It’s normal to hear shouting and cursing on the trading floor of a hedge fund. There’s a lot of money at stake, and the pressure to perform well is intense, so people are bound to get heated. So when the entire trading floor is silent except for your apoplectic boss, with all eyes on you and him, it’s a memorable occasion, and not in a good way.
That was one of the many stressful situations that Stanley (not his real name) has found himself in. After working as a staff auditor of hedge funds and private equity firms at an accounting firm, he became an execution trader for a long/short strategy at a mid-sized New York-based hedge fund.
“I was building financial models and going for my CFA, but I didn’t want to stay on the execution trading desk, which is the bottom of the totem pole,” Stanley said.
Eventually he earned a promotion to become an equity analyst – a step up, sure, but he was still at the beck and call of the Type-A portfolio managers and partners.
The life of a hedge fund analyst
It may not shock you to hear that many portfolio managers are control freaks.
The PM who Stanley worked for went on a week-long ski vacation to Vermont with his family. Before he left, he told Stanley, “I want you to call me every time the S&P 500 futures market moves 10 handles.” The following Monday was a volatile day, and the market kept going up and down 30 handles at a time, first in one direction, then the other.
“I was calling him every five minutes,” Stanley said. “It was getting ridiculous, so I started executing trades without calling to get his permission – the market was moving too fast. He flipped out, cut his vacation short and flew back the next morning. He really chewed me out when he got into the office, a real explosion – ‘Do what I f@%&ing say!’”
Stanley sat on the trading floor, with a row of portfolio managers on either side of the rows of traders and analysts in the middle. One day, the price of oil started going crazy, peaking above $130 a barrel but with heavy volatility. Everyone was trying to trade stocks and exchange-traded funds at the same time, and prices were going nuts, like futures when a surprising job report comes out.
“Someone else’s trader was out so I was executing traders for another PM, and the PM I worked for kept trying to piggy-back off of the other guy’s trades – the first guy tells me, ‘Short $50K OIH,’ then my PM interjects, do it with this broker and put me in for another $25K – actually make it $50k.’
“Then he’d shout from his desk, ‘What’s my fill?’ meaning ‘What’s the price and how much have I done?’ I didn’t have the fills back, the price kept fluctuating a few hundred basis points first in one direction, then the other. More volume in illiquid tape can push the price, and it didn’t go in our favor.
“I can’t get the broker on the phone, when I finally did he said ‘You changed the order so I had to change the ticket.’ The guy originally tried to do the trade but when I changed the order the price changed by the time he revised it and put it through. We lost money.”
The PM Stanley was working for was having a bad month, and it was evident. He didn’t take news of the loss well. He started screaming, “What do you mean? What the f@%& are you doing back there? What the f@%& did I hire you for?”
“He was screaming and yelling, going ballistic, his face bright red,” Stanley said. “He curses loudly, then kicks the garbage can next to his desk and trash goes everywhere, scattered all across the trading floor. Everyone was silent and staring at us.”
The PM yelled a few more off-color insults before charging off.
“I went to the bathroom and got a little choked up, I wanted to cry, and I thought about quitting, but then I said ‘I’m not going to let this guy take away what I want to do.’"
Later the PM was taken to the side and chastised by a partner, who told him it wasn’t Stanley’s fault and to dial back his temper a notch or two.
“He was hard on me, but it motivated me to be a fast learner,” Stanley said.
A lot of people started leaving because some analysts felt that they were underpaid compared to other firms. In fact, at one point Stanley was the only a few analysts left who focused on his particular area of expertise, working under a different PM. But after a few more analysts from other areas left, he started being shared between four PMs. In a situation like that, it’s impossible to make them all happy.
“The PM I originally worked for exclusively wants me to be on the trading floor, but another PM wants me to be somewhere else,” Stanley said.
Another frustrating thing was that his original boss didn’t read his weekly write-ups of the research he’d done on various stocks.
“I’d see him invest in insurance companies, energy stocks, piggy-backing on other PMs’ trades, but I was struggling to get him to implement the ideas I’d been researching and working on for a week or more,” Stanley said.
“I’d hear him talking about me, ‘WTF is he doing, his face is stuck in the mud,’ and I’d want to shout ‘I can hear you, I’m standing right here!’”
Meanwhile, another PM had left the firm to go run a long-short strategy at another firm. Stanley put out feelers, but he had signed a non-compete and basically said “I can’t hire you unless they fire you.”
It was like the episode of Seinfeld where George is trying to get fired from the Yankees so he can get a higher-paying job with the Mets.
Performance review meltdown
Stanley had heard about his current boss unfairly trashing other analysts in performance reviews before, and most of them were no longer at the firm. It all came to a head when he was supposed to have a performance review and they asked him to sign it before his boss had filled it out.
“I refused – I said ‘I’m not going to sign it, I know he’s going to trash me.’ They told me you have to tell him how you feel. So I confronted him,” Stanley said. “I said, ‘I spend a lot of time doing these weekly write-ups and I don’t get any feedback, you’re trading all of these other stocks, you’re trading everyone else’s ideas,’ and on and on. I started to sweat – the conversation got heated and just continued to escalate. ‘F@%& you,’ F-bombs flying back and forth, and finally we both stand up, and we’re shouting at each other.”
Stanley got called into the managing partner’s office the next morning and, sure enough, they let him go.
“They were great about it – they gave me a month’s notice to find a new job, and severance,” Stanley said.
The timing was perfect. By that time the hedge fund was really struggling, and it went under and shut down completely.
“By that time I had already started working for the PM I knew at the other firm,” Stanley said.
Stanley worked at a long-short strategy within that other firm for around two years before they made cuts to that division, and he’s since gone back to the hedge fund side, as a senior analyst and assistant portfolio manager at a much larger firm.
“There’ve been some negative headlines, and traders who aren’t performing are getting cut all the time, but I’m holding on for now,” Stanley said.
It’s just another day in the life of a hedge fund analyst.
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