I’m interviewing for a company that has considerable AUM (>$20B) and the role I’m interviewing for is Portfolio Manager in the overlay group. Basically focuses on adding after-tax alpha through tax and implementation trading strategies. Is this type of job too narrow, meaning will I risk being pigeon-holed down the road with this type of experience? What do the fundamental analysts out there think of overlay management in general? Is it respected? Thanks in advance.
Can you expplain further what the role entails, I dont quite understand and it sounds itneresting, just to help me out here with a little career advice aswell
It’s essentially acting as a sub-advisor to a pool of large equity accounts. As the PM trades, the role entails building customized benchmarks, performance attribution and adding after-tax alpha by using tax strategies to increase return (i.e. tax loss harvesting, identifying tax lots, rebalancing strategies). I view it as an implementation strategy type of role as you are not the one making the call on what to trade. There is high quantitative analysis in this but it seems “black box” and adminstrative. Thoughts?
I am somewhat familiar with overlay management as our firm (small RIA) has been pitched on unified managed accounts (multiple managers, lower minimums). There is definite value added from a tax perspective. We have chosen not to use these types of programs because the the managers in these unified managed account programs tend to be median ranked among peers and not real alpha generators - more of asset gatherers. I can see the risk of being pigeon-holed, as many jobs have this likelihood. I think you are right on in your assessment as an implementation role in that you are not evaluating investments based on value, but rather for the tax benefits. If you do get to interact with the PMs and decide which positions should be bought or sold for the short term 30 day wash rule, there may be some exposure to investment analysis. Just my 2 cents, good luck.
I appreciate the info, Q. And you’re dead on that it is a unified managed account that generates after-tax alpha. I believe this company was one of the pioneers, which is obviously good to be around folks that know what they are doing. I think there is some leverage to deviate from the PM’s target holdings for the 30-day wash rule. I’m just a little unsure as this seems more CFA-related than my current job (finance manager for commercial bank), but I’m skeptical about exit opportunities down the road…
Whats after tax alpha? and what is the 30 day wash rule? Excuse my stupidity
maddane - I’m the one that’s supposed to be the amateur looking for advice, not providing advice to others! j/k After tax alpha is exactly what it sounds like, alpha that includes the tax-management effect.
ahh ok, I don’t really see what sort of quantitative analysis would be involved in this. Wouldn’t it just be various strategies to implement to minimise tax?
from my understanding… tax lot identification, deviating from portfolio targets to minimize tax (aka alpha drag), rebalancing decisions, attribution (how much value did the tax strategies actually create), and factoring in client restrictions (screens) with overall portfolio manager trade decisions. Not trying to glamourize it by any means as I think the majority of the quant is built into the software. But they wouldnt pay good money for a data entry jockey, so there has to be SOMETHING to the analytical side that I’m not understanding.