@FundamentEdge ↔ @PeriFalconCal conversation
Brett Caughran@FundamentEdge
19 views
Jan 09, 2026
~7 min read
Advertisement
Brett Caughran@FundamentEdge
ANALYST EVALUATION, A 6-PART FRAMEWORK
Over the course of my 13-year buy-side career I had the challenge & honor of managing a total of 9 analysts, not including 3 on an in-house team in India and not including 6 interns.
First, I found managing a team as a PM to be HARD.
Over the course of my 13-year buy-side career I had the challenge & honor of managing a total of 9 analysts, not including 3 on an in-house team in India and not including 6 interns.
First, I found managing a team as a PM to be HARD.
Brett Caughran@FundamentEdge
The stress I felt as analyst dealing with the uncertainty & volatility of markets was intense...throw some additional souls into the mix with their unique mix of goals, biases & emotions, and at times it seemed an impossible task.
Brett Caughran@FundamentEdge
We all have grand intentions as PMs to train, mentor & guide our analysts. But "we all have a plan until we get punched in the face", and the reality of markets can unfortunately lead to benign neglect. I've been guilty.
Brett Caughran@FundamentEdge
At first I was far from an adequate manager. Fortunately, I had some very good examples as PMs when I was an analyst to draw inspiration from. I was also blessed to attend in-house PM leadership training at two large hedge funds, which helped immensely.
Brett Caughran@FundamentEdge
One lesson I learned from one of my first PMs as well as from PM leadership training was the importance of setting very clear upfront expectations for your analysts.
In my experience, too many PMs carry the insidious view that expectations can be unspoken.
In my experience, too many PMs carry the insidious view that expectations can be unspoken.
Brett Caughran@FundamentEdge
We forget that analysts are new to the seat, this is their first rodeo. They might have a hunch around what you expect, but the expectations guessing game can be handled so much more effectively in my opinion.
Brett Caughran@FundamentEdge
I believe every PM should provide a one-pager on "analyst expectations" that you print and provide to a new analyst. It will take you 20 minutes and could prevent some big issues!
First, a couple thoughts.
First, a couple thoughts.
Brett Caughran@FundamentEdge
INPUT vs. OUTPUT
How do you want to evaluate your analysts? On their input or their output? My general experience is that evaluating an analyst in their first 2-3 years on OUTPUT is problematic.
How do you want to evaluate your analysts? On their input or their output? My general experience is that evaluating an analyst in their first 2-3 years on OUTPUT is problematic.
Brett Caughran@FundamentEdge
A high functioning investment institution is not going to rely primarily on the view of the most junior person at the table. The best investment decisions I participated in were usually a triumvirate of viewpoints (usually the analyst, PM and CIO).
Brett Caughran@FundamentEdge
Yes, the analyst can and should express an opinion, but the ultimate decision maker in those situations were the more senior investment professionals.
Alpha-focused stock selection is a hard game, and I didn't feel like I got my "stock picking license" for about 5 years.
Alpha-focused stock selection is a hard game, and I didn't feel like I got my "stock picking license" for about 5 years.
Brett Caughran@FundamentEdge
If you agree with me, your dimensions for assessing & ultimately compensating junior analysts should be more focused INPUT than OUTPUT.
As the investment professional matures and earns more responsibility, that balance should shift more to output, in my opinion.
As the investment professional matures and earns more responsibility, that balance should shift more to output, in my opinion.
Brett Caughran@FundamentEdge
COMPENSATION
As a PM, I never loved being backed into a corner on expected levels of compensation. In an ideal world, in a team of 4-8 people, I would have no conveyance of comp levels and thus complete degrees of freedom at the end of the year.
We don't live in that world.
As a PM, I never loved being backed into a corner on expected levels of compensation. In an ideal world, in a team of 4-8 people, I would have no conveyance of comp levels and thus complete degrees of freedom at the end of the year.
We don't live in that world.
Brett Caughran@FundamentEdge
To recruit, retain & incentivize top decile talent often requires providing visibility around expected levels of compensation. To me it's a bit like crossing the Rubicon. If I can avoid the conversation, I can be vague & high level.
Brett Caughran@FundamentEdge
If I cannot, I should tie my evaluation framework into that comp framework to avoid uncertainty & disputes, and ideally have a quarterly check in. For more senior team members, I have tied it directly to a team & sector P&L number, still with room for flexibility around netting.
Brett Caughran@FundamentEdge
MY 6-PART FRAMEWORK
With the preamble around input vs. output out of the way, here is my 6-part framework that I provided to my junior analysts (sub 5-years experience).
