Investment Banking Strategies

Let me give you an insider look into the hedge fund industry. (For wannabe analysts, allocators and managers). I have been working on the launch of my macro hedge fund Palinuro Capital for 11 months now. Here is what I learnt. 1️⃣ For wannabe analysts If you want to break into the hedge fund industry, your best odds aren't with online applications. Instead, it's about: - Content creation (visibility) - Proof of concept (concrete skills) - Communication (marketing yourself) Hedge fund managers or PMs are likely to hire someone that consistently produces great quality content, approaches them with concrete solutions to their problems, and does so in a concise and efficient way. If you are looking for a hedge fund job, show the manager why she needs you. And specifically you. 2️⃣ For allocators Research shows that managers' alpha tends to be concentrated in the first years of a fund: that's when managers are hungrier and most concentrated on risk-adjusted returns than AuM maximization. Yet there is an extremely limited amount of allocators out there that are willing to take the ''career risk'' of allocating to boutique managers. The assessment is mostly qualitative in the early stages, and I have observed the smartest day-1 allocators are after: - A repeatable investment process - Managers that understand the importance of operations and cash flows - Humility and long-term mindset 3️⃣ For managers Launching a hedge fund in 2024 is extremely hard. You have two main routes: - Get a deal from a seeder (sell equity or revenue share to get seed capital) - Go solo (bootstrapping) A seed deal generally comes in the 50-200M area (~100M median), and seeders require a substantial portion of your GP equity in exchange. Yet they give you a large amount of working capital to start, and peace of mind when it comes to operations. These deals are hard to get by, and they don't allow you to remain independent. Unless you are spinning off Millennium or Citadel, if you want ''your own baby'' then prepare to: - Front at least $250k in working capital - Work on the setup and asset raising for 12 months - Fight hard to get to breakeven AuM (~50M) At Palinuro Capital we have managed to raise some solid day-1 capital, and it's been mostly by NOT showing any rush to our investors. We are here for the long run, and allocators love a true long-term mindset. As a wannabe hedge fund analyst, allocator or manager: do you agree or disagree with this post?

I've helped +3,000 new managers craft their thesis. Here are the 3 thesis mistakes I see every time. A fund thesis is a single statement that tells Limited Partners (LPs) two things: 1. What you're investing in 2. Why you're uniquely qualified to outperform in this space Get this right and 1 in 5 LPs will commit to your fund. Get it wrong and you'll spend months in meetings that go nowhere. Here's the template: "[Fund Name] is launching a [$X MM] [Stage] fund in [City] to back [Geography] [Sector] companies [with Secret Sauce]." Sounds simple. But here's where managers get it wrong: 🚨 MISTAKE #1: THE SECRET SAUCE IS OFF-THESIS Managers pitch a healthcare fund but their track record is in fintech. They claim deep founder networks but can't name 10 founders who'd take their call tomorrow. LPs notice. Your secret sauce must directly connect to WHY you'll win in the specific space you're investing in. Seeing an opportunity is not the same as having an advantage. Every other VC sees the opportunity too. Opportunity ≠ Advantage The ones who win have the edge. 🚨 MISTAKE #2: THE THESIS IS MUMBLE JUMBLE "Investing in women's and consumer health and CPG (including AI-enabled consumer fintech)..." No. Your thesis is where you'll do 80% of your deals. Not 100%. You don't need to cram everything in. Pick ONE stage. Pick ONE sector. Make it simple enough that an LP immediately knows which allocation bucket you fit into. If your investment focus is more than 5 words or, god forbid, needs parentheses, it's too complicated. 🚨 MISTAKE #3: THE FUND SIZE DOESN'T MATCH THE STRATEGY "We lead Series A rounds in enterprise software." With a $7M fund? The math doesn't work. Or: "We're investing globally." With a $10M fund? You can't afford the legal infrastructure for multi-jurisdiction deals. Your LPs don't want the tax headaches. Your thesis needs to be executable at your actual fund size. The managers who get funded have theses that are: → On-thesis (secret sauce matches the investment focus) → Simple (no kitchen sinks) → Realistic (math works at the fund size) If you are thinking of launching a fund, save this advice! --- ✍️ Myrto Lalacos Follow for more on launching, running, and investing in VC firms.

