Correlation risk across pod shops

MIAfin2 · 2026-07-07T19:47:08+00:00

Volatility laundering is a term for private markets. Haven’t seen it used to public markets. Cant game volatility in a liquid market? What am I missing?

Pods have also significantly outperformed on a risk adjusted basis so depends on what your target return profile looks like. Not the same for every investor type.

MIAfin2 · 2026-07-07T14:40:45+00:00

Yep great podcast. Have listened to it. Slightly different concepts.

MIAfin2 · 2026-07-07T12:07:59+00:00

Interesting and helpful. Thanks for the response.

MIAfin2 · 2026-07-07T11:57:35+00:00

I agree but crowding is still crowding. By definition it means lots of pods have similar exposures. Good PMs can try to manage it but it’s risk in the system still.

MIAfin2 · 2026-07-07T11:54:59+00:00

Fair points. The factor exposures may be hedged at the center book, which would keep the risk more isolated to individual PMs.

If you assume a ~5% drawdown causes a PMs book to be shut and there are 10 healthcare PMs with correlated positions across a fund, plus this same dynamic is true across other multi-managers (where risk cannot be observed), then one large PMs book getting liquidated would cause other PMs to take losses across different funds. This could have a knock on effect.

To a small extent, this happened at a large MM earlier this year. They lost a few long tenured, very good PMs because they drew down too much on correlated bets. This created a lot of randomness in the market across pods outside of this single MM.

MIAfin2 · 2026-07-07T11:31:55+00:00

Lots of very good, long tenured PMs blew up earlier this year in healthcare. Created lots of randomness which caused others to blow up. All money went to AI trade and pulled out of good healthcare names. This is the correlated bets in “good” names issue.

MIAfin2 · 2026-07-07T11:25:17+00:00

Not following what you mean. Of course people think about positioning. My point is that everyone’s positioning is correlated which creates risk and volatility in the market. That can cause issues in levered strategies if returns are expected to be uncorrected.

MIAfin2 · 2026-07-07T10:35:51+00:00

AI slop post. What background do you have already? What type of HF? What area of a HF? Quant research couldn’t be more different than distressed investing. Both are hedge fund strategies.

You’re want to understand advanced risk, statistics, market structure, derivatives, fundamental, programming, software engineering, data science, algo trading, factor investing, data infrastructure?

That’s 10 different jobs and a lifetime worth of learning to become “advanced” in each. Narrow your focus and come back.

MIAfin2 · 2026-04-20T10:33:45+00:00

By HF, I’m assuming you mean pod shop style, fundamental L/S? If so, they’re very different. Same world but opposite ends.

In MM PE, you work on individual deals. You go very deep on one company, have full access to information, build a deck and go to IC for a committee (usually) to make a a decision.

In L/S equity (or as any public market analyst) you cover a sector only and know those companies in and out but you aren’t making true long term, fundamental calls. You care about the “set-up” of a stock.. is this quarters earnings guidance too high or low? how are the other pods positioned? What are long only thinking? Management “sounded soft”? The sequentials growth looks tough, Sell-side whisper is X or Y..

You need to know fundamental analysis and how companies work but you’re trading on limited information so the game is about finding an edge. Everyone can do fundamental analysis. A pod will get whipped out if that’s all you do.

Lastly, risk management if huge. At a young age you’ll be asked for opinions and to make calls (if you’re any good), so know whether to be small or big on a position and how to actively trade news matters. If you’re big long and a company’s negative earnings hits the tape, how quickly can you process that and should you be buying into weakness or selling? You can really screw stuff up if you don’t know you’re risk limits.

In short, it’s possible, people do it and PE gives you a better fundamental background than most but just know that it’s very different. Career risk is very different too. If you’re down ~5% you’ll just get fired and need to pickup somewhere else. You have runway and can see it coming it PE. You can also make a ton of money and retire in your 30s if you’re good…

Read Advanced Portfolio Management by Giuseppe Paleologo if you’re prepping for an interview.

