When most hedge fund managers open up their own shop, they already know about the long hours. One poll found that the average hedge fund professional works 51 hours a week, but it’s not uncommon for managers who open up their own shops to work many more hours every week, especially those without many (or any) employees.
Beware of burnout
Managers running their own funds have much more on their plate than just overseeing a portfolio. They also have to concern themselves with fundraising, marketing, strict regulations, and the other day-to-day tasks of running a hedge fund.
Unfortunately, this leaves very little downtime, and burnout can be a real problem. Managers who open up their own shops are also entrepreneurs, and studies about burnout among entrepreneurs are very revealing. According to one survey, nearly 88% of entrepreneurs struggle with at least one mental health issue, and over 34% experience burnout.
The importance of connecting with other managers
However, relationships with other managers can go a long way to mitigating these issues, and one study shows the benefits of relationships between hedge fund managers when it comes to returns.
One study looked at relationships between fund families like the Tiger cohort of funds. On one hand, it showed that hedge fund managers who have worked at the same firms hold and trade more of the same stocks than those with no such connections. The study also found that a long/ short portfolio of connected/ unconnected overlapped trades generates 3.6% of annual alpha.
Most importantly for the purposes of this article, the author found greater results between fund pairs with “stronger social connections and longer relationships, implying a socially reinforcing channel is responsible.”
Loneliness at the top
Many managers over the years have discovered the benefits of having others to turn to for help solving problems, including those related to the entrepreneurial aspect of running a hedge fund.
Turning to mastermind groups
An excellent source community for entrepreneurs of all kinds is a mastermind group, a term coined by Napoleon Hill. Mastermind groups are peer-to-peer networks of like-minded people who meet on a regular basis for support, knowledge sharing, and accountability.
“As you advance in life, you need peers who grasp the stakes,” explained Matthew Peterson of Peterson Funds. “A mastermind community uncovers insights and mutual support becomes breakthroughs. Every exchange uncovers opportunities and blind spots, and the collaborations compound.”
Capital Alliance is a mastermind community that’s part of the “go-giver” movement, focusing specifically on founders of all finance-related firms, including hedge funds.
“Capital Alliance is a private, invitation-only community of founder-level investment managers,” explained founder Ken Majmudar, who also founded Ridgewood Investments, a value oriented firm based out of New Jersey. Being an entrepreneur can be isolating, problems are exacerbated in an intense high stress field like investing.
Ken noticed the problem and need through his years of running an investment firm and speaking to others in the industry, but there seemed no one providing a solution. He created a community where people can form real genuine in-person connections. “know What makes the group special is that our members are ‘go-givers.’ We focus on the entrepreneurial side of running an investment firm because it can be a lonely job at the top”, Ken told me.
Being a “go-giver”
“There’s a lot of things you can’t talk about with your wife or your best friend because they just won’t understand it,” said Vatsal Nahata, co-founder of Capital Alliance. “They don’t know what it’s like being the founder of an investment firm. And what we’re really trying to do is collective problem solving. Because if I’m going through something right now, maybe one of the other 12 people in the room have already gone through it’”
Go-givers is a play on the term go-getters, but the difference is go-givers help others and focus on providing value to others, considering that the more you give, the more you have. Go-givers remain open to receiving as well.
“Few things are more important in the hedge fund world than help from your peers,” said Evan Tindell, founder of Bireme Capital. “Sharing investment ideas, operational advice, joint research trips, and LP references can add significant value especially to a smaller fund. In my case, I am lucky enough to have some peers as clients, and their endorsement has been a game changer in a few cases with potential clients.”