How to be Great Hedge Fund Analyst and What Makes a Great Idea

Welcome to the 52nd Pari Passu newsletter.

Alix is the Managing Partner and portfolio manager at hedge fund Prime Macaya Capital Management. I recently heard of him on Twitter and over this past weekend, I wanted to learn more from him. There are several talks he has given available on the internet, and you can find below some of the lessons I learned from him.

This week, one of the Gods of Investing, Charlie Munger, passed away. In his honor, I am sharing a PDF with over 1,200 pages which includes everything he has ever written / said / shared going back to the ‘70s. If you are interested, you can get it here.

Part 1: Being a Great Hedge Fund Analyst

As with virtually every investor, Alix appreciates the God of Investing and shares a quote from Warren Buffett:

“ Over time, markets will do extraordinary, even bizarre, things. A single, big mistake could wipe out a long string of successes. We therefore need someone genetically programmed to recognize and avoid serious risks, including those never before encountered. ”

While history rimes with the past, new events make the market unpredictable, and therefore analysts should always be able to keep an open mind. This topic connects to the idea of game selection which is more important than the playing skill itself. Investors have to think in the same way. Deciding where to apply our skills is more important than the skill level itself. Imagine being the world’s 2nd best at a game, if you play against the best in the world you will end up losing, despite being virtually invincible compared to the rest of the world. Understanding the game and the competitors is essential.

This concept is well explained by something Charlie Munger once said: “Competency is a relative thing. What I needed to get ahead was to compete against idiots. And luckily, there is a large supply”.

This idea applies to every sphere of the world, including how companies operate. Alix defines a Prime Pattern as when an individual or organization is financially taking advantage of a weaker individual or organization. For example, when Walmart started to take out small grocery shops one to one, that was an example of Prime Pattern.

Some qualities shared by great analysts

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