Advice from Hedge Fund Manager - Karim Moussalem

Advice from Hedge Fund Manager – Karim Moussalem

Last week I had the pleasure to interview Karim Moussalem. Karim made MD at Goldman Sachs in his twenties, and was responsible for their single stock-trading desk in Europe. He then left in 2011, to start Verrazano Capital based in Paris. Verrazano now manages $1.6bn across equity strategies.

Karim now 38 years old, has been involved in equity markets for almost two decades on both the sell side and buy side. I was very interested in hearing his views since he had a reputation at Goldman of being a great trader, mentor and thinker.

We discussed Karim’s career, how he gets smarter, and how you can develop an edge.

 

Early Career:

Karim used to play tennis competitively in his teens and twenties and he attributes a part of his hiring at Goldman Sachs to have been driven by luck. Fortunately his MDs were interested in Tennis, so he got to spend a lot more time versus the other interns playing tennis with them. Karim believes that one of the reasons for his success as an investor are the decision making skills he learned in tennis.

 

Signal vs Noise:

Tennis like trading or being in the markets is a competitive match. You have to make lots of decisions. Some decisions are right, some wrong, sometimes you win even when you make bad decisions, and sometimes you lose even when you make good decisions. Be able to learn from your mistakes and move on.

 

But you have to have the mental strength to get back in the game and keep making better decisions

 

He thinks one of the most important skills is having a sound mental process – to take the emotion out of your decisions. One of the ways they implement that when it comes to investing at Verrazano is the use of stop losses – don’t get attached to positions. If its not working, they get out.

 

Take time to reassess the investment case, respect a cooling off period, speak to the company again, and potentially get back in

 

One of the tricks he has learnt to avoid losses apart from stop losses is to look for a spike in volatility in other markets – usually a vol spike in a market cascades across markets. So when he saw China vol pick up last summer, they worked to take their net down quickly before the price moves propagated.

 

Secrets to Success:

In Karim’s mind, the secrets to his success are:

  1. Reading a lot
  2. Understanding what moves markets – when the macro becomes more important
  3. Understand the forces that influence stock prices
  4. Be humble, focused

 

Reminds me of the Soros quote:

Once we realize that imperfect understanding is the human condition there is no shame in being wrong, only in failing to correct our mistakes

 

How to be a better PM:

  1. Read a little about a lot – you need to know about a lot of things
  2. Be on top of what markets are doing around the world
  3. Learn how to buy when others can’t or won’t
  4. Read interviews of other great managers

 

Why a PM’s job is different from an analyst:

It’s hard to make the transition because a PM’s job is very different from an analyst’s:

  1. You need to understand the market’s view
  2. Understand what else is going in the market and in the sector
  3. Understand what could de-rate the market, the sector and the stock

 

Advice for those starting out:

  1. Work hard on something you are good at
  2. Surround yourself with good people – your teachers matter
  3. Read a lot
  4. Invest in your network
  5. Develop a process that works for you
  6. Stay humble
  7. Work in a few different regions and countries
  8. But don’t change jobs too early or too often

Thank you Karim

 

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