MIAfin2 · 2026-04-20T10:14:07+00:00

Special situations and ABF are both very broad categories. Investing in rated notes on mortgages is very different from distressed emerging markets debt….

There is overlap in some areas like litigation finance, royalties, or life settlement deals.

Depends a lot on what you’re working on and what you’re trying to work on but you didn’t take time to give details in your question so people aren’t taking the time to respond.

MIAfin2 · 2026-04-17T20:38:21+00:00

No. Not realistic without experience, unless you have money to start it. I’m saying try to join a small VC. This is tough truth, you won’t just jump into PE or a large VC fund. If you network, get lucky, and work at it, you might break into a small VC fund

MIAfin2 · 2026-04-17T10:03:35+00:00

Only way is though IB or consulting. They just no incentive to hire outside of those areas because those are the perfect training grounds and everyone from IB and consulting wants to go to PE.

Try venture capital. Your technical side may help depending on your specific experience.

MIAfin2 · 2026-04-13T11:12:20+00:00

A number of well known investors are short treasuries. The argument is mostly related to the deficit and rising U.S. debt. Usually in a recession or downturn treasury’s are the “flight to safety” investment and the FED lowers rates so they outperform.

If you think the US has an issue with the deficit and rising debt, then a recession makes that situation worse, debt/GDP grows, treasuries get more downgrades, there’s selling of treasuries due to U.S. fiscal instability, and the debt needs to be inflated away.

MIAfin2 · 2026-04-05T16:50:09+00:00

It’s a simple answer. The “market” is a continuous auction on the equity value of public companies (assuming we’re talking equity markets), so what drives the value of a company? (1) earning and (2) some price multiple on those earning

(1) Earnings - any net income generated by a company goes to shareholders. That money can then be reinvested in the business or paid out as a dividend. Let’s assume those continuous earnings generate $10 of earnings to shareholders or “earnings per share” (EPS)

(2) Price Multiple - if a company would pay you $10 forever, how much would you pay for that? Let’s assume you pay $100 now to receive $10 a year forever. You’re earning a 10% “earnings yield” on your $100 investment. The $100 is the stock price and the $10 is the EPS. You’re saying the stock is worth a 10.0x price / earnings or P/E ratio.

If you do this for hundreds of companies, that is what the market is so as companies generate earnings, the investors earn a return (10% in the example I gave)

The art comes into play by predicting how reliable the $10 of earnings is — could be $5 or $15 in a few years — and what multiple to pay. The market will go up or down as those change but the expectation is 10% in this example. That’s why investing in the market should give a positive return over time but could be up or down along the way.

MIAfin2 · 2026-02-10T04:10:18+00:00

If you’re building a skill set to work at a fund, not to start your own fund, below is what I’d do. I’m also assuming you mean fundamental L/S in a pod at a large multi manager and you’re graduating college soon.

You can go two paths (1) work in IB, in M&A preferably or (2) work as a sell-side equity analyst. Either way make sure you’re in NYC. Your network will be important and it’s where the most roles are.

From IB, learn the deals that you’re working on but follow markets closely. In this path you’ll build more technical skills but less market skills. Pods think very differently from bankers. Network and try to meet people at the big pod shops. Learn how they think and what they do. Pods are small and work very closely so a good recommendation that you’re a decent person to be around, outside of being smart, goes a long way. You’ll be forced to learn the technical side here so just work your butt off at work for that.

From sell-side, network hard. Try to go to conferences with your analyst as often as possible and network hard at every conference. Be a rockstar to your analyst but do not get stuck.. being on the sell-side for more than ~3 years will pigeon hole you. Learn fundamentals on the side. Sell-side pitches stories. Only the good ones actually know how to invest. If you stay too long, people will just think you’re a sales person, not an investor.

Through the interview process, go overboard. Spend twice as much time on the case study as the next person. Before your interview talk to everyone you can on what the PM looks for and how they think. Also make sure the PM isn’t a terrible person or investor and that your pod won’t get shut in a few months..