1) EFFORT & PRODUCTIVITY. In your first 2 years measuring your value-add is a difficult exercise.
With the preamble around input vs. output out of the way, here is my 6-part framework that I provided to my junior analysts (sub 5-years experience).
1) EFFORT & PRODUCTIVITY. In your first 2 years measuring your value-add is a difficult exercise.
Brett Caughran@FundamentEdge
But measuring you on tangible, observable factors is easier. What is your work ethic? Your sense of urgency around responding to requests? Do you have the ability to produce large quantities of work with a high quality bar?
2) ANALYTICAL SKILLS. This is a performance business.
2) ANALYTICAL SKILLS. This is a performance business.
Brett Caughran@FundamentEdge
Bad analytics can lead to bad decisions, and bad decisions can lead to negative P&L. Do you have the analytical toolkit to rip apart any situation? Whether it's a highly levered equity with balance sheet messiness or a fast growing but cash burning company, do you have the
Brett Caughran@FundamentEdge
ability to rip through this idea and lay out the pathway on the idea, and do so in a zero defect way.
3) ATTITUDE & TEAMWORK. The markets can be a stressful place (probably more often than not). Are you a force for good in your team or a pain in the butt? Are you the team member
3) ATTITUDE & TEAMWORK. The markets can be a stressful place (probably more often than not). Are you a force for good in your team or a pain in the butt? Are you the team member
Brett Caughran@FundamentEdge
who is helping others when they are struggling? Do you have a team first mentality, or is it all about you. The "what can you do for me" entitled mentality was a HELL NO for me and analysts who had that mentality ended up having more conflict. Bust your butt, help your team, and
Brett Caughran@FundamentEdge
I will 100% recognize that at the end of the year.
4) SELF-CONTAINMENT. I believe the goal of every analyst should be to conduct a rigorous tip to tail investment process with minimal to no oversight. Can you do this? Can I just say "hey go look at XYZ stock" and you come
4) SELF-CONTAINMENT. I believe the goal of every analyst should be to conduct a rigorous tip to tail investment process with minimal to no oversight. Can you do this? Can I just say "hey go look at XYZ stock" and you come
Brett Caughran@FundamentEdge
back in a week with all of the issues identified, rigorously researched, and framed in a succinct and probabilistic fashion? YES PLEASE. My time is at an absolute premium, as a PM there is always an issue somewhere. If you aren't the issue, grabbing an oar to row rather than
Brett Caughran@FundamentEdge
the one flailing and needing help constantly, I appreciate that. Listen, if you need help we will help you, but your goal should be self-containment, self-directedness.
5) DEVELOPMENT. What is the pace at which you are improving? Do you make a dumb mistake once, navel-gaze, and
5) DEVELOPMENT. What is the pace at which you are improving? Do you make a dumb mistake once, navel-gaze, and
Brett Caughran@FundamentEdge
fix the issue? Or is this a common & recurring mistake? Are you a hyper-learner who is absorbing new frameworks & approaches and rapidly going up the development curve. Or are you stagnant and just going through the motions. I'm much more willing to have a "career development"
Brett Caughran@FundamentEdge
chat with an analyst who is motivated & intentional about building the skillset NOW that the analyst will need to take the next step. Are you building skills that you can help the team win now?
Brett Caughran@FundamentEdge
6) OVERALL VALUE-ADD. Again, this can be a surprisingly hard to measure question at the end of the year. If you built a model and did channel checks for a winning idea, how much of that P&L should be ascribed to you, if any?
If you were the senior analyst and raised that idea,
If you were the senior analyst and raised that idea,
Brett Caughran@FundamentEdge
fully vetted the key drivers, and successfully advocated for the idea to go into the portfolio, how much of the P&L should be ascribed to you? It's more clear in that case.
Generally, in your first 2-3 years the primary driver of comp will be team performance & the primary
Generally, in your first 2-3 years the primary driver of comp will be team performance & the primary
Brett Caughran@FundamentEdge
framework for your evaluation will be INPUTS, some of these more vague concepts.
I hope this is helpful. By no means will this 6-part framework apply to every investment institution, but I believe the approach does apply.
If you are a PM, PLEASE IMPLEMENT THIS.
I hope this is helpful. By no means will this 6-part framework apply to every investment institution, but I believe the approach does apply.
If you are a PM, PLEASE IMPLEMENT THIS.
Brett Caughran@FundamentEdge
And if you are an analyst without clear expectations, please send this to your PM and say "hmm interesting tweet from Brett" lol. Maybe it stimulates a conversation!
THANK YOU!
THANK YOU!
Ben Natter@PeriFalconCal
If my analyst sent me this I would say f- off go back to work
