I finally had it with the outdated old big boy attitude in the investment industry! I am tired of convincing customers that their money is in the best hands when in fact a simple ETF would serve them just as well. I am sick of an industry that is too stupid to realize that the ground is shifting and a good deal of those smug 3000-dollar-suit wearing pricks will be out of a job in a decade for not embracing a new wave of automization. I can’t stand this industry anymore in which the old guard cashes in the fat paychecks without really contributing due to their outdated “knowledge” and the newcomers get to do the menial tasks until their knowledge too becomes obsolete and they don’t pose a threat anymore.
So I landed a great job in the “real” industry that pays just as well (with just as shitty hours), but where I work with decent people who are open to change (in fact they encourage it). Here, it matters what you do and your choices have clear consequences, unlike in the investment industry where you can always blame the market for whatever mistake you made and get away with it.
Don’t get me wrong, the market is still a passion of mine and I make some money on the side with social trading, but I can’t stand the industry around it and the people who work in it (no offense) any longer!
By real industry I mean an industry that actually produces real goods.
The problem is that I liked the investment industry a lot activity-wise. As I said, the market still intrigues me a lot and and I would have settled to open up my own shop, where I would’ve sold my algos and models to fintech firms (there is quite a demand for compartmentalized solutions) , if the sacrifice in income, free time, and financial security would not have been so huge.
My problem with the FSI at the moment is that the wrong people work there for the wrong reasons, especially in the higher echelons. If you are comparatively young and full of ideas, you will be rammed into the dirt until you are suit filled with industry buzzwords just like everyone else. And all the while fintech is portrayed like the doom on the horizon (which it will be to large extent), yet the company bigwigs refuse to take advice, knowing that the change needed to stay ahead in the industry might come at their expense.
Sure, if I was a senior partner in my early 50ies and a 20-something analyst told me to stop hiring the semi-competent kids of my partners, who were groomed to take over their roles, and begin hiring programmers and financial enginiers who come to interviews wearing two different-colored socks, I woulf be baffled as well. However, a top-tier manager should have the foresight to push aside firm micropolitcs and embrace innovation.
Yeah, there’s a lot of buzzword hawking going on, when for a lot of people, sticking things in a bunch of ETFs and rebalancing yearly or quarterly will be enough, perhaps with an insurance wrapper to help with taxes. But why pay someone millions of dollars to do that.
Too bad there can be only one Jack Bogle. Have you read his book “Enough”? If you haven’t, I’m guessing you might enjoy it, based on the tone/frustration of your post.
I’ve worked in your industry and agree with most of what your saying minus the ‘real goods’ part. There are plenty of meaningful, ‘actually feeling like your helping’ jobs out there that don’t involve ‘real goods’.
Also, the industry won’t completely die because how do you algo your way for a 50 something year old who has 3 kids, 2 of which are about to go to college next year, a mortgage, assets tied up in several different taxable accounts, a major health problem, etc., etc. My point is roboadvising and such is more geared towards people who can can easily be modeled into certain brackets that the algorthim then adjusts the amount of risk/return to match. There will be a need for human intervention. Second, one must assume humans are completely rational and will choose (assuming they fit the need) the lower cost, and higher potential return post fees robo option. Buuut, people are not and some get a satisfaction of having a human touch as well considering this is their life savings thus creating economic value.
Nevertheless, more power to you. Takes guts to leave a good paying job for what you believe in. Good luck man.
In itera’s defense. I think the rising tide of the market and also over supply has created below alpha return over the last 7-8 years. Hard to stand out in a rising tide market. As we enter a sideways market over the next several years (of course just my opinion) coupled with many HFs exiting the industry, I think we see a balance back to HFs that itera alluded to creating alpha and thus value and thus their existence is justified again.
Also, a third thing that will likely happend is enough with the 2/20 fee structure. I mean the HFs shouldn’t totally dread that as it will give them a lower hurdle to cross, reducing the stress of beating their index + fees.
If more untalented active investors stop trying and go index, it just means the remaining managers are now more skilled. Remember, if you want to win, someone else has to lose in the zero sum alpha game. Indexers are not playing the game at all, so you can’t steal their alpha and must try to take it from the remaining higher-skilled competition. I’m very skeptical of the idea that more indexing = easier alpha generation. If you are a professional active manager, you want to be a small fish in a sea of ignorant Joe six pack stock owners, while what currently exists is a bunch of sophisticated institutions competing against other sophisticated institutions.
I’m sorry to hear about these difficulties, but it is good that you managed to find something else to do. I have to say that my experience has been the opposite; I’m generally impressed by the business knowledge and competence of people who run the organizations that I’ve worked for. Not everyone deserves the roles they have, but this problem probably existed in some periods in the past, as it does today.
The problem with “exiting the industry” for many investment managers or finance people is that it comes with something like a 75% pay cut. The days of DB paying out $15 million to Boaz type people is probably over for the time being. However, it’s still sustainable for banks or funds to pay high six or even seven figures to at the non executive level, in the interests of attracting and retaining staff who are critical to revenue. If outside jobs were abundant and similarly financially attractive, many people would probably love to try something else.
I doubt that “crowding” or any other phenomenon has actually made active managers less successful today than in the past. What has changed is that performance data today is more carefully measured, and the financial crisis has turned a spotlight onto investment costs, including the performance to fee value of active management - the “hedge fund industry” is really only 25-30 years old at the moment.
Sorry if this is not the most cohesive post. I am just reflecting on what has been stated above. Good luck in any case.
I’m still interested in which industry you went into … something with widgets? improving the quality of widgets? Selling widgets? What is this magical industry???
I think the “essence” of the original post has something to do with the country which the original poster is from. AUSTRIA is that correct? In German speaking Europe the attitude is that the investment and banking industry is full of spivs and real value is created in the creation of “actual” goods such as manufacturing goods.
It is totally different to the anglo saxon world where jobs nowadays are in services
That’s a good point and is definetly playing a role, but I disagree that HFs performing the same pre-08. From the stats I see, returns of HF vs. market slightly better for HFs before even factoring in lower risk of HFs. Post 08, all the data I see points to vast underperfomance vs. market.
One of the interesting things is how luck starts to play more of a role when the relative gap between skill levels narrows.
For example, if I play tennis with Roger Federer, almost no amount of luck will prevent him from wiping the court with me. Similarly, if I play Rafa Nadal, the result will be the same. They just have way way more skll than me.
But if Roger plays Rafa, now both players are highly skilled, and the outcome of the game can depend a lot more on chance happenings - the sun in someone’s eyes, or some minor quirk here and there.
Similarly, when the alpha game consists only of highly skilled players competing for a zero sums in alpha, minor factors can suddenly make a big difference.
So I buy the idea that skilled alpha generators depend on having non-indexing noobs in the game. It makes it much more fruitful to apply skill. Indeed, when you think that you are generating alpha, one needs to figure out who you are taking it from. Who’s on the losing side of the trade and why are they doing it. Often times it’s just liquidity and forced selling, but if it’s not that, you have to figure out why they are doing it, because one day, they may stop, and then your alpha will disappear.