Q&A: Multi-Managers Amid Market Chaos - Positioning, Performance, Recruiting
A big post dropping this Sunday - make sure you check it out.
What a day. What a few weeks. Incredibly difficult market to navigate. One headline can change everything, as we saw today.
Quick Q&A on a few key questions:
What are multi-manager portfolio managers doing in this environment?
How have the multi-managers performed so far?
Is now a good time to prepare and recruit for multi-managers?
An incredibly important post will be released this Sunday - make sure to check your inbox so you don’t miss it.
What are multi-manager portfolio managers doing in this environment?
At a high level, they are mainly reducing gross (de-grossing) and net exposure - the former helps lower PnL volatility, allowing to redeploy capital at a later time, and the latter protects against market directionality when times are uncertain.
PMs are also modeling individual stock-level tariff exposure and input cost risk (supply chain changes) and trying to hedge out any broader portfolio-level tariff exposures, often through a custom “tariff” factor embedded in their risk models. They are likely in close communication with senior management and the risk teams.
Most fundamental l/s PMs don’t want to take any “macro” bets and typically look to hedge out any exposures. That said, they do think deeply about macro in terms of which sectors or groups of stocks are likely to benefit or get hurt the most. (e.g., short a basket of high tariff-exposed names, long a basket of potential beneficiaries). Defensive trades and portfolios are more relevant than ever - a focus on low-beta names, strong balance sheets, consistent free cash flow and ideally stable margins (limited exposure to input cost swings). Classic defensive setups you can see are something like long staples / short discretionary or long utilities / short cyclicals, etc. Ideally, PMs would have positioned their portfolios well in advance. It is quite fascinating how Allen discussed defensive trades on Phoenix back in December, sensing the slowing macro environment and made an amazing argument for a pair trade that would fit perfectly in today’s market.
How have the multi-managers performed so far?
Overall, quite well I would say. Unusual divergence in performance (and in an unexpected direction) between the top 3 (C/M/P) and the rest, with C/M/P lagging behind (down ~1-2% to flat/up ~1% YTD). But ExodusPoint and DE Shaw are leading the pack at +3.5% and +3.4% respectively through the end of March, followed by Walleye +2.9%, Balyasny +2.6%, LMR +2.4%, Schonfeld +2.2%.
I personally find this incredibly impressive. Just look at how other hedge funds and long/short managers have performed over the past few weeks - I believe Goldman Sachs reported that many L/S fund managers were down mid-single digits just in the first week of April. That first week was incredibly volatile, and yet Schonfeld gained an additional ~60 bps in the first week, Balyasny held steady at +2.6% YTD and Citadel was roughly flat for that week, as reported by Bloomberg. Of course, it’s not an apples-to-apples comparison - multi-manager versus single-manager L/S. But still, the performance is strong given the broader hedge fund landscape and overall market environment.
Sources: Bloomberg, Business Insider
Is now a good time to prepare and recruit for multi-managers?
It seems like it, based on what I am hearing directly from people. Recruiting is still in full swing. A number of Phoenix members have told me they are currently going through the process. I have anecdotally heard whispers that some teams have “paused” hiring or more so are taking their time with candidates as they navigate the difficult market environment, but not sure how widespread or accurate this is. Don’t forget that plenty of new PMs are always getting ready to start trading live at the platforms, even today. Not to mention that quite a few PMs, including some high-profile ones, are or have recently been on garden leaves and are actively building out their teams.
Important note: Some of the information above is based on a somewhat small sample size (e.g., conversations with 7–8 people) and may not be fully accurate or representative of the broader picture. I hope it provides helpful color, but take it with a grain of salt.
See you on Sunday with an important post.