Retired PM at multi-billion L/S fund. Sharing career advice and insights to help aspiring analysts break into the hedge fund world. Not Investment Advice
Using a quantitative framework to understand which factors have the greatest impact on valuation multiples
Important quantitative drivers of a valuation multiple are return on capital, cost of capital, growth, and duration of growth. From a quantitative perspective, it is
Key concepts to understand how L/S equity multi managers think about risk:
$Vol: Rather than thinking of a portfolio solely in terms of gross capital, many L/S PMs think about their portfolio in terms of $Vol. $Vol is the standard deviation of the portfolio's returns in dollar
Great podcast with Brian Christiansen from Sands Capital. Insightful discussion regarding the firm's approach to growth investing and the six investment principles that the firm employs:
Sustainable above-average earnings growth
Leadership position in a promising business space
Hedge fund titan Seth Klarman shakes up Baupost Group: 19% of investing team cut in biggest restructuring in firm history. Layoffs concentrated in the real estate and equities units. Shifting focus to distressed debt, special situations, private investments, and capital solutions
Time Arbitrage: Is time on their side?
Does time benefit the company by bringing significant opportunities closer (i.e. significant growth in demand, market share gains, cost deflation, margin expansion, etc) ?
OR
Does time work against them and is the business a melting ice