8 is Great! Multi-Asset Credit or MAC has emerged as a compelling solution for capital allocators looking to generate attractive risk-adjusted returns in the Public Credit markets. MAC distinguishes itself by dynamically allocating capital across the four segments of the public credit universe—Structured Credit, Leveraged Loans, High Yield, and Emerging Markets, best implemented when maintaining a rigorous focus on credit selection, sector rotation and active risk management. At its core, credit managers who run active MAC programs are best served by using their keen knowledge and applying it to dynamic asset allocation based on disciplined fundamental research and understanding of relative value. Specialized-dedicated individual portfolio management teams with deep domain expertise operate within each asset class as an integrated team and the CIO presides over the program. This creates a collaborative environment where investment decisions are enriched by a range of perspectives to uncover optimal relative value. By allocating across the four primary sectors of Public Credit, MAC benefits from differentiated drivers of return, while mitigating idiosyncratic risk. Dedicated teams expert in Structured Credit provides a wide range of opportunities (RMBS, ABS, CMBS, CLOs) with relatively lower volatility. BSL offer floating-rate exposure, low duration, and strong relative performance in a rising rate environment. Dedicated teams for High Yield and Leveraged Loans adds upside potential through credit spread selection along the yield-credit curve. Dedicated team for Emerging Markets, focused on hard currency sovereign, quasi-sovereign, and corporate bonds introduce global diversification without assuming local currency risk. The net result is additive when run under a single mandate. MAC strategy is measured vs. its benchmarks, but should deliver more than a benchmark return, if the investment manager has the requisite specialized credit expertise, couples it with dynamic optimal allocation approach to deliver a cohesive, risk-managed solution for institutional investors seeking alpha through cycles. When I think of investing in public credit markets, I don’t think of just one segment but the entire market place. In order to do so, you must employ specialized investment teams that are integrated and collaborative to drive an optimal public credit portfolio. I believe investors and capital allocators are best served by a multi-asset approach. This graph below shows the component yield today, with MAC the yellow dot in the middle. “8 is Great” is my mantra for MAC today.

Had a conversation with one of our LPs last week that's been sitting with me. We were catching up on the portfolio and he pointed to one of our earlier bets — a company we backed about six months ago — and just asked: "What's the thesis?" I knew the answer, of course. But I've seen that question stop a lot of first-time investors cold. They remember the energy in the room. The founder was sharp. The deck was tight. The round was closing fast. But the thesis? They fumble for it. It's the most common thing I see from people stepping into investing for the first time. And it's not bad judgment. It's not naivety. It's mistaking excitement for conviction. The question I always come back to — and the one I now use before every decision: Can I explain this in one sentence, without the founder in the room? Not "the market is massive." Not "the team is incredible." A real sentence: who actually pays for this, why now, and why this specific team figures it out before anyone else. If you can't say it out loud before you write the cheque, you don't have a thesis. You have a feeling. Feelings make for great dinner conversation. They make for pretty rough portfolios. The thing that helped me most early on was building a personal investment checklist — 5 or 6 things I genuinely need to believe before I commit, written down before I look at the next deal, not after. We have coded this as part of our Investment Process at #Equanimity Not glamorous. But it's the difference between investing and just writing cheques. If our LP had asked that question and I'd fumbled? That would've told him everything he needed to know. #Investing #VentureCapital #InvestmentThesis #Founders #DecisionMaking

Mastering the Buy-Side M&A Process: A Strategic Guide . Navigating the buy-side M&A process requires precision, strategic alignment, and effective execution. Here's a breakdown of the key stages to ensure success: Developing an M&A Strategy: Every M&A journey begins with a strategy that aligns with the corporate vision and business model. A well-defined approach sets the foundation for value creation. Target Screening: Identify potential acquisition candidates that meet your strategic objectives. Criteria such as market position, synergies, and growth potential play a crucial role. Due Diligence: Evaluate targets thoroughly, analyzing valuation, operational efficiency, and potential synergies to determine value creation opportunities. Making an Offer & Closing the Deal: Approach negotiations with clear goals and finalize the deal to set the stage for integration. Pre-Close Integration Planning: Prepare a detailed Day 1 integration blueprint, mobilize teams, and outline key processes to mitigate risks and capture synergies effectively. Post-Merger Integration (PMI): Execution is critical! Integration plans should be refined and expanded post-close to ensure seamless alignment of operations and deliver anticipated value. Post-Mortem Analysis: Conduct lessons-learned sessions to refine processes and enhance readiness for future M&A transactions. M&A is not just about the numbers—it's about creating long-term value, achieving strategic objectives, and ensuring cultural alignment. With the right framework, you can transform opportunities into success stories. ----- Follow me for more like this... Jeetain Kumar, FMVA® PS: If you want to start your career in finance, check the link in the comments to book a 1:1 session with me #finance #cfa #investment #valuations #strategy

