Draftkings vs Stock Market: The Use Of Investment Simulators In The Hiring Process
Draftkings vs Stock Market: The Use Of Investment Simulators In The Hiring Process by Steven Delano, MyInvestmentRecord.com
In light of the popularity of sports competition websites like draftkings and fan duel perhaps the proliferation of stock market games should come as no surprise. Howthemarketworks, SIFMA’s stock market game, stocktrac and marketwatch are some of the more popular. Universities such as Wharton, Ithaca, UT Dallas and UIC offer stock market contests to high school students, although there has been some criticism that with a normal distribution of outcomes, a short term game competition can give a misleading impression of skill (or lack thereof) to novices. But of course questions about performance persistence are nothing new at all levels of investing.
For over 800,000 people in the US alone (US Dept of Labor 2015), investing is not a game but a career that is challenging and pays well, which raises questions about access to and progress along this career path. Central to this question is the efficiency of the selection process, and specifically the criteria by which investment talent is identifiable.
Below is our 13F roundup for some high profile hedge funds for the three months to the end of March 2021 (Q1). Q1 2021 hedge fund letters, conferences and more The statements only include equity positions as 13Fs do not include cash and debt holdings. They also only include US equity holdings. Funds may hold Read More
Recruiters and HR people for top tier investment companies recognize that cultural affinity with the hiring authority can prevail in the absence of more objective criteria. A good word from a friend/networking contact or graduation from ‘feeder schools’ can drive selection in the resume sorting phase of the process.
In a business where the value added (performance) is measurable, there may be a role for a less arbitrary indicator of skill, one that can compete with school and interpersonal fit to improve the interview list. Could an investment simulator i.e. “paper portfolio” produce useful data to make the early selection process for investment jobs better and fairer?
On the continuum between high school students choosing stocks they have heard of and investment professionals spending long, intense days researching markets in order to make a half dozen important calls a year, it is reasonable to assume that at some point a record of investment decisions becomes relevant. Indeed some large money managers provide employees with market simulation tools the results of which are taken into account at bonus and promotion time.
That said, a problem arises: performance records on resumes from external candidates suffer diminished credibility due to the potential for “cherry picking” i.e. choosing a portfolio that shows better results than others. In contrast, a candidate cannot select from among credit reports because they are third party administered and usually uniform. Past investment performance samples are generally absent from the early stage of vetting candidates for interviews due in part to low confidence in reliability (the exception being lead portfolio managers with audited records).
Perhaps the day is approaching when investment simulator performance will have more influence in people selection. Some features of myinvestmentrecord.com may suggest the future direction. myinvestmentrecord.com does not attempt to track total portfolio value but instead highlights the accuracy of investment decisions, and sends a summary of results directly to employers and investors. All portfolios which a user initiates on the site are summarized within the report – including any with less than stellar results.
Honest reporting by investment professionals is not for the faint of heart, and we all