Institutional Investor's Alpha Magazine - February 2008 - (Page 48)

Top Analysts who have made the jump has been mixed.” Being an analyst at a hedge fund requires a set of skills more akin to those of traders and port folio man agers than to those of traditional Wall Street equity analysts. Generating money making ideas is paramount, as good stock picking is often the difference between a firm’s success and failure. Proﬁtable picks can translate into massive bonuses, seven-ﬁ gure compensation packages and even the promise of ulti mately running one’s own hedge fund ﬁ rm. Poor picks, however, can make for a short-lived career. Not surprisingly, hedge fund analysts describe their jobs as extremely intense and stressful, and say turnover is much higher than on the sell side. But with the potential for such lucrative payouts, their positions are in huge demand. “The pressure at hedge funds is substantially higher,” says one top-ranked hedge fund analyst who spent several years on Wall Street and who asked to remain anonymous. “Your longer-term thematic ideas are still relevant, but they need to be put in the context of what a holding and a short is going to do in the next week, month and sometimes even day — depending on the horizon of the fund you’re at. High-performing funds don’t tolerate poor performance.” To identify the individuals who shine as hedge fund analysts, Alpha turned to the people outside their ﬁrms who know them the best — their sell-side counterparts. Throughout the fall we asked sell-side analysts who received votes in the 2007 All-America Research Team survey conducted by Institutional Investor, our sister publication, to name the most impressive hedge fund analysts in nine industry categories, from Basic Materials to Telecommunications. The results, which make up our inaugural Top Hedge Fund Analysts ranking, highlight the top vote-getters in each category, based on feedback from more than 420 sell-side analysts at more than 80 ﬁrms. Stamford, Connecticut–based SAC Capital Advisors leads the ranking. Analysts at SAC are considered best in Basic Materials, Consumer, Health Care and Telecommunications; in Capital Goods/Industrials, members of SAC’s research team nab both the No. 1 and No. 3 positions for the category. Citadel analysts are also popular among sell-side voters, helping the ﬁrm ﬁnish second overall. Citadel analysts take ﬁrst place in Financial Institutions (a sector where the firm also lands the No. 2 position) and Technology, along with top-three rankings in Capital Goods/Industrials, Consumer and Media. New York–based Galleon Group comes in third overall, as four of the ﬁrm’s analysts rank in three sectors — Energy, Health Care andTechnology. At investment banks, covering many of these sectors often means the need to forsake in-depth coverage of individual stocks in favor of more general, longer-term industry perspectives. But at hedge funds analysts are usually given free rein, with the expectation that they will make such freedom pay off. “One of the interesting things about being at a hedge fund is that if you can’t make money in a particular sector, then you don’t follow it,” says Andrew Slabin, who works in Daniel Johnson • Citadel Investment Group Financial Institutions D ANIEL JOHNSON LIKES TO WIN. And as a sharpshooter, both in and outside the ofﬁce, he wins often. Sell-side analysts describe Johnson’s focus on the insurance industry as laser-sharp. “He’s like a sponge for all things related to what he’s focused on,” says one voter. These days, Johnson is concentrating on spotting opportunities in an industry plagued by declining premiums and a stressed credit market — two factors he expects will remain ongoing for the foreseeable future. “There are always opportunities that emerge when the market bids all companies in a sector up or down equally,” says Johnson, 39. “In these situations, good returns come from owning reasonably priced companies with quality management, good distribution and strong balance sheets.” Johnson began covering health care for Chicago-based venture capital ﬁrm Brinson Partners in 1996, following the completion of his MBA at the University of Chicago, and transitioned to insurance in 1999. In 2004, attracted by the prospects at hedge funds, he moved a few blocks down the street to Citadel Investment Group, where he continues to follow the insurance industry. “Being successful here is not just about the bottom line; there’s more to it,” says Johnson, who spends his days looking for investment opportunities others have over looked. “To ﬁnd out what the market’s missed takes effort and a time commitment,” he adds. His efforts are paying off. Beyond his strong investment track record, the depth of Johnson’s knowledge of the insurance industry and his willingness to share his insights with the Street impress sell-side analysts. Those who know him outside the ofﬁce are also quick to note that he is a crack shot with a gun — a hobby he picked up as a boy growing up in the Midwest that he is now passing on to his own sons. 48 • INSTITUTIONAL INVESTOR’S ALPHA • FEBRUARY 2008

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - February 2008

Institutional Investor's Alpha Magazine - February 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Alternative Perspective The Good Guys: A Simple Plan Cover Story: Energy and Commodities: Fueling Opportunity Regulation: Energy Trading: The Brawl on the Hill Interview: Master of Values Regulation: Hedge Fund Registration: Way Out West Research Center: Top Hedge Fund Analysts Alpha Bytes: Rocket Man Unhedged: Commentary: Structured for Success

Institutional Investor's Alpha Magazine - February 2008

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