Honey, I Shrunk the Sample Covariance Matrix - Research Paper "Honey, I Shrunk the Sample Covariance Matrix" by Olivier Ledoit and Michael Wolf addresses a fundamental issue in portfolio optimization: the instability of the sample covariance matrix when the number of assets is large relative to the number of observations. This instability can lead to poor portfolio performance, as the sample covariance matrix tends to overfit the data. Key Points 1. Problem with Sample Covariance Matrix: When the number of assets (p) approaches the number of observations (n), the sample covariance matrix becomes unreliable. This is because it tends to capture noise rather than the true underlying relationships between assets. The problem worsens as the ratio of p/n increases, making it harder to estimate the covariance matrix accurately. 2. Shrinkage Estimator: The authors propose a "shrinkage" method to improve the estimation of the covariance matrix. The idea is to combine the sample covariance matrix with a well-structured target matrix. By introducing a shrinkage factor, the estimator is a weighted average of the sample covariance matrix and the target matrix. The shrinkage reduces the impact of sampling noise while retaining essential information about asset relationships. 3. Optimal Shrinkage: The authors derive an optimal shrinkage coefficient that balances bias and variance. This is done using a rigorous statistical framework, minimizing the mean-squared error of the estimator. 4. Benefits: The shrinkage estimator improves out-of-sample performance in portfolio optimization by providing more stable and reliable covariance matrix estimates. It helps prevent the overfitting problem associated with using the raw sample covariance matrix, leading to better risk-adjusted returns. 5. Applications: This approach is widely applicable in portfolio construction, and optimization. It is particularly valuable in high-dimensional settings where the number of assets exceeds or is close to the number of observations. In essence, the paper offers a practical and theoretically sound solution to the problem of noisy covariance matrix estimates in portfolio optimization by "shrinking" the sample covariance matrix toward a more stable and robust estimator. I've attached a comprehensive research paper. I highly recommend reading it for anyone interested in portfolio optimization. #covariance #portfolio #optmization #shrinkage

Manager Selection: The Hidden Alpha Engine “It’s not just the strategy. It’s who’s driving the car.” We obsess over strategies: macro vs long/short, private equity vs credit. But in alternatives, it’s often not what you buy—it’s who you back. Top-quartile managers can outperform by thousands of basis points. And yet, due diligence often gets treated like a checkbox. I’ve seen funds with dazzling decks and nothing under the hood. And I’ve seen quieter managers with airtight process, discipline, and skin in the game deliver decade-long outperformance. Manager selection isn’t always glamorous. But it’s your real edge. Don’t chase alpha. Allocate to it. #bealternative So how do you identify the right managers—and avoid the wrong ones? Here are five actionable principles backed by Hedge Fund Due Diligence, Due Diligence and Risk Assessment of an Alternative Investment Fund, and Private Equity Compliance: 1. Prioritize Behavioral Red Flags Over Marketing Shine Most blowups stem from behavioral warning signs—not poor returns. – Be alert to evasive answers, overpromising, and CV inconsistencies. – If the manager can’t clearly explain their worst drawdown, walk away. Operational risk often wears a smile. 2. Use a Layered Due Diligence Framework – Investment: strategy clarity, mandate discipline, leverage use. – Operational: NAV policies, service providers, valuation controls. – Manager: track record, co-investment, legal history. A strong fund passes all three layers—not just the first. 3. Move Beyond the Checklist Mentality – Ask how—not just what. – Request audit letters, compliance manuals, fund org charts. – Evaluate how quickly and how clearly information is shared. It’s not what’s disclosed. It’s how it’s delivered. 4. Re-underwrite Annually—Not Just at Allocation Diligence doesn’t stop once the subscription agreement is signed. – Monitor for style drift, team turnover, and audit delays. – Build an annual risk scorecard: manager alignment, NAV consistency, valuation transparency. Great managers stay great when they’re held accountable. 5. Investigate the “Why” Behind the Performance Outperformance isn’t always repeatable—but process is. – Ask: “What edge do you believe is durable?” – Review decision-making consistency, not just returns. – Confirm fee alignment, risk-adjusted mindset, and long-term incentive structure. Strong governance and repeatable process beat personality and narrative—every time. Alpha doesn’t live in the deck. It lives in the decisions behind it. What’s your non-negotiable when assessing a manager beyond performance? #bealternative

