translate to more like $1-1.5m at a pod. It’s difficult to assess how much of your $ return is alpha but feel like that’s really what it hinges on because having a good process that you believe in (which it sounds like you do) which works in a low net setup is the holy grail in pod land. One easy litmus test is also breaking down long vs short return, imo the low net part is the key, some platforms can be more flexible than you’d imagine on factor/subsector tilts etc.
On seniority you should definitely push for an Analyst seat (using Citadel titles), I’m guessing you get bucketed as Senior Associate but have definitely seen 6 YOE buyside come in above that and running a sleeve from year 1. Maybe it’s a bit harder to convince BD if your fund is not so well known/maybe you get the Analyst seat but under a new PM, I wouldn’t worry too much about that as if your sleeve does well you will be re-assigned very quickly even if they blow up.
So all comes down to whether you think your performance works in that setup - ime on not liking to trade around earnings etc, I have seen a wide dispersion in how tactical PMs are at pods, don’t think it needs to be as short term as the most tactical PMs are. question is more about again, how much do you think you’d have to modify your process to fit the vol constraints.
The performance question is frankly an unknown. We take plenty of thematic/factor tilts and can be overexposed in certain sub-sectors at times. There's plenty of "alpha" that we've generated beyond that but the mandate is undoubtedly more flexible so while over multi-yr period we have a lot of outright alpha vs. mkt we aren't really isolating it either (running tight/neutral on both market and factor basis). There's likely some of our performance that's attributable to factor performance but the track record over the last 6+ years has been strong enough every year to withstand any doubts on actual alpha generation and broad outperformance vs. an index.
That sort of leaves me at an "I don't know" answer, in reality I'm sure I could learn it and I want to be clear to any responders here but our process isn't vastly different than the pods, the portfolio is just structured differently and managed with wider risk parameters. My job still requires deep earnings previews, in-depth modeling, etc. The major difference is portfolio construction/setup at the PM level where replicated in a low-net environment is the bigger ?
We have a low-net mkt-neutral vehicle as well that is just our larger book reformed to be low-net and that does pretty well.. not a great comparison but basically in-line with the headline returns of all the platforms annually
What? If you consistently do MSD alpha in a pod for 3 years straight, you’ll make a lot more than $1.5m. $400m * 5% * 10% = $2m sure, but you consistent do MSD alpha that 400 grows to $1bn, and if it doesn’t, you spin-out where the new platform allocates you $1bn…
You are smart to ask this question. Unfortunately, I would say leave now to LO or pod or family office. You are happy now but are quickly approaching a dead end.
You will be too old for any of these very quickly and will have a hard time finding a job that values the skills and experience you have built.
Given its a small firm, and you started as a junior, I would say there is nil chance that the Founder will pass the firm to you and that LPs would keep money in for that transition.
there’s also no path to raising your own fund today unless its 10mm friends, family and former bosses and you build it from there making nothing for 5-7 years even if successful.
Agree RE: getting the fund passed on. Not unheard of or out of the question (I've asked) but understand extremely low likelihood & therefore not banking on it at all.
Think just to echo above, it doesn't feel like the skills I've developed here are much if at all different from those necessary to be successful at base level pod roles. If anything I'm getting more and more experience here that would contribute to me being a valuable senior analyst / carve level person, beyond the basic necessities of being a strong junior at a pod.
I guess the more specific follow-up question is how old is too old? Have seen plenty of senior analysts 5-10 years my senior make the leap from SM to MM. That leads me to believe it's not out of the question
Feels like you are digging for the answer you want to hear. I hope you are right.
But:
1. Don’t underestimate the effort to make the move. MM is not a backup job. You’ll be eating humble pie trying to explain why you stayed so long at a SM but your true intention was to be at a MM the whole time.
2. The last 5-10 years was a real shift in MM firms getting scale. Looking forward in 5-10 years, do you think you’ll be job hunting in an environment with less, the same, or more net new MM seats?
3. I think that pods will view you at the same transferable experience level in 5 years as now, but with more age and inflexibility. That’s because you can’t point to ownable alpha based track record, don’t have a high velocity investment process, can’t claim risk management, and have not built specific sector expertise no matter how many more good years of PnL you put up as a generalist. I’m with you but experience is better than raw talent as you get older.
