Nishant Kumar, Liza Tetley | (TNS) Bloomberg News
More than a decade ago, hedge fund titan Steve Cohen and his portfolio manager Harry Schwefel sat huddled on SAC Capital’s busy trading floor. Schwefel was musing on how a run of lucky breaks had powered his rise at the firm. Cohen’s reaction: “We shouldn’t allow it to be luck anymore.”
Today he’s enjoying the fruits of that epiphany. The duo went ahead and constructed one of the hedge fund industry’s first assembly lines of top talent — in Cohen’s words by taking people you’d rank as a “nine” and making them perfect 10s. The result is a conveyor belt of polished high-performers who’ve helped him rebuild after a costly insider-trading scandal and to emerge on the other side with an empire whose coffers now boast $34 billion of client cash.
Cohen and Schwefel, who’s risen even further to become co-chief investment officer at SAC’s successor firm Point72 Asset Management, have pioneered the hedge fund boot camp, but they’re not alone. Ken Griffin’s Citadel, Chicago’s Balyasny Asset Management and other industry giants have devised grueling training regimes, too. The trick is to perform a kind of human-resources alchemy: turning the base metal of promising analysts into the gold of portfolio managers who might bring you $50 million to $100 million in yearly profit.
Their talent mills seem to be producing. More than half of Cohen’s stock pickers have come through its program. The first graduate still trades for him. At Citadel, where even an internship can pay $19,200 a month, training up traders means staff are staying longer and getting ahead quicker. Phil Lee was elevated from humble analyst to head of one of its stocks units in less than a decade. Balyasny’s Anthem scheme has churned out 14 portfolio managers who are among its best performers, including partner Sebastiaan De Boe.
At Citadel, trainees are taught how to back pitches from colleagues lower down the food chain; at Balyasny they get a limited pot of cash and have to deliver returns that match or beat the firm’s older hands; Point72 wants its cadre to think like CEOs, meaning they’ll need to create and run a book of ideas, all while getting total buy in from their teams. Their every move is tracked and analyzed, and the data pored over to make sure they have the right stuff.
In the end it boils down to one question: Can we trust you with our billions?
The birth of these programs captures a historic change in this $4.3 trillion industry — as it moves on from the era of wildly competitive one-offs like Griffin and Cohen and tries to incubate a new generation of leaders with softer skills such as team building and listening to other people’s bright ideas. More critically, they’re also being driven by a recruitment crisis. The behemoths of the hedge fund world simply don’t have enough star traders to share around.
“The need’s evidently clear,” says Pablo Salame, Citadel’s co-CIO, in a rare interview. “One of the most …read more
Source:: The Mercury News – Entertainment
