Dude, you’re jumping all over the place just trying to pick a fight. I’m not really sure what you’re point is anymore. Obviously the process I laid out is generic. Do you have any idea how long the institutional sales cycle is? It could take a year or two to win a mandate. So, yeah, I was being overly simplistic, which I’m pretty sure I was clear about.
If you want to go passive with all your clients, have at it. It’s my opinion that being all passive now is a horrible idea, but whatever. You seem to have it all figured out.
This is why so many HFs under perform their benchmarks? The “benchmark” I am referring to is not generic SP500 or some index funds.
Most if not ALL hedge funds separate their positions into sub portfolios in which these sub portfolios are compared to the more appropriate benchmark. So one hedge fund may have several sub portfolio where the performance is measured against a benchmark that you and I all know very well or custom benchmark with securities most people have access to. Back office FTW on this. They do all kinds of performance attribution reports. These well…after fees, which is hefty 1.5/20, we rarely beat the benchmark. So much for the “valuable information that changes the game.”
I guess we have different experiences. Maybe you have just had bad luck with the funds at which you’ve worked. If I do a deal for, for example to keep it fun, a medical marijuana roll up strategy then what is the appropriate benchmark? What is the standard dev of returns? These concepts are nonsensical in this scenario, there is meaningful, completely legal nonpublic information, and these types of investments beat the sp500 quite often. Most of my money outside of retirement plans is in illiquid investments where there is informational asymmetry. I guess you’re thinking only of public markets?
Maybe I’ve just been really lucky to work for/with funds that perform well (I don’t know what the universe of funds as a whole are doing), but that seems rather implausible. As I said, public markets have been tough for HF but that is not always the case (point 3).
awwww yes yes. I come from equity funds mainly public equities. Very few private equity positions but nothing like your example. Also reason why I am desperately trying to move to the PE side. Not the real estate PE side but venture PE side.
It’s getting harder and harder. DOL has forced the many broker-dealers to “rationalize” away many of the products they offer. Morgan Stanley, for example, cut about a third of the mutual funds offered out of their system. Combine that with fee compression (to try to remain competitive with ETFs) and asset managers are getting squeezed, hard.
Three to five years out there will be about 30-40% fewer advisors, more consolidation among asset managers, and fewer actively managed funds.
Guess what I’m saying is, try to find a spot with a larger, established asset manager. Many of the smaller shops are going away.
Yeah I think the biggest reason is the fact that in the bull market era from 2009 to 2017Q1, there has been almost a $1 trillion in outflow from mutual funds. People are catching onto index funds and ETFs so yes, JPM, American Funds, MS etc has been cutting their active funds and replacing with ETFs, which are in high demand and costs less. Also, ETFs use computer models so naturally, you see active teams get cut left and right, case in point Blackrock few months back when they shut down several of their active for passive.
^Yep. One thing that will keep mutual funds alive for some time is that broker-dealers can’t survive without the revenue sharing we provide them. ETFs don’t pay the BDs anything. Going all passive would kill the financial advisory business (except for RIAs).
Yeah I guess there might (I certainly hope it happens and that I happen to have a high position in the company to get the benefits of riding the wave) be a point where too much of passive and in turn create opportunities for the active managers to make significant alphas. Kind of like the 70s and 80s when the market was no where close to as efficient as today’s. The owner here always talks about how easy it was to pick the “winner” especially among small and mid cap firms and how we are sh*t outta luck in that dept.
^Neither. Institutional sales. Primarily I work with home office analysts, some consultants (increasingly so, thanks again to DOL), and sometimes I get roped into a gigantic retirement plan.
My role has different titles depending on the firm. Relationship Manager, Platform Development, Key Accounts or National Accounts Manager, or just Institutional Sales Manager. They all mean pretty much the same thing.
I started out as an Internal Wholesaler many years ago but, for several reasons, I didn’t want to be an External (in the traditional sense, that is, calling on advisors). I’m external in that I travel a lot and I’m client facing. Just a different set of clients and a much different sales process.
I wouldn’t hold my breath. Passive is still less than 50% the size of active, there’s a long way to go before we start entering the territory you’re talking about. Many more jobs and companies in the active space will go away before we start to reach an equilibrium. Given your job, and your career ambitions, I would read both of these very carefully.