Sector focus vs generalist
How would you think about the choice between a small-cap generalist vs sector specialist seats at two different shops that are broadly similar in quality? I find the small-cap generalist seat more interesting - the ability to look at different sectors, different business models should, in theory, be great for developing as an investor. However, the advice I have received from more experienced investors thus far has highlighted the career benefits of developing a sector expertise.
Any input would be appreciated!
They’re not wrong, focusing on an expertise could help expedite your career whereas starting as a generalist could end up with indecision.
Now if you don’t know where to start and want to explore before deciding on what you like the most, go the generalist route.
Generalists don’t make money
This is a team of small-cap generalists, and they have been quite successful actually.
The argument for generalist alpha is that you can apply pattern recognition across sectors
The argument for specialist alpha is that you know the companies better than anyone else
I find the latter a lot more persuasive, but idk
I've been a generalist for 10+ years. It was more common when I started in the industry but the industry has definitely shifted to specialization. If I were starting my career now, while I would find being a generalist much more interesting, I would most likely choose to focus on a sector.
Thank you, very helpful! Would you choose the specialist route regardless of the sector assigned to you?
Sector. Breadth comes with time and experience (Pattern recognition).
I'd probably still go sector...unless it was a sector I really couldn't get excited about. At the end of the day, to do well, you still need to be excited for and enjoy the job at some basic level (it can't feel like torture).
All the very successful pod shops operate in verticals, i.e. sector specialists. Given the rise of pod shops, that might be a good career move if you are thinking long-term.
While this is the rule, there are exceptions.
I've seen a handful of generalist pods at MMs, its doable if that's what you want.
The important note to this in my experience is that most generalist PMs at MMs began as specialists and gradually added additional verticals to their coverage. They tend to be more 2-3 sector specialists than people that look at the entirety of the market.
Do you have offers from both? More detail on the shops would be helpful (size, general strategy, etc), but sector specialist is continuing to become much more valuable and sought after
My fund is generalist and has managed good results. What I’ve found is we all tend to gravitate towards some sector bias (someone more oriented towards financials, one on healthcare and TMT, but all moving across sectors as we see fit) so you get some benefit of sector focus while still having flexibility.
I feel that being a generalist has prepared me more to make the eventual step to PM, but definitely have felt disadvantaged in certain sectors/situations where expertise is valuable and takes longer to develop. In those cases I basically have to handicap things more or stay away. Usually the latter.
I have been able to generate solid results as a generalist but probably would have done better with a sector focus. But being a generalist is def more interesting IMO. Markets are so competitive that being sector focused is probably better if you have the team to do it.
"Generalists" = factor specialists (value, turnaround, distressed, etc.).
"Specialists" = industry specialists (technology, autos, consumer, etc.).
Remember: "Practice doesn't make perfect. Perfect practice makes perfect."
Well shit. I partially picked my job because we got to cover companies in several industries. This is making it sound like I should have stuck with the traditional SS ER model for buyside roles.
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