With public equity and fixed income markets in turmoil in recent weeks the traditional 60:40 portfolio model has again been challenged. There's little doubt uncertainty will pervade these markets for the foreseeable future. Therefore it is timely to release further research on the beneficial portfolio characteristics of private market assets. In this paper "Optimising private market asset allocations" we examine the integration of this asset class within traditional asset allocation strategies to  assess performance impacts across investor risk profiles. We believe that including private market assets can significantly enhance portfolio returns for investors who adopt a risk-based utility-maximising strategy in portfolio construction. Additionally, we find that unlisted infrastructure has the most potential of the private market assets considered to improve portfolio Sharpe ratios, especially for ‘Defensive’ and ‘Balanced’ investors. Our research applies a utility maximisation framework which facilitates risk appetite aware optimisation to tailor portfolios to match specific investor risk preferences and lifecycle stages. A novel two-stage returns unsmoothing approach is used to more accurately estimate true private market return volatility. We show that even after returns unsmoothing, private markets can significantly enhance portfolio outcomes. This study finds that defensive investors benefit from allocations  to infrastructure and private credit, achieving lower volatility and higher returns. Balanced investors see similar advantages with  a stable allocation to infrastructure, while growth investors lean towards private equity for higher risk-reward profiles. This analysis adds further weight to our assertion that private market assets have a material role to play in optimising investor portfolios. With IFM Investors Economics & research Frans van den Bogaerde, CFA and Christopher Skondreas #investment #assetallocation #risk #privatemarkets #portfolioconstruction

Our latest research reveals a fundamental shift in the hedge fund landscape that's rewriting the rules of capital allocation. Some of the key findings: 74% of allocators now consider the absence of independent fund administration an immediate red flag – the single most disqualifying factor in investment decisions. The operational disconnect: 35% of managers cite adding new funds as their greatest scaling challenge, yet 64% of allocators demand clear operational scaling roadmaps as a comfort factor. The bottom line: The days of Excel-based operations and ad-hoc infrastructure are over. Institutional-grade systems have moved from aspirational to essential – even for emerging managers. This isn't just about compliance; it's about competitive survival in an environment where operational excellence has become the new alpha. The message for the industry is unequivocal: invest in institutional infrastructure from day one, or risk systematic exclusion from institutional capital. Full analysis in our latest HedgeWeek Insights report. Register on the link in the comments below for a free copy of the report now.

Navigating Acquisitions: Key Considerations for Software #Startups 🚀💼 Thinking about selling your software #startup? The decision to pursue a merger or acquisition (M&A) is a pivotal moment that requires careful planning and strategic alignment. Based on insights from Volaris Group's The Ultimate Guide to Selling Your Software Company (2025), here are key factors startups should consider when approaching an acquisition: (1) Merger vs. Acquisition: Decide whether a merger (integrating with a complementary business) or an acquisition (operating standalone or absorbed) aligns with your goals. For instance, mergers suit smaller startups seeking access to larger customer bases, while acquisitions are ideal for market leaders with strong brand recognition. (2) Customer Impact: Choose an acquirer committed to maintaining your product and service quality. Ask: Will they invest in your software, or force customers to migrate? Will support remain consistent? Prioritizing customer trust ensures your legacy endures. (3) Employee Development: A great acquirer invests in your team’s growth. Look for buyers with a culture of collaboration, clear talent management strategies, and opportunities for professional development to secure your employees’ future. (4) Strategic Fit and Values: Align with an acquirer whose values and growth strategies match yours. Investigate their track record—do they foster long-term growth through R&D investment, or focus on short-term gains? A shared vision is critical for success. (5) Avoid Common Pitfalls: Don’t wait too long to sell, as market conditions can shift. Ensure transparency during due diligence and prioritize deal structure over price alone—earnouts and contingencies can impact your outcome. (6) Prepare Thoroughly: Build a strong M&A team (CEO, CFO, CTO, legal counsel) and create a comprehensive Information Memorandum to showcase your company’s value. Address technical debt and refine your growth story to boost valuation.