Employing analysts remotely. Crazy idea?

[MrB]

Does anyone have strong views or experience with this?

I had great success building up relationships globally with people I hardly ever see or in some cases have not even met. They made a great contribution to my research effort, but they are mostly of the PM variety.

 

I have been toying with the idea of using analysts more regularly irrespective of where they live and without requiring them to move from where they are living today. I recently decided to allocate part of our budget to potentially use for this purpose, so it is more than a casual thought.

 

I am concerned about the practicality of the idea, but is it really impossible to say have an office in the US and successfully employ some brilliant young analyst in Asia without requiring him/her to move to the US?

 

Your thoughts/feedback is appreciated.

 

[Kraven]

Does anyone have strong views or experience with this?

I had great success building up relationships globally with people I hardly ever see or in some cases have not even met. They made a great contribution to my research effort, but they are mostly of the PM variety.

 

I have been toying with the idea of using analysts more regularly irrespective of where they live and without requiring them to move from where they are living today. I recently decided to allocate part of our budget to potentially use for this purpose, so it is more than a casual thought.

 

I am concerned about the practicality of the idea, but is it really impossible to say have an office in the US and successfully employ some brilliant young analyst in Asia without requiring him/her to move to the US?

 

Your thoughts/feedback is appreciated.

 

I think it's a workable idea.  I worked with many people that I rarely saw, if ever, and it was fine.  It all comes down to how you work and what your expectations are.  That is, are you the type of person or organization that expects everyone to get into a conference room and hash things out?  Or is most communication done by email and phone anyway?  There are some people who are uncomfortable reviewing things and having discussions other than face to face.  There are some cultural aspects to this as well, although that probably matters less here.  It also depends on what kind of workproduct you look for.  Do you just want a memo or bullet points or something, or do you want a presentation with power points and lunch served?  Finally, the last thing that comes to mind is time differences.  That can be a pain sometimes.  If everyone is always say 12 hours ahead or behind, then sometimes it can be hard to set things up, but that goes back to workproduct.  If you're just looking for a memo or something, it doesn't really matter.  I think in the right situation it works very well for all parties.

[oddballstocks]

It depends!  I have a lot of experience working from offices and home, neither is better than the other but there are big differences.

 

The first is you need to have enough actual work to keep someone busy.  This seems obvious, but if you're in an office with co-workers it might be hard to know exactly what this is.  My experience is that some percentage of office time is completed wasted talking to others in the lunch room, by the water cooler, at the desk etc.  These might all start as work related conversations that diverge into something about kids or sports.  This is a part of normal office life, no one is a robot who works 8 straight hours.

 

My experience with home is that I'm much more productive, I don't have to deal with a commute or many distractions that I have at the office.  Therefore what might take six hours at the office might only take three or four at home.  The question is what to do with the rest of the time?  Also keep in mind that the person at home isn't a robot who works head down.

 

Figure out communication before you start this.  Phone and IM usually work best.  Have realistic expectations, don't expect a person to ALWAYS pick up their phone on the first ring just because they're at home.  People at home have lunch, go to the bathroom, take walks too just like an office.  No one gets up in arms when someone's away from their desk, yet if that person is at home and doesn't answer the phone instantly some managers go crazy.

 

Even if someone is at home they need to go "home".  This is tough when at home the temptation is to always be on at work, just walking into the office and checking work email at night or looking into an issue.  I know everyone claims they work 100 hours, but few actually do, and those who do constantly burn out.  People need to have some sort of dividing line and a way to step away from the job, if they don't there could be unintended health consequences from the stress and fatigue.

[JEast]

The idea is fairly strait forward, but I am of the belief the you and the analyst still need to spend a fair amount of facetime together to understand the subject at hand.  At the end of the day, one of you will get unintentionally fooled via email and phone misunderstandings as the only form of communication.

 

The other question at hand is renumeration.  Is the person full-time, part-time, contract?  This also plays into the soft-science of quality of work.  I have attempted remote analysts over the years, but with no success yet but I am still hopeful that it can work. 

 

 

Cheers

JEast

[MrB]

Thanks for the feedback.

 

I am generally more concerned about whether the work gets done and if it takes someone 5 minutes then more power to them. As long as I meet my budget targets and they deliver then I will not miss the headache of having to employ someone and they will be spared the torture of sharing an office with me.

 

With work, I'm thinking it is possible to outsource some basic tasks initially, like getting me the annual reports of company x and its competitors, industry reports, management background checks, industry specific info etc. This can take quite a bit of time as soon as you move into more inefficient markets.

 

Also, hunting for very specific information, as in sleuthing, can take a lot of time and is a skill which few people have. You need a bit of Dick Tracy, IT skills, understanding of information sources, lateral thinking and some plain old common sense.

