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> You might have read some nice sounding theory around risk profiles I read no such thing, but I have practical real world experience speaking to and reviewing

> You might have read some nice sounding theory around risk profiles I read no such thing, but I have practical real world experience speaking to and reviewing investment decks for institutional investors, ranging from pension funds to insurance companies, banks and funds of funds. And these are what we call "non sophisticated investors". Yet even at that level, none of them would just "do anything" or "just look at returns".

danielmarkbruce 4y ago
There are a lot more investors than that. There are loads of of hedge funds and PE shops (ie the people actually making the investments) who are trying to generate the highest returns they can. The idea that "we are the smart money" at places like you mention isn't accurate. Almost every single person at an insurance company, bank, fund of funds, pension fund wishes they were at the VC, PE, Hedge fund etc who is actually doing the investing. But they can't get a job there.
- Galanwe 4y ago
  > There are loads of of hedge funds and PE shops (ie the people actually making the investments) who are trying to generate the highest returns they can. You are mixing investors (the one having money to invest) and investment managers (the ones having an investment product). The objective function of both are very different, because an investor accumulates multiple investment managers in its portfolio. An investment manager can be very focused on a single purpose, because ultimately he will sell his investment strategy to an investor that will blend him with others in his portfolio to respect his risk profile. We are talking about investors here, not investment managers. > The idea that "we are the smart money" at places like you mention isn't accurate That's not what I said. I'm working in the asset management side, and I was talking about investors. To rephrase, I said that even non sophisticated investors have an understanding of what is a risk profile, what is an exposure, what is risk parity, and overall efficient frontiers. > Almost every single person at an insurance company, bank, fund of funds, pension fund wishes they were at the VC, PE, Hedge fund etc who is actually doing the investing. But they can't get a job there. That's just a demeaning, simplistic, blanket statement. Not even worth arguing that.
  - danielmarkbruce 4y ago
    In many cases, the investor and the investment manager are the same person or entity. Even pension funds sometimes have an in-house team these days. Almost all PEs and hedge funds have significant amounts of their own capital in their funds. Pension funds might view them as "investment managers", but they view themselves as "investors". Most non sophisticated investors have no clue what risk parity or efficient frontiers are. "Risk profile" and "exposure" are used in various contexts by different folks. Only people from a quant background would think something like this. That isn't a shot at quant, but it's a very specific lens through which to view or do investing. Fair or not, folks making investment decisions (ie the folks at PE, VC, hedge funds) have little respect for the people at pension funds, insurance, fund of funds etc. It might not be fair, but it's largely true. And it's largely true that one side wishes they were the other.
    - Galanwe 4y ago
      Seriously, do you mind enlightening us of how you get that sense of the market? Because it is in total contradiction to what I see on the field... I started to reply to your comment but stopped as I can hardly agree with any single sentence you wrote.
      - danielmarkbruce 4y ago
        PE and value hedge fund. Ie, basically the non-quant folks. I think there is a pretty large gap between quant and the rest of the investment community (although I haven't actually worked in quant, so I'm speculating this is where the mismatch is). Concrete example - Bill Ackman hasn't ever thought about "risk parity". The average small value fund hasn't ever thought of it. Activists dont'. PEs don't. VC's haven't even heard of it. PE and VC also think of their investors as "LPs", not investors. As for who wants to work where... this is anecdotal but have you ever heard of someone at a PE/VC/HF say "I would really like to work at CALPERS/CPP etc"? I have not

danielmarkbruce 4y ago

There are a lot more investors than that. There are loads of of hedge funds and PE shops (ie the people actually making the investments) who are trying to generate the highest returns they can. The idea that "we are the smart money" at places like you mention isn't accurate. Almost every single person at an insurance company, bank, fund of funds, pension fund wishes they were at the VC, PE, Hedge fund etc who is actually doing the investing. But they can't get a job there.

Galanwe 4y ago
> There are loads of of hedge funds and PE shops (ie the people actually making the investments) who are trying to generate the highest returns they can. You are mixing investors (the one having money to invest) and investment managers (the ones having an investment product). The objective function of both are very different, because an investor accumulates multiple investment managers in its portfolio. An investment manager can be very focused on a single purpose, because ultimately he will sell his investment strategy to an investor that will blend him with others in his portfolio to respect his risk profile. We are talking about investors here, not investment managers. > The idea that "we are the smart money" at places like you mention isn't accurate That's not what I said. I'm working in the asset management side, and I was talking about investors. To rephrase, I said that even non sophisticated investors have an understanding of what is a risk profile, what is an exposure, what is risk parity, and overall efficient frontiers. > Almost every single person at an insurance company, bank, fund of funds, pension fund wishes they were at the VC, PE, Hedge fund etc who is actually doing the investing. But they can't get a job there. That's just a demeaning, simplistic, blanket statement. Not even worth arguing that.
- danielmarkbruce 4y ago
  In many cases, the investor and the investment manager are the same person or entity. Even pension funds sometimes have an in-house team these days. Almost all PEs and hedge funds have significant amounts of their own capital in their funds. Pension funds might view them as "investment managers", but they view themselves as "investors". Most non sophisticated investors have no clue what risk parity or efficient frontiers are. "Risk profile" and "exposure" are used in various contexts by different folks. Only people from a quant background would think something like this. That isn't a shot at quant, but it's a very specific lens through which to view or do investing. Fair or not, folks making investment decisions (ie the folks at PE, VC, hedge funds) have little respect for the people at pension funds, insurance, fund of funds etc. It might not be fair, but it's largely true. And it's largely true that one side wishes they were the other.
  - Galanwe 4y ago
    Seriously, do you mind enlightening us of how you get that sense of the market? Because it is in total contradiction to what I see on the field... I started to reply to your comment but stopped as I can hardly agree with any single sentence you wrote.
    - danielmarkbruce 4y ago
      PE and value hedge fund. Ie, basically the non-quant folks. I think there is a pretty large gap between quant and the rest of the investment community (although I haven't actually worked in quant, so I'm speculating this is where the mismatch is). Concrete example - Bill Ackman hasn't ever thought about "risk parity". The average small value fund hasn't ever thought of it. Activists dont'. PEs don't. VC's haven't even heard of it. PE and VC also think of their investors as "LPs", not investors. As for who wants to work where... this is anecdotal but have you ever heard of someone at a PE/VC/HF say "I would really like to work at CALPERS/CPP etc"? I have not