Hedge Fund Analyst: “The Things I Know For Sure”

Q: What is the best piece of advice you can give an aspiring credit analyst?

A: Self-confidence is important, but there’s a difference between self-confidence and arrogance. Arrogance can send your career down the drain. You have to be humble enough to to admit to yourself that you don’t know everything. For instance, if there is someone who has spent the last two decades in the gold mining industry and you’re relatively new to the game, they are going to have a significant advantage over you, no matter how smart you think you are. That’s why industry conferences are so valuable. It’s a chance to socialize, yes, but more so it’s an opportunity to learn from experienced executives from different industries and use that knowledge to your advantage. That said, you need to know your own strengths. Mine, for instance, are problem solving, pattern recognition, and financial analysis. You can then add to your strengths by utilizing the knowledge you’ve gained from others. That’s how you build your confidence.Q: Do you ever find the work monotonous?

A: It’s important to enjoy each new challenge. I would like to compare my work to military intelligence. A credit analyst is briefed on the intelligence, performs financial modeling and channel checks, which I like to refer to as “reconnaissance work”, and connects with the in-the-know local contacts, and finally you deploy capital, which is like pulling the trigger to complete the mission. But really that’s overly romantic. In the reality of the daily grind, I find myself thinking about how companies make profits, why the market over or under values those profits, and what it would take to bridge the gaps between the two. To do that I have to read, and read a lot. I read transcripts, research reports, local newspapers, industry reports, and government reports. It gives you perspective, as you realize that the market is always fluctuating, one year for you and the next year against. This helps develop a long term outlook and an appreciation for the everyday work you do.

Q: Do you have any favorite investments that you’ve made over the years?

A: You shouldn’t get married to your trades. Companies aren’t quintessentially good or bad, so committing yourself unconditionally is never smart. Investing requires you to consider the value of a visit within the context of it’s current market price. While that seems like common sense, I’ve met many analysts over the years who refuse to consider a particular company even when they end up with losses because of that perspective. One of the most difficult lessons I learned as an analyst is when to cut my losses when an investment isn’t going as planned. The best analysts can identify when to continue with a long term investment when they earned money in the short term, and when to move on.

Q: Any advice about moving up the career ladder?

A: To achieve career growth, you have to have a goal in mind for the next three to five years. A lot of talented analysts slow their career growth prematurely because of too much loyalty to their funds. To move up you have to know when to take a position at a new fund, and your goals are a good guideline for those decisions. This results in a high turnover rate within the industry, as it’s often tempting to take a better title with a pay raise even if the fund is smaller than at your old position. Of course, once you get near the top, the number of positions available are fewer than the accomplished analysts vying for them. That’s why by that point it can be a tempting to start your own fund. But if you decide to do that, you also have to realize that it’s very difficult, because it generally requires at least a three year track record before you’ll see any meaningful asset growth.

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