Hedge Fund Allocators Look to Load Up on Europe, Goldman Says
Europe is seen as the biggest geographical focus for the second half of the year, according to a Goldman Sachs Group Inc. survey of 333 investors who collectively have more than $1 trillion allocated to hedge funds. This marks the first time in data going back to 2018 that the continent has been the top target, the note said, while interest in North America faded sharply.
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C-suite access is the new divide in the hedge fund world
Corporate access has become the latest institutional shift for the largest hedge funds in the industry. The biggest firms have teams of people handling their relationships with companies and get the most access. Citadel, for example, does more than 30,000 meetings with executives a year. You can't buy time, but hedge funds are trying. Some of the most valuable time in the world is that of a CEO of a large public company like Jamie Dimon or Mark Zuckerberg, whose days are planned to the millisecond. They carve out time to speak to their companies' investors about strategy, expectations, and more, and it's those seconds that the biggest hedge funds in the world are increasingly monopolizing. Multistrategy giants like Izzy Englander's Millennium, Ken Griffin's Citadel, Steve Cohen's Point72, and Dmitry Balyasny's eponymous firm operate with dozens — sometimes hundreds — of investment teams under one roof, each running their own strategy. These firms' stock-picking teams compete with each other and rivals for face time with leaders at the world's biggest companies. In conversations with 15 portfolio managers, hedge fund executives, bankers, corporate access professionals, and investor relations heads, Business Insider found that access to C-suites — once a more level playing field — has become another area where the biggest firms dominate. The process is now a source of growing tension as smaller investment firms get edged out, companies are flooded with requests, and even top firms grapple with internal strains over who gets into the boardroom. A decade ago, the connection between these firms and corporations was run solely through brokers working at investment banks, also known as the sell-side. Now, while the sell-side has not been cut out of the equation, the biggest hedge funds employ large teams of corporate access pros themselves, with personnel based in the US, Europe, and Asia helping mega funds get their ever-growing investing team members face time with CEOs. Citadel boasts on its website that it does more than 30,000 meetings with corporate executives each year. Millennium's increasing allocation to externally run funds means more wallets to pay the sell-side, ensuring better access and preferential treatment from brokers. Balyasny has done educational events for corporate investor relations teams in Asia, India, and the US in the last 12 months to explain the firm's structure and introduce its broker relations leaders. Funds mentioned in this story declined to comment. "A big part of the job is keeping everyone happy," said one hedge fund executive who has managed stock-picking teams for more than a decade. 'Kids' table' Twenty-seven-year-olds in T-shirts. Cameras off during pandemic-era Zooms. Typing on laptops or phones while CEOs spoke. Twenty people on a call, all vying to ask a hyperspecific question, often related to next quarter's earnings. Companies, especially the largest ones with the busiest executives, were getting frustrated as the headcounts of the industry's elite swelled, according to two corporate investor relations executives. At bank-held conferences, alongside tenured portfolio managers from long-only funds and asset management giants like Fidelity and Wellington, "we were always the kids' table," one multistrategy executive admitted. It was "pretty common" between 2018 and 2021 for executives to say no to meeting with some of these firms, or sharply curtailing the number of seats allotted to these funds, said Christopher Melito, a former corporate access pro at Cowen, Citi, and Credit Suisse. Even with how much these firms paid the sell-side, "at the end of the day, a C-suite could say 'don't confirm that request, we aren't meeting with them,'" said Melito, who is now the head of investor access at consulting firm ICR. Though the industry started building corporate access teams as early as 2015, it took years for teams to get to their current efficiency. One early hire industry experts pointed to was when Citadel promoted Johnna Shields to the role of corporate relations manager within its Global Equities stockpicking unit. Now, these staffers play a critical role in smoothing the path for hedge funds, which aren't always trusted by CEOs who worry about potential short-sellers and capital that'll leave at the first sign of trouble. Similar to the growing importance of the business development role, those in corporate access have become a key cog within multistrategy firms, despite the fact that they don't manage capital themselves. Jain Global, for example, brought on Katie Vogt, a former Balyasny and Goldman Sachs staffer, to head its corporate access efforts, deeming the function important enough to hire someone pre-launch. There's now a much healthier two-way street between funds and corporates. For example, "a lot of top four funds stopped putting junior members in these meetings," Melito said, and started training younger investment team members on protocol. One former PM said that at Point72, blazers are required when meeting with an executive. At other large firms, Melito said, young analysts start by meeting with smaller-cap companies before shadowing more senior investors in meetings with large-cap corporations. Corporate access teams have shifted from booking agents to matchmakers, one person close to a big four fund said, pairing different teams and investors with the right executives. "The large four funds have been a lot more strategic about their asks," Melito said. Everything's political Although the relationships between funds and companies may be solid, there is still plenty of bickering internally at the asset managers. One portfolio manager at a large firm said the biggest fights he ever saw were between two teams wanting access to the same executive — and there would only be room for one. Firms often give more tenured teams the right of first refusal for a meeting, but sometimes big-name new hires will jump the line, causing a rift, another PM said. All jobs have an element of internal politics to them, but in the cutthroat hedge-fund world, where a right call could mean a life-changing annual bonus and a wrong call could mean a pink slip, the stakes are magnified. The growing staff at the biggest managers means that a potential meeting with a Fortune 500 CEO will have plenty of interested parties. At Citadel alone, there are roughly 300 stockpickers, Griffin said at a talk at his former high school in Florida earlier this year. While the biggest funds can offer eye-popping sign-on bonuses and larger books of capital to manage, smaller funds that haven't been able to keep up with the big boys on corporate access resources are leveraging the internal tiffs to help their recruiting. "We can say 'You're our tech guy,' and while we can't compete on upfront guarantees, we can