What Happens Inside Steve Cohen’s Point72 Academy – Hedge Fund New Hire Training.
“Point72 Academy” — a 15-month paid program designed to train college graduates as investment professionals for the fund.
Point72, a family office that manages the assets of its founder Steve Cohen and other employees, manages more than $10 billion. It trades equities and makes macro and quantitative investments.
The academy program is the first of its kind, and it’s intensely competitive. It launched in August, and only 12 of 400 applicants were accepted for its first year. Spots are already filling up for next year’s class.
“They get to have exposure to companies at a very early age [and to] the senior management at a very early age in ways that, at other firms, the younger people don’t get,” said the academy director, Jaimi Goodfriend.
Typically, a young person hoping to build a career in finance will begin with an internship and a two-year analyst stint at an investment bank before interviewing with and taking a job on the “buy-side” — that is, at a hedge fund or private equity firm.
Analysts undergo rigorous training at the banks, but the work is often uninspiring — and grueling. A common complaint is that analysts work excessively long hours scrolling through Excel sheets and putting together PowerPoint presentations.
As one hedge fund intern told us, “a monkey” could do the job of a junior banker.
Why would a hedge fund want to pay to teach people?
Buy-side firms begin recruiting from the banks as early as six months into the analysts programs — a full 18 months before they would typically join the firms.
The recruiting process takes up lots of resources — recruiting firms lead the effort and pick up sizable fees in the process — and the hedge funds, for their part, often wind up retraining the new hires anyway.
“I think there’s a big learning curve between when they start at a buy-side firm and when they become really productive,” said Goodfriend, who herself has worked in banking and on the buy-side.
“There are a lot of gaps to fill before you can become productive as an investor, and I think just recruiting out of a two-year bank is not sufficient to become that person.”
The firm is also up against major banks, private equity firms, other hedge funds, and even Silicon Valley for young talent.
According to Point72 president Doug Haynes, the academy “will help us get first crack at the next generation of investor talent before they might go elsewhere.”
What does hedge fund school look like?
The program begins with classes in the fundamentals of finance and economics. Students study accounting, statistics, and economics.
Around four months in, they graduate to more real-world pursuits: company research and modeling.
For about 10 months, they then cover companies in various sectors under the guidance of the academy. Then they get to start rotating across porfolio-management teams.
A job is not guaranteed at the end of the program, but the intention is for most students to get a permanent placement. In the words of Goodfriend: “If we want you, we will find a way to retain you.”
The class visited by Business Insider was taught by Point72’s chief economist, Dean Maki, who joined the firm in January from Barclays.
His lecture covered everything from the Fed’s decision not to raise interest rates in September to China’s export and consumption trends.
The students — sporting shirts, slacks, and in some cases matching company fleeces — peppered Maki with questions: Why do people fear deflation? What might the real rate of growth be in China?
They were graduates of Boston College, the University of Illinois, and a handful of Ivy League schools. Several were army veterans, while others had previously worked in finance.
All of the students were male.
A direct path to managing money
One student, Sean Donlon, worked as a research analyst at Point72 for four years before joining the academy. He told Business Insider the program provided him a more direct path to becoming an investment manager, which is his ultimate goal.
Brian Mulvihill, another student, set out along the conventional investment-banking route. He did an internship and one year as an investment-banking analyst on the industrials team at UBS.
Mulvihill studied at the University of Illinois, where he first met Goodfriend, who lectured and directed an investment-banking academy there.
We asked Mulvihill why he didn’t sit out his two years at the bank before jumping to the buy-side, like most analysts do. After all, it could be 15 months before he graduates from the academy and is able to begin working.
His answer: This route offers more of a guarantee.
“It’s really just a matter of, ‘Do I want to join Point72 now — or at least interview for that opportunity now — versus wait another year to try to join a team here?'” Mulvihill said.
He said it’s impossible to know if, two years from now, he might end up with a job at a prominent hedge fund like Point72. The job market, or the firm’s own hiring practices, could change in that time. This way, he is giving himself the best chance of getting a job at the firm.
And though academy classes have only just begun, he said the lifestyle is better than investment-banking life.
The nature of the analysis they do is also different: “In investment banking, you’re often scanning the universe for consensus opinions. Here you’re really forced to take a view on — who has the right view? Is consensus right or wrong?” he said.
The work flow is calmer at the academy than at Mulvihill’s former employer, too, and it’s easier to feel self-motivated to succeed.
That isn’t to say life at the academy is warm and fuzzy. The students are still expected to work hard, and Goodfriend told us the office is purposefully kept cold to keep everybody awake.