 

 

 

[king888]

Muddy Water , Alfred Little , Geoinvesting and many more employ analysts , investigators overseas especially in China.  I occasionally hire someone in China to do a due diligence to avoid the fraud companies also. But in lesser degrees and a lot lower cost than these short-sellers.

 

Local people has a better understanding about local companies than most of the professional investors overseas who just read the annual report without on-the-ground due diligence. But it also depends case by case anyway.

 

 

[PLynchJr]

I believe Bruce Berkowitz does this too.

[Sportgamma]

How would you look for a local analyst? Some freelance site or what?

[JSArbitrage]

I've always thought this was a smart way for funds to outsource some of their research while people with smaller portfolios actually get a large payoff relative to their portfolio.  For example, I love to scour nanos and micros and I love to do special situation investing.  However, it's a lot a brain damage for a small gain.  When you have a 5 or 6 figure personal portfolio, making a 50% return on a 10% position sounds great until you realize you could have made more money per hour of effort by working at McDonalds. 

 

But if you could find a fund willing to pay you, say $10K-$25K flat for each idea that the fund decides to use, it suddenly makes economic sense for a young analyst who has a full-time job outside of investing. 

 

And for a $50M fund, a 50% return on 10% of the portfolio, a $10K or $25K cost of an idea is small. 

 

It's a win-win for both parties from a cost perspective.  It's like someone offering to sell your widgets on a pure commission basis; no fixed costs. 

 

If you put a website up and have a $25,000 grand prize for the best idea (as defined by you), you'd probably have dozens of admissions.

[MrB]

Maybe Sanjeev can take care of the website angle if I manage to scrape together a few thousand dollars?

[oddballstocks]

This is an interesting idea, a good idea for a startup.

 

A site that allows hedge funds to post for the types of ideas they looking for and a price they'd pay for a good idea. Then users submit ideas, the fund picks their favorite and pay the outsourced analyst. The site gets a cut of the transaction.

 

The site is simple, it could be written in a weekend or less. Issues I see are funds putting out an ad, getting ideas then never paying. There would need to be an agreement that the fund wouldn't buy any idea presented to them except ones they pay for, then some connection with their compliance officer to enforce it.

 

Not sure why someone like SumZero isn't doing this. A bonus for submitters is the site could audit ideas, so submit, get cash and build an audited track record.

 

I'm half tempted to build this myself if I wasn't already consumed trying to launch something. Maybe down the road..

[west]

The site is simple, it could be written in a weekend or less. Issues I see are funds putting out an ad, getting ideas then never paying. There would need to be an agreement that the fund wouldn't buy any idea presented to them except ones they pay for, then some connection with their compliance officer to enforce it.

 

I'm not too familiar with them, but I don't see why you couldn't use an online escrow service to do this.

[Guest deepValue]

Eh, ideas are overrated; most capable analysts add about the same amount of value as the next analyst. Just think about all the ideas posted on SumZero. Most of them aren't worth reading, yet some highly-paid analyst is crazy about the stock he writes up. Value Investors Club is even worse.

 

The real value comes from the successful implementation of a sound investment philosophy.

[bennycx]

Eh, ideas are overrated; most capable analysts add about the same amount of value as the next analyst. Just think about all the ideas posted on SumZero. Most of them aren't worth reading, yet some highly-paid analyst is crazy about the stock he writes up. Value Investors Club is even worse.

 

The real value comes from the successful implementation of a sound investment philosophy.

 

+1

[ericd1]

Thanks for the feedback.

 

I am generally more concerned about whether the work gets done and if it takes someone 5 minutes then more power to them. As long as I meet my budget targets and they deliver then I will not miss the headache of having to employ someone and they will be spared the torture of sharing an office with me.

 

With work, I'm thinking it is possible to outsource some basic tasks initially, like getting me the annual reports of company x and its competitors, industry reports, management background checks, industry specific info etc. This can take quite a bit of time as soon as you move into more inefficient markets.

 

Also, hunting for very specific information, as in sleuthing, can take a lot of time and is a skill which few people have. You need a bit of Dick Tracy, IT skills, understanding of information sources, lateral thinking and some plain old common sense.

 

Mr B,  I've used a virtual assistance to pull together information for different aspects of my business. After providing some initial background on the tasks and ways to gather the information my assistant was able to pull together the info I was after.  The only problem was with a lack of familiarity with the tasks she didn't develop new or different ways to gather the data.  There's a big difference between performing tasks and developing sourcing techniques.  If you are looking for the latter your search will probably be more difficult and you'll likely have to pay more for the talent.

 

I've also outsourced several projects on Elance and had good results. 

 

There's a growing number of capable freelancers out there in almost any industry.