Analysts act primarily as a screen, the portfolio manager uses discretion to choose the best ideas. The PM typically doesn't have the same ground level knowledge of the industry or business that the analyst does. Good PMs focus on defending against what they don't know rather than capitalizing on what they do.Question:How do you evaluate your research team? What are your goals and expectations of them and how do you manage those goals and expectations?David Poppe:With a stick! We have a really bright team of people who are pursuing interesting ideas. A lot of stuff is bubbling up all the time. Our guys travel a fair amount; they see a lot of things. It’s incumbent on Bob and me but also on the other senior people here to voice our opinions — we think this idea is better than that one. Ultimately we’re the editors and we’re the ones who have to make the decisions on the ideas that bubble up. Their job is to present us with a good set of choices and our job is to pick the best of those choices. Sometimes we’ve been really risk-averse. Sometimes we’ve probably erred on the side of caution.
Monday, February 13, 2012
Insights on Investment Management From the Sequoia Fund
I'm currently reading the transcript of the Ruane, Cunniff and Goldfarb Investor day from May of last year. RCG runs the Sequoia fund, which is one of the top performing mutual funds of all time. This portion of the Q&A stood out to me for the way in which it highlights what the analyst function is like at a top money management firm.