“lot of pods that have reached out tend to bucket me slightly more junior than I would've expected”
Adding my 2 cents because I have been going through the same thought process myself recently: currently plateauing as the #2 in a 'SM' type setup where I am putting names into the book with minimal oversight / do a lot of our portfolio construction work / trade when the lead PM is away, but I don't have a dedicated 'sleeve' to point to that is mine, nor am I paid formulaicly on my P&L. I had largely dismissed the big platforms for years as overly ST-oriented "traders" and preferred my current setup where I could focus on "long-term investing". I am now at the point where I'm seriously considering moving across to pod world for a bunch of reasons.
Key 'selling point' for me would be ability to a) run my own capital / b) get paid on individual P&L: on b) I am in a seat where being paid formulaicly on individual alpha would have been extremely lucrative, alas this is not the case (like at most "SM"-type funds from what I understand). On a) running my own capital in the current seat would basically involve sitting around and waiting for my boss to retire to step into his role - which is at least 10 years away so not a timeline I'm interested in.
FWIW I have been having converstations with most of the platforms and they are keen to stress that it is possible to be less ST-oriented than the common stereotype while sticking to their risk model. I.e. you can have long-duration theses based on deep fundamental work, but just need to be a bit more tactical around position sizing into catalysts, and hedge out unintended bets more tightly.
As a piece of more directly relevant advice: I am a bit more senior than you with ~10 years of experience (first couple of years on the sell side, rest buy side in equity L/S). The conversations I have had with the platforms (all initiated by them) are generally about going to start a new pod / join one of the 'emerging PM' type programmes, not to join an existing team as an analyst with a sleeve. It is definitely doable to stay in the current role for a few more years and then make the move at a more senior level: experience beyond a certain point is not completely discounted. A couple of important caveats being that 1) I am already used to working in a beta-neutral environment and 2) I am a (broad) sector specialist rather than a pure generalist - both of these probably help with the platforms giving me a bit more credit for my experience.
The key thing that I am wrestling with as I try to make the decision is success rate: how many new PMs who come from outside of the pod construct (even if they are used to working in a beta and/or factor constrained world) manage to successfully make the transition to a world with very tight drawdown limits?
The sector coverage and beta neutral experience makes all the difference vs. OP’s position.
How many names? Velocity of new names?
Investment universe is not dissimilar to pod setup from what I understand (70-100 names) but velocity of ideas and engagement with universe (i.e % of names I have a position on at any given time) is much lower at the moment. I would prefer to be a bit more nimble but not feasible in the current setup for a bunch of reasons - that is also part of my internal debate about whether now is the right time to make the move.
All really good takes, thank you for the thoughts.
"FWIW I have been having converstations with most of the platforms and they are keen to stress that it is possible to be less ST-oriented than the common stereotype while sticking to their risk model. I.e. you can have long-duration theses based on deep fundamental work, but just need to be a bit more tactical around position sizing into catalysts, and hedge out unintended bets more tightly."
This above is essentially our current strategy. Not like we're completely blind into earnings ever and we do the same level of depth work on positioning/sentiment into prints that most of the platforms do.
As to your point on specialist vs. generalist, as I tried to highlight in a response directly above maybe I over-generalized my generalist tilt. I have a huge coverage list (> 70 names) that span 2 primary sectors, with a handful of my coverage that falls outside of it but is more "one-off" by nature. The roles that I've been considered for at large tend to be focused in these 2 sectors entirely and I think from what I can tell I am decently competitive for those roles. Where I am not competitive is for any sector roles outside of those 2 focuses.
To your last question - I don't know. I actually don't know if it's as transferrable as people think. I've interviewed with a handful of platforms and have since stayed in touch / tracked their performance loosely (if they've been fired in the last 3-4 years I'd see that). There's some folks who came from the SM world who really struggled to adapt to tighter risk limits but they have a stylistic tilt and were managing $ in SM world rather than making a move from SM analyst to MM PM. They also tend to be the folks who have wider duration limits and are able to spend less time trading and more time building a fundamental, slightly longer duration book. The guys I've seen who've really crushed it were analysts (or sometimes even traders) in the pod model and moved up the chain or SM analysts who made the move over as a "senior analyst" and then migrated up the ranks. Typically if you managed capital outside the pod model and then are forced to abide by the pod model directly that's a much more conflicting style change.
