The Best PMs at Citadel, Millennium, Balyasny: What They All Share

What makes the very best Portfolio Managers so successful?

What makes the very best Portfolio Managers at Citadel, Millennium, Balyasny so successful?

Fundamental investing has become a highly commoditized and “crowded” profession, with many PMs doing all the same things - modeling, talking to management, looking at data, tracking positioning, using software to manage risk. The typical outcome is 1-3 years, and then you are fired. What is so unique about the very few who have been consistently successful?

We will soon go back to discussing the research process in depth and all the topics we described in our last post, The Long/Short Analyst Blueprint as Taught at the Best Shops, but this is an important write-up for anyone aspiring to be a great investor, not just at a multi-manager, but more broadly.

This post was inspired by Phoenix’s upcoming guest speaker event with an all-time great MM PM (Phoenix members, last chance to sign up is Sunday) and by some of the similarities I have observed among the truly great investors at multi-managers, those with real longevity and success.

Quickly before we start, a friend of Phoenix, a highly-respected CIO/Head of Equities, is looking for an analyst with 2+ years of equities research experience (either buy-side or sell-side is fine) to work under the guidance of a very experienced event/merger arb Portfolio Manager in Dallas, TX. If you are interested, let me know by replying to this email.

I will start with some quick information, then get into the important takeaways, so please bear with me.

Let’s get straight into it.

If you recall, the first edition from Mt. Rushmore is based on a conversation with one of the best multi-manager PMs in the world right now.

Here’s what he said (from our conversation here):

The hardest part of being a multi-manager PM is balancing the short-term and the long-term. He believes that a trap many multi-manager PMs fall into is being too short-term oriented. Obviously, if you’re blowing up, you need to act. But to truly scale your business, you can’t just be day trading.

If you’re running a $100M book, maybe you can get away with it. But if you want to scale and manage a $2-4B book, that (day trading) is not a sustainable way to make a living.

The bottom line is: you have to be longer-term oriented in your investment process - you can’t be day trading.

Now, take a look at what Dmitry Balyasny, the founder and CIO of Balyasny (still running a book), said at the end of last year:

“Trading too much”

Balyasny started revamping its fundamental equities unit in 2023 after it had struggled for years. The firm claims that the periods of underperformance in the unit coincided with the rise of alternative data and multi-manager teams becoming overly reliant on it (hence the “trading too much” part).

This is exactly one of the points the PM from our Mt. Rushmore series made - that being too focused on the short term might be a mistake, and that day trading is not a sustainable way to make a living.

The person in charge of helping lead Balyasny’s revamp was Steve Schurr, most recently Balyasny’s senior managing director of fundamental equities and a well-respected PM in the industry. Schurr is now on his way to Millennium, where he was allegedly offered a $100 million (potential) payout package. He previously worked as a PM at Point72 and also had a stint with the well-known short-seller Jim Chanos.

At Balyasny, he was reportedly managing a very large portfolio, in addition to leading a centralized research unit focused on primary research. Interestingly, he started his career as a journalist at the Financial Times!

This is just to give you some context on his background. Now let’s get to what we actually care about:

Steve Schurr, top MM PM, on his investment process:

Unlike other multistrategy portfolio managers, Schurr didn't want to use alternative data like credit-card receipts to focus on "triangulating and calling quarters" by estimating a company's earnings before they're released, calling the popular investing process "a strategy of diminished expected returns".

"I thought of the research process as an extension of the work I did as a journalist," he said, noting that "there's not a secret trove of information that no one else has access."

"The best thing you can do is doing the research yourself," he said, recommending industry conferences and expert networks over sell-side-organized events and meetings with company executives and investor relations teams.

On what he thinks a durable competitive advantage is:

Schurr believes that "durable edge" for all multistrategy firms investing in equities would come through primary research.

I think we are back to the anarchy of having to be good investors …… 80% of a portfolio manager's opportunity is going to be from equity selection.

Schurr also thinks it’s important to be able to hold a stock through volatile periods, as most of your profits will be generated from long-term positions.

Again, we see this theme of longer-term thinking.

One of the questions Schurr asks PMs: What's your unique strategy?

We will go back to Schurr’s investment process in a little bit.

What we know from another top MM PM

Our own Allen White spent a decade at Millennium as a PM and he describes his investment process as going beyond the next data point and looking past it.

As he shares his investment process with examples, it becomes very clear how unique it is, with the foundation being his deep fundamental understanding of the companies. He made an amazing call on a long MCD / short SBUX, and I personally love going back to his process and studying the trading sheet.

His investment process is also on a 6-12 month horizon, certainly not typical of the average pod PM today.

Now onto our guest speaker and why all of this matters so much…