You’re a high-flying young investment banker, you work at Goldman Sachs, and you have an MBA from a top business school.
There’s a problem, however: you’d much rather be working at a hedge fund.
Breaking into the hedge fund sector is, of course, notoriously difficult – jobs for bankers are limited, especially in Asia where the industry is far smaller than in the US or Europe.
But Sid Choraria, a vice president at APS Asset Management in Singapore, managed to make the move. Here’s how he did it.
What got you interested in hedge funds?
I got hooked on value investing during the 2008 financial crisis when I read a book on the early partnership letters of Warren Buffett. I was an analyst at Merrill Lynch in Hong Kong, but decided to fly to Omaha in 2009 to attend the Berkshire Hathaway shareholder meeting – that was a life-changing moment. During the crisis I actually bought stocks that helped me pay for my MBA at NYU Stern (2009-2011).
Alongside my coursework at NYU, I also gained experience at the hedge fund Bandera Partners. I was a portfolio manager at the NYU student small-cap endowment fund, seeded by legendary value investor Michael Price. I really enjoyed fundamental research and this soon became a passion.
How did you then get your first full-time hedge fund job?
After my MBA I got a job in TMT investing banking at Goldman Sachs back in Hong Kong. While Goldman was an intensive training ground with lots of talented people, being a career banker didn’t appeal to me.
In 2013 I left Goldman to pursue my dream career in alternative investment. I wishfully wrote to Warren Buffett with an investment research write-up on an Asian company I thought he should look closely at. To my surprise, he wrote back saying “keep your eyes open”.
It was good advice. Soon after a former colleague introduced me to Wong Kok Hoi, the founder and CIO of the company I now work for, APS Asset Management, a Singapore hedge fund established in 1995 which focuses on Asian equity investments and now manages $3bn in assets. What appealed to me about APS was the primary investigative research approach it took as well as its long-term approach to businesses.
What are the main differences between your Goldman job and your hedge fund job?
Goldman gave me terrific training in corporate finance and financial modelling and great exposure to deal-making. But at a hedge fund the research work I do is a lot more rewarding as the results are directly measurable in the markets.
If you’re a good research analyst you can actually make a significant impact on the business – instead of waiting several years to climb the partnership ladder at Goldman. For instance, over the last few years I’ve been fortunate to have won multiple research competitions run by SumZero, Ira Sohn and the Value Investing Congress.
What do you like most about your hedge fund job?
I’m passionate about stocks, so I enjoy my job. What I especially like is that at a hedge fund you have to stay intellectually curious to learn about new businesses. And combined with the right investment process, huge rewards can be had for a diligent investor.
But at the same time, the markets can be irrational, so to have a long career at a hedge fund you must be willing to adapt, stay humble and learn all the time. I’ve been fortunate to have a front-row learning seat working with hedge fund veterans like Wong Kok Hoi.
How do jobs at hedge funds in Asia differ from those in the US or Europe?
Asian markets are more inefficient than the developed Western markets. At APS, we find that fundamental research tends to be more preached than practised in Asia, while analysts and investors often place blind faith in reported numbers and are overly reliant on secondary research.
Asian markets are also typically more short-term focused, so taking a longer view on a business can be a source of competitive advantage. And Asian markets – China, India, Japan, South Korea, Indonesia, for example – are more disparate and complex in their politics, regulations, cultures and languages.
But in the US or Europe, there are lots of smart hedge fund people all fishing in the same pond. This actually makes working in Asia much more exciting because you can get a clear edge from your primary research.
How would you advise young bankers wanting to move into the hedge fund sector?
Differentiate yourself by knowing your stocks and investment thesis intimately. Understand how business models and companies make their profits and cash flow. What does the market not yet know and why do you have an edge in this situation?
And read. Constantly. My four favourite books are Margin of Safety by Seth Klarman, Financial Shenanigans by Howard Schilit, Creative Cash Flow Reporting by Charles Mulford, and the Essays of Warren Buffett.
To succeed in a hedge fund you have to be intensely curious and get to know as much as possible about a broad range of topics. Investing is like connecting the dots.