As for the pay? Neither Mulvihill nor Donlon would disclose what the academy is compensating them. But Mulvihill said that, next to his bank-analyst pay, the academy’s is “definitely comparable.”
Point72 Asset Management, is rolling out a new way of measuring performance that will identify core, necessary skills and rank them on a 6-point scale.
“A job is really just a cluster of skills, and now we have a way to talk about that with a lot more precision that informs every stage of the process,” Mike Butler, Point72’s head of human capital management, told Business Insider.
Butler and President Doug Haynes, a McKinsey veteran, joined forces with an external consulting firm, Vega Factor, to identify the essential skills required for individual roles, build an inventory of those skills across every position in the firm, and map it all out.
The new system enables employees to build career-progression plans based on their skill set by identifying what they most need to focus on. Employees can assess, for example, what to focus on as an individual, how their managers should be supporting them, and what resources the firm can provide to help.
“Like most performance-management systems, ours had some characteristics that weren’t really well aligned with where we’re going as an organization,” Butler said. “It tended to be somewhat backward-looking, judgmental — it didn’t really help people develop their skills and advance their careers.”
he Securities and Exchange Commission in 2013 shut down Point72’s $16 billion predecessor, SAC Capital, banning the hedge fund from managing outside money. Cohen pleaded guilty to securities fraud and launched Point72 a year later as a family office to run his billions of dollars of wealth.
The firm is expected to start managing outside money again at the start of 2018, after he struck a deal with the SEC in January.
And the firm has launched an “Academy” to train the next generation of money managers, recently extending the program to recent grads in London and Asia.
The new performance-measurement program assesses skills ranging from generic — like effective communication, presentation skills, and time management — to specific and technical. Butler said that when his team started compiling the skill inventories, employees in different specialist groups would say it was a futile task because they felt their skill sets were unique to their roles.
“But in reality, when you break it down to a fundamental skill level, it’s a lot more relevant than you think,” Butler said.
He said that recognizing the universal nature of many of those skills helps with internal talent mobility, too. Employees hoping to move across divisions can examine their personal skills map and zero in on which skills need further development before making the move.
Skills are broken down into prioritized and not prioritized, meaning if you’re a junior-level accounting analyst, some of the higher-level skills — related to, for example, managing people — are not relevant.
“If there are 80 skills that might define your career from beginning to end for a particular role, there might be 15 or 20 that are relevant at your particular stage of development,” Butler said. “The whole thing is there; you’re zeroing in on the skills that are pertinent.”
Six columns help gauge how well you’ve mastered each skill. Those include:
Learning: getting comfortable with the skill.
Doing: performing that skill at a high level of proficiency without supervision — in other words, being a master of that skill.
Ready to teach: you’re not only good at it, but you have the capability to make other people good at it, too.
Teaching: actually teaching that skill.
Tool-building: you might find a way to automate a process, or build a spreadsheet or an excel model to save time in the future.
Inventing: rethinking the work in its entirety — not just finding ways to do the work faster or more efficiently, but taking a step back and observing changes in the industry, for example, and recognizing that a process isn’t as valuable as it used to be. Fundamentally rethinking whether that task or process still servers a purpose, or whether it needs complete tearing apart and rebuilding.
“As a firm, we provide employees with the tools they need to do [their] work better, or faster, or at a higher level,” Butler said. “Some are so skilled that they reinvent the skill for themselves. Most performance-management systems never get beyond ‘doing.'”
Doug Haynes. Wall Street Week
Point72 has introduced the program in stages, starting last year with a pilot in the operations group. This year, it’s been rolled out across investment services, meaning all the traditional corporate functions: finance, human resources, IT, research, strategy, and communications.
That covers about 650 of Point72’s 1,000 employees. Now the firm is working on extending it to investment professionals — meaning portfolio managers and analysts. Currently the firm is building out the skills inventory for analysts, which should be finished by the end of this year. It will begin mapping out the analyst skills in the first quarter of 2017.
Here’s what an analyst’s skills inventory might include, from Point72:
Analyzing root causes
Building effective working relationships
Communicating in writing
Communicating with presentations
Evaluating oneself in terms of mindset and skills
Gathering and incorporating qualitative and quantitative input and feedback
Giving upward feedback
The new system could also affect how the firm hires new talent. The language and framework for thinking about which skills are needed for each job enables the firm to write clearer, more specific role descriptions when hiring and assessing candidates, Butler said.
The firm is even incorporating the new, more specific language into its promotion guidelines.
“I’ve heard people describe this as a replacement of our performance-management system, but it’s much more than that — it’s a framework for thinking about talent through the entire life cycle,” Butler said.
Read More: Business Insider