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LONG/SHORT EQUITY IS A DYING BUSINESS
I recently caught up with a successful multi-manager PM who spent almost his entire career at one of the large MMs (Citadel, Point72, Millennium).
In his words: “Fundamental long/short equity is a dying business”:
Fundamental investing now represents a smaller share of the market. Passive flows and quantitative strategies drive a large portion of price action, while active management, as a pool of capital, continues to shrink.
“Many of the billionaires who started these big funds 20-30 years ago would certainly not be billionaires if they started today”.
Out of the hundreds of PMs at the MMs, maybe 1 in 20 is actually doing really well. Most are just keeping their heads above water. The PM turnover at some of these places is insane. At Millennium, for example, you hear annual numbers as high as 30-40%.
Before you call him a dinosaur or old school for comparing what investing used to be decades ago to today, he hasn’t had a down year in 15+ years and still manages a relatively large portfolio.
He obviously doesn’t mean you can’t make money anymore, but that the risk-adjusted opportunity set for fundamental L/S has compressed massively relative to the past.
We explore the reasoning behind this (alpha pool/window, positioning/crowding) and cover his approach to learning and training his team.
