Investment Professionals Within these Groups
Rule #1: titles matter very little – function makes the man.
Analyst – someone who covers an industry or asset class to generate trade ideas within a fund’s mandated strategy. For our purposes, “Analyst” and “Researcher” are synonymous jobs, unless the researcher is supporting a customer business as well or explicitly not trading (this makes the person a “Strategist” in functional terms). May be expected to execute his own best ideas without approval or consultation, but normally has to sell ideas internally to PMs and desk/strategy heads or Sr. Analysts. The vast majority of investment professionals employed by HFs and Prop groups are analysts of some sort: idea generators, sometimes with sector coverage, who model companies and have some trading responsibilities. Functionally, a Sr. Analyst is defined by sector or strategy coverage, combining research and analysis with trading responsibilities. A Sr. Analyst must have a P&L to be considered a Sr. Analyst – this job is ‘desk #2’, one career step below a Portfolio Manager.
Trader – in common parlance “Trader” is used interchangeably with Analyst or PM depending on the firm type: a generic description of an investment professional. For our purposes, though, a Trader is someone responsible for executing transactions in an asset class or strategy area, handling (sell-side) Street relationships, trade design (hedging strategy, risk monitoring, exit signals); Traders also frequently cover the new issue market and advise on the most attractive opportunities from the calendar; infrastructure like technology and analytics are also often within the purview of a Trader. In smaller funds and lower-volume strategies, Trading responsibilities are typically shared by Analysts rather than assigned to a dedicated Trader.
Strategist / Researcher – an industry expert (or asset class / strategy expert) who writes ‘research reports’ or ‘investment memos’ for customers (whether internal or external). Refer to Appendix 1, which shows the Strategist on a spectrum of ‘trading involvement’ at one far end, where the Trader is at the far opposite end and the Analyst is somewhere in between with a hybrid of trading and research responsibilities. A Strategist is the desk’s or firm’s ‘go to’ guy for a particular area, whether that’s a market sector (“Energy/Utilities/Oil Services”) or a given trading discipline (“quantitative credit arb”). The core definition of a Strategist (versus an Analyst) is that the Strategist doesn’t trade, doesn’t run money, and is purely a research analyst. A sell-side med-tech analyst is a consummate Strategist, for example. Qualifying question: “so you don’t put trades on, you don’t know what happens to your ideas after you write the memo? You’re basically a strategist then, right?” It might be helpful to think of a Strategist as a Sr. Analyst with no P&L and no trading responsibilities: both are subject matter experts with predefined industry or strategy coverage.
Quant / Modeler – Quantitative Analysts or “Quants” and Modelers must universally have programming skills, as their jobs are defined by accountability for cutting up and investigating enormous data sets. Quants are usually trained as statisticians, whether from a Ph.D. program in a hard science or a Master’s degree program in CompSci or Statistics or Computational Finance. Many Quants have put in time as Risk Managers or Risk Analysts, in many cases having built custom portfolio analytics, trading platforms, and high-volume order entry systems for bank prop desks. Quants are responsible for back-testing theories, complex modeling and simulations, and often risk analytics; in all cases a Quant or Modeler needs to have sophisticated command of some statistical, computing, or other artificial language for creating simulated environments (and usually trading screens).
Marketer – In fund management, a Marketer is in fact a fund salesperson. While they’re indeed responsible for the traditional marketing functions like communications and product development, a fund Marketer is really the asset-gatherer who pitches high-net-worth individuals, family offices, pension and endowment funds, Funds of Funds, and other HF investors on allocating investment dollars to the fund. Founders, fund and portfolio managers, and other senior staff are frequently involved in the firm’s fundraising activities, but these initiatives are spearheaded by one person, the Marketer, who oversees the pitch process, leads management, client development, and who’s personally responsible for prospecting, successful solicitations, and an asset-gathering pipeline. Many sell-side jobs like Structuring are transferable into the Marketer function: HF marketers are usually responsible for structuring transactions, just like any placement agent (negotiating contract terms, determining the optimal deal structure, etc.).
Portfolio Manager – the PM role is defined by two characteristics overwhelmingly: full transactional discretion over a book of securities; and personal P&L responsibilities. A Sr. Analyst with a carve-out will have a personal P&L (on or off the record), but a PM’s career is defined by his portfolio returns. His day to day job may involve developing/coding a trading system with no support, or overseeing a team comprised of one fundamental analyst who investigates his best ideas through custom cash flow modeling, one execution trader, and one quant who handles the analytics and risk. Whether he oversees a team of ten analysts or none at all, the PM ‘pulls the trigger’ on investment decisions – he’s personally responsible for both security selection and allocation size (plus, of course, successful outcomes). No one is qualified for a PM job who has less than three years’ performance attribution in his work history; no one is currently a PM, despite any contrary evidence, who’s not currently running money with a current, verifiable P&L. Differing dynamics between Silo and Pyramid models can change the equation a little, but these rules, as far as we’re concerned, are pretty simple. A Sr. Analyst with a verifiable track record can often step into a PM role: each function involves ‘running a book’.
Founders – we could talk all day about founders, but suffice it to say that we’re unlikely to find a new position for a Founder of a $500M or $1B+ shop. That said, it’s very, very common for a successful PM to strike out on his own, fail to raise enough capital, then return to someone else’s employ. You’ll frequently meet a President/CEO/Founder of a fund with $50-100M in capital who’s decided after a lousy year that he’s not able to successfully manage a business while generating sound trade ideas – the economics of the locked up management fee simply don’t allow it: these are potentially employable.