I guess part of my honest reluctance to move is 1) I'm paid extremely well for my age/YoE and don't have to worry about my own individual alpha. If I'm being honest my coverage generates over 50% of the annual PnL (this the last ~2 years) which has been my reason for wanting to move. But impossible to know to what extent this is alpha, what extent has been driven by my PM trading it effectively, or if that would hold up in a low net model. So I'm comforted by the idea that I get paid on the team's PnL rather than isolating my own contributions, even though on an absolute basis those have been large. 2) It's impossible for me to know if I'd do well and it seems PM dependent. I don't really have a concerted view or style yet, only what I've learned in the last several years under one guy. We have a slight factor tilt as a function of his strategy but to be frank he grew up in the pod model as a PM so the risk mgmt here likely mimics that of a pod, with just far wider risk parameters on net / gross / beta / sector. I do decently well on both sides of the decently LT theses and some of the NT trading ideas. Tough for me to know if you tighten those parameters and for every long I need a short if my abilities get smoked.
If your boss worked for Kenny G before spinning out, I know him. If he’s who I’m thinking, bright guy, has done really well for himself.
Unless it’s your dad, DO NOT…DO NOT assume you will takeover when CIO steps down. DO NOT.
Contrarian view here but I’d be really careful to give up your seat. Comp sounds like it’s pretty solid even vs. a pod, you have the respect of your team, and have the flexibility to handle ideas of various duration. While it’s true that some pods allow longer duration ideas, you have to make sure you find a PM who will allow you to run them. Speaking from experience, I told my previous PM during my interview process that my process skews towards longer duration holds that may have some noise in the short to medium term but have very consistently performed on a 1-2 year basis. He said he didn’t have an issue with that but when I pitched longer duration ideas, he’d be rather hesitant to put them in the book because he didn’t want to warehouse a series of larger, concentrated positions more than 6 months. We made it work for a while but ultimately parted ways.
Just be very thorough to diligence your next PM. That’s a no brainer type thought but you’d be shocked at how few people know much of anything about their new boss.
Fair point. How do you reconcile that with eventually having to move? My original question being - I want to manage capital eventually, it seems the only way to do that and build a track record is via the pods. I'm essentially trying to thread the needle and time my exit so that I can avoid all the bullsh*t of pods at the junior level and get into a seat that has more direct exposure to managing sleeve/capital/risk or with a clear timeline that gets me there. I've interviewed with pod PMs, all with different styles but plenty have made the pitch that my style would be incorporated into their process. Impossible to know how true that actually is until you're in the seat, right?
I am biased towards staying (Devil you know better than the one you don't). Just figured eventually in < 10 years I'll have > 15 years of experience, my current PM will probably be done or out of the game, I'll be late 30's. Is that when I try to make a jump? Or does it make more sense to try and find a sensible PM ASAP in a structure that eventually will afford me managing capital sooner.
Tbh I'll add I don't really have a timeline or care for WHEN I'd be able to be in a PM seat, just that I get there eventually at all.
Have you considered asking to interview with PMs who have come from SMs themselves? Seems like there are a lot of them lately. Obviously the tradeoff is maybe they aren’t equipped themselves to manage the MM environment.
I did several years ago…would say it was definitely the right choice. if you reply in bullets (not novel form…learn to be brief son) what your biggest reasons for not switching would be, I’ll give my thoughts.
Does pod offer have an upfront $ component? Portfolio carve? Formulaic payout? Netting? Path to PM? If carve, are you ready for that?
And being blunt son…if you can’t write briefly and concisely pod will not work for you / PM will despise you… I can’t stand when my analysts send me novels. No one has time to read novels (or write them).
What do you mean by netting?
- No
- No
- No, but maybe
- Not sure what netting means
- Path to PM yes but unclear on timeline
- No carve, but path to carve - could be ready but is anyone ready? Would probably need ~2 yrs as non-carve as it currently stands b4 carve, dependent on sector
Consider the risks of leaving and failing too. If you leave how easily will it be to regain your current seat or something comparable? If other firms think you’re more junior than you believe you are then that’s a sign that you may struggle to regain your current seat back or something comparable.
Just remember that all pods and funds will proclaim they have the best tech, op support staff, people, deep capital, etc. but in reality this is simply not the case. You can certainly take a jump but before you do please picture yourself in the downside situation where you/your new team fails and you have to take a much junior position than where you are currently. It’s easy to picture the upside where you make millions, but the downside where you struggle for a few years to regain your footing is extremely depressing/emotionally challenging, and is a large reason why many leave the industry entirely.
That's basically my entire reason for staying. Only reason I'd leave is to "bet on myself" that my track record would be decent enough to at least wind up somewhere else afterwards in a similar seat. Hence the preference on sticking around until that opportunity is available (if it ever becomes available).
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