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Erik: How do the skill sets compare between the hedge fund analyst role and the hedge
fund portfolio manager role?
Shaheen: It’s totally different skill sets actually in some ways because an analyst gets
back to what we were talking about earlier about gathering information, analyzing it,
digging for it, putting it together, generating it… putting it together into something that’s
valuable and usable for another person to make decisions on and it’s probably the
big difference between a work doer and a work evaluator, so as an analyst you’re a work
doer. A portfolio manager is more of a work evaluator, right? So, their task is once there’s
all these investment ideas to weigh them, push back and they have to understand the
analyst and the analyst’s task because they have to be able to push back and say ‘It’s
weak here, it needs to be strengthened here, answer this question for me’ they have to
give them feedback, they have to send them back and say ‘This is what I need’ but
then they need to… organize and synthesize all these ideas into a portfolio and so they
need to say ‘Okay Erik’s idea is going to be huge, Shaheen’s is going to be half
the size.’ They think a lot more about concentration, you know across sectors, across companies,
they think about risk a lot, I don’t think about those things much at all, like ‘Is
this stock high beta, low beta… do I have too much exposure to companies in Europe versus
America? Currency macro effects.’ So, putting that all together and synthesizing it is more
the task of a portfolio manager, I can – I have the luxury, I can look something,
a company and not really worry so much about how it’s going to fit into the over all
body that is our fund. Our portfolio manager sets – who’s my boss, the CEO of the firm,
but he also sets market exposure, which is hugely important. So like we’re long and
we’re short, so if we have a hundred dollars long and we’re eighty bucks short we’re
net twenty long, but we could be a hundred sixty so we’re net forty long so we have
more exposure to the market up or down, so that’s a macro player, right? Which you
got to be – I mean I don’t think about that at all, but that’s hugely important…
gross exposure, which is market exposure and then leverage, I mean how much debt are you
going to put on there? And leverage works both ways, you know. If you… if you have
something leveraged five to one and you were going to make a dollar, you make five but
if you were going to lose one you’re going to lose five. I would say like those are probably
in top three or four things that they need to really seriously think about if they’re
going to affect performance, what is the gross exposure, how long or short is the whole book
over all and then how levered is it going to be? And then within that you’re trying
to optimize these individual ideas and size them to generate a return on the other side
and it’s tough because a lot of portfolio managers - almost all of them are – at some
point you’re doing it for the first time and you were an analyst before that and so
it’s not a skill - you don’t go to school to be a portfolio manager and it’s a pretty
different job actually from what I do and some people like it, some people hate it,
you know? But that’s a lot of fields, where you get to a certain point and then you hop
into the next level which is completely different from whatever you were doing before, like
consultants. Consultants are solving ideas and consulting, consulting, consulting and
then one day they’re asked to go out and sell work, so suddenly they’re in a sales
role as a partner but they’ve been doing work.