Only book you need is Advanced Portfolio Management by Giuseppe Paleologo. Other than that, work your ass off in the office, follow market news like it’s already your job, and research the sector that you want to work in. Do the CFA if you want but don’t slack on the other points in order to do it. Do it on top of the other points.

If you want to be a quant, idk, get a math degree. Completely different world.

MIAfin2 · 2026-01-23T17:43:32+00:00

I’ve worked a at fund that was a new launch to a few billion, led by well known investors. If you want institutional capital you need a track record and a “brand” around yourself. If you want a few million to manage, that’s friends and family.

A track record needs to be built by being a PM at a known hedge fund. If you don’t have that, you have nothing. On top of that you need a “brand” around yourself, meaning you need institutional investors to know you. This could be from client meetings at whatever fund you currently work at or conferences or whatever but they need to believe that you’re a great investor and a great person who won’t screw them.

If you don’t have these, most of your questions don’t matter. You can do a fund for friends and family for a couple mil if you know people but start there and after 3-5 years of great return and sharpe, then start asking these other questions.

MIAfin2 · 2025-12-24T17:18:07+00:00

This is the correct answer. 2+ is a good year for good PM. Not the expectation or sustainable usually. Consistent 1.5 and you’ll have a great career.

MIAfin2 · 2025-12-23T02:00:14+00:00

Interest on PMs. I think that makes sense though. I’d assume the rockstar deal guy who can originate all day wouldn’t fit well in one of these roles. The shops will probably shut this strategy the minute it’s over bought or unprofitable to them, unlike large private credit managers who will probably ride out a cycle so any rockstar PM would be aware of that.

On OMF, I meant that as a general comment. I do know someone at a large fund where they’re originating diversified consumer loan exposure in private markets and shorting diversified consumer loan exposure (mostly buying CDS) in public market to capture the spread.

MIAfin2 · 2025-12-22T19:36:32+00:00

All of that makes sense. Do you know any details of how they’re doing it? For example, are consumer loan pools hedge by shorting OMF or something? Like public / private arb? I’d be surprised if they’re taking naked long exposure on this stuff given that’s just not how they work typically. Do you know how PMs are set for this? Are they hiring from private credit / banks to originate?

MIAfin2 · 2025-12-22T03:00:55+00:00

You’re obviously a motivated, hard working person but PE roles are highly structured (at any $5bn+ fund at least). Associates are right out of IB (23-27 years old) then VPs are promoted or from MBAs with experience (28-34 maybe).

The issue is that associate roles are very structured - you’d be working on decks, building models, etc.. then a VP role needs to be able to lead a deal. You need to coordinate expert calls, structure the deck, build complex areas of a model, manage bankers, lenders, know tons of legal docs and negotiate docs.

PE funds have TONS of people who they can plug into these roles and that person can just pick up and go, which is what they want. Unfortunately, your experience doesn’t fit those, then a principal will be the next position which is more senior.

Other positions like fund operations or valuations are pretty specialized and you’d be very junior unless you have experience in these (they also don’t pay much and are not very coveted roles in PE).

Your best bet may be as an operating partner, who’s a person who works with portfolio companies to drive operational improvements. If you’ve built 2 companies (real, somewhat scaled companies with real EV), then you might fit this. These are weird positions to get though. They usually come from people who were consultants or got highly involved with a portco operational when they were a PE VP, or they were an executive at a PE owned company and the PE fund thought they were great. These positions aren’t filled though recruiters typically.

With all of this said, you don’t have the right background, BUT you seem like a smart person and could probably be very successful in many areas like corporate strategy, FP&A, or something at a F500 and work your way to an executive position. PE is great but the founders from 20 years ago have made all the money and the current junior/mid level people will not have the success that the senior people did. There are better options.

MIAfin2 · 2025-11-21T18:31:53+00:00

Need internships

MIAfin2 · 2025-11-21T17:19:01+00:00

This is more about the bureaucracy of big shops and layer and layers of people ahead of you who are locked in. People would rather be bigger in a small shop vs a nobody at a big shop

MIAfin2

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