Questions & Answers:

One of the very biggest problems of all, Kiev says, is the problem of star hedge fund managers being unable to cope with the extra responsibility of managing a team, or a rapidly expanding team, as their funds under management grow into a billion plus from being just a few hundred million.

‘The assumption that people that you hired can manage themselves is a real problem for many of the star managers. I have seen this repeatedly where a guy starts a fund and immediately hires a bunch of analysts. Then he’s sitting there, waiting for the analysts to provide him with the work he’s accustomed to doing, and now he’s depending on other people’s work; that’s a very different model than what he may have been successful at. That’s a classic scenario for disaster.’

Q: What makes the difference between the good fund managers, the great ones, and the mediocre?

A: I think the best guys are really very skilful in avoiding drawdown; the best guys are good at getting out of losers; the best guys are good at pressing the bet when they see the opportunity. They are making the most of their money; they have the eye of the tiger; they have great purpose, great intensity and a willingness to really stick it out... How do the not-so-great managers show themselves under extreme pressure ? ‘Even when a trader gets ahead again and up, he doesn't want to sell out of his positions even though they can go down further because he doesn't want to admit that maybe he’s wrong. He wants to hold on, hoping against hope that it’s going to return to a higher level. One of the things that you do when you’re in the zone is you say, “OK, I just missed it, I struck out, I have to get up and bat again. Let me take my losses. And let me now allocate what I have into things that are more potentially profitable as opposed to holding onto things that are going down.”

Q: What are some steps I can take
to be a better trader?
A: Set goals! As easy as it sounds, the vast majority of people are reluctant do to that. Set goals that are reasonable; determine what you need to do in each stock, what percent each week. Think about your portfolio in a systematic way. How many shares do you need to follow your plan? Build a template. Do the digging, call around to the distributors, vendors and contractors. really understand the company. Have a variant perception, figure out when you're going to get paid. It's a lot of work! It's not just watching television and buying the latest hot tip. Have a goal, have a plan in terms of how big you're going to be in your positions, and track the stock. The biggest mistake, holding the stock once it starts running against you. The best traders cut their losses! Get bigger in your winners. Make a plan, develop the plan, then follow it. To be a success - master stress, and master the impulse to do things that are intuitive, that's the key to success.

Q: How can I stop dwelling on past mistakes?
A: if you're someone who's obsessed with past mistakes, you're having a hard time getting into the now, getting into the present in terms of focusing your attention. It might be a good idea to get out a notebook and write those things down until eventually you kind of expel them on paper. Maybe its going to take you an hour or two to write down those thoughts. Now what happens is the next time you start to obsess, you write it down, or just remind yourself that you can put these thoughts in a notebook and get back to the task at hand. You may be experiencing a problem in distractability. You're distracted from the present which is really where you ought to be and focusing on the past. A very common problem and something which is usually associated with stress and getting out of the game. What you need to do is increase the amount of time you can spend focusing on the task at hand, focusing on the goal, focusing on the stocks you selected in your portfolio and the work you can do to build your level of conviction. To the extent you can do that, you'll stop thinking about what went wrong.

Q: How do your seminars work?
A: I like to ask every team I work with to bring in their trading stats. I want to hear about how they handled their positions, why they got out so soon, and why they held on when it was going against them. Sometimes it is a one-on-one situation and sometimes it is a portfolio manager.

It's a question of going through the routine. When they have a big drawdown, they question what’s going on, and sometimes they think they have just lost their edge.  My job is to get them back into a positive frame of mind.

A fairly typical example will be a hedge fund manager who, say, specializes in telecoms and media. Only, all of a sudden, he thinks things are happening in energy and he gets involved in the energy trade. But he doesn't really know energy. Somebody is telling him about energy, another friend of his is telling him about biotech, which is fine, but usually when people tell you what to get into, they don’t tell you when to get out of it. So you start looking at it. You see the guy has gotten away from his strength and the first thing he’s gotta do is tear down, reduce his risk, get back to hitting singles, not try and make back all the money he has lost and drawn down, which people sometimes do. They get in early, they start chasing money, and they really put themselves in jeopardy.

You really have got to go back to basics, you have to set some reasonable targets, and you’ve got to build up some rhythm. And then you’ve got to find out what dropped out of your strategy.

Q: The most frequent problem with managers, traders and private investors?

A:  It's the paradox of why certain people are good at picking long, but are hopeless on the short side. They are balancing their book with high-beta tech stock and many of them they don’t know anything about it. I then say, “Why are you making these random bets? Did you ever think about doing the same kind of work on the short side as you’ve done on the long side?” You know visiting the company, sizing them up, seeing if there are structural weaknesses, and making money on the short side is not just simply taking a flyer. it is not uncommon for me to say well, what kind of support do you have? Well, I need an analyst and I need to dig deeper, I need to develop a consultant from Taiwan, I need to have a mining specialist, I need a geologist to help me understand the oil space. When you approach it with this sort of proactive approach you begin to find all sorts of communication problems, the analysts aren’t talking to the portfolio managers... it can all fall apart very quickly.