During my years in equity sales I’ve covered both hedge fund traders and long only traders. Given the choice, I would always choose the former.
When you’re a salesman in an investment bank, having clients working for long-only funds has a few advantages. Long only traders are usually big commission payers. And while hedge funds come and go, the long only clients are pretty stable. You’re less likely to lose a huge chunk of your budget from a fund closing overnight if you’ve diversified and you cover a few big asset managers.
Even so, traders at long only funds are a pain in the ass. These guys have a lot of clout and they’re not afraid to use it. If you upset them, they’re liable to throw their weight around in a way that’s completely unjustified and to threaten to harm the relationship with the whole bank. They’re often full of themselves, are always too busy to talk on the phone, will never answer emails and ignore your Bloomberg chats. – All of which seems a bit odd given that their trading style is usually very basic and they don’t really have a huge amount to do every day.
By comparison, hedge fund traders tend to be much more self-deprecating, much more witty, and much more willing to engage. These guys have a much harder job to do. They’re often portfolio managers as well as traders and are generally far less diversified so that any small thing can harm their portfolios. Even so, they give you time. They’re open to suggestions and they’re fun to talk to. If you can add value, they’ll engage with you. If everyone in the industry was like them, life would be sweet.
Unfortunately, though, everyone isn’t. The long only traders – who are just executing the orders of their portfolio managers – are always lurking malignantly in the background. I’ve had these guys complain that I haven’t sent them a piece of research, even though I sent it twice over and called about it. People have lost their jobs for less.
Why are long only traders so arrogant? I suspect it’s because they’re over-broked. They know that everyone wants a piece of their pie. They know too that all it takes is a negative comment in the broker review system and the salesman they’re talking to will be in trouble. – Not just with their current employer, but with anyone who might hire them in future.
Don’t get me wrong. I’ve come across very unpleasant and sleazy hedge fund traders and some brokers can be irritating and aggressive too. But long only traders are the worst of the bunch. If you’re a salesman who’s assigned one, I’d suggest you study they client very, very well before you meet them and ask any questions. One wrong step and you could jeopardize your whole career. And they just know it.
John Crow is the pseudonym of an equity salesman
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