give them better long-term incentives," said one individual who runs a smaller multistrategy firm. These incentives include automatic IPO distributions, he said, which can be hard to come by if you're lower down the totem pole in one of the bigger firms. In the ongoing war for talent that has top moneymakers getting offers of tens of millions of dollars in total potential compensation, an important question for candidates is how many other teams trade their specialty or sector, one recruiter said. "It's a make-or-break kind of question," he said. No one wants to be one of 20 investing in technology companies "unless the money's just stupid," he added. Is it 'something AI could do' or a differentiator? The reason these firms have been able to build up these teams and pay out such large commissions to the Street is because of the pass-through fee agreements that put their backers on the hook for business costs. The question limited partners need to ask: Is it worth it? Several PMs at firms with large corporate access teams told Business Insider they could do without. One European equity investor said CEOs have become more scripted than ever, so meetings are basically a rerun of what they've previously said on earnings calls or at conferences. Another, based in the US, said the biggest value from these meetings used to be a sentiment check on how other teams were thinking about the stock — but now questions are often too specific and narrow to give any kind of indication into their thinking. For one founder of a smaller activism fund, the meetings are a prime example of something that firms could eventually save money on by automating away. "All these young analysts are asking questions off a sheet of paper their PM gave them and then typing into their models right there," the activist said. "It's something AI could do." It's hard to quantify how much a 30-minute conversation with a CFO is worth to a fund's bottom line. One industry consultant believes the push for funds to adopt cash hurdles — which would require their net returns to be over that of a Treasury bond to earn performance fees — might lead to some firms cutting costs in different places, including payments to the sell-side. Still, longtime stockpickers appreciate time with executives, and the old guard believes there's value in it. Tiger Global's billionaire founder, Chase Coleman, sees merit in these meetings and still attends them, a person close to the firm said, and funds have brought in former CIA interrogators to help investors dissect body language and read between the lines of a prepared statement. Even beyond the informational advantages mega funds can glean from these meetings, corporate access is also a zero-sum game. The more meeting slots and conference registrations the industry's largest firms take up, the fewer everyone else can get. "It's a finite resource," said one sell-side broker. "They don't want to share." Read the original article on Business Insider Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
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New Jersey says 3 chemical makers agree to 'forever chemical' settlement worth up to $2 billion
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Ramit Sethi: When You ‘Should Take the Big Swing' of a Financial Risk To Be Happier
Even when we're thriving in our careers, making good money and feel relatively content with the way things are going, we may have pretty frequent callings to reflect on the hustle and bustle world around us and think, 'Can I just quit my job and travel for a year?' Find Out: Read Next: Financial expert Ramit Sethi talked about this common wanderlust, wondering in a recent email newsletter sent to his subscribers. He looked at a real-life example of one of his readers, a 25-year-old product manager based in California who was in incredibly strong financial shape. He asked Sethi, 'Can I quit my job to travel for a year? How will this impact my future career prospects?' Even When We're in Great Financial Shape, We May Hold Back The question of when you can take this kind of risk-loaded 'big swing' may be 100% feasible financially, but you need to have a crystal clear look at your money situation. If you live below your means, hold no debt, have a strong investment portfolio and plenty of savings, as this person did, then you can absolutely 'afford' to take the risk. But even if you have the dream financial situation and money isn't really a problem, you may resist seizing the opportunity to embark on freedom. It's a sort of mind over matter issue. But rather than using our minds to overcome something, we're using them to hold us back. 'The problem is that it is very difficult to break out of the mindset of needing to 'maximize' how much you invest and save,' Sethi wrote. 'Many people I've talked to who have savings rates like this are in the FIRE community. They find it incredibly psychologically crippling to reduce their savings by even 5%. They also find it very difficult to spend money.' Explore More: Careers May Be More Resilient Than You Think Whether quitting your job and traveling for a year will hurt your career is a whole 'nother beast to tackle. It's highly unlikely that you can quit (unless that job is in academia and you're approved to take sabbatical) for a year and have a guaranteed good job upon your return. 'How will this affect your future career prospects? 'It's likely that it will affect them negatively,' Sethi said. 'It's possible that if you go away for a year, you may come back to a recession. You may come back to your industry being reduced.' But don't just think about the probability of things being tough when you get back. Think about how different and more culturally enrichened you'll be a year from now. 'I know a lot of people who have traveled for a long period of time and came back with an amazing narrative that they could share in interviews,' Sethi wrote. 'That depends on the market, your abilities and the combination of both.' It's OK To Take a Break From Being Aggressive More likely than not, there will be some bumps in your career if you decide to quit your job and spend a year doing something you've always wanted to do (and make nada while doing it). That's why it's so important that you ensure you're well ahead of the game with saving, investing and living debt-free. But a rich life, as Sethi reminded us in this newsletter, isn't just about generating the max amount of money all the time. It's about enjoying money, too. 'A Rich Life is not just blindly accumulating more money,' Sethi wrote. 'In fact, a Rich Life might be actually prioritizing the numbers second.' If you're in amazing shape financially and see no evidence that a big swing of a risk will disable your future or hinder your retirement, go for it. And as you take the leap, recognize with confidence that part of the point of doing as well as you're doing with money is to be able to luxuriate in it (within reason) while you still can. One day, doing something as extravagantly carefree as traveling the world may not be a realistic option for you. More From GOBankingRates 9 Downsizing Tips for the Middle Class To Save on Monthly Expenses This article originally appeared on Ramit Sethi: When You 'Should Take the Big Swing' of a Financial Risk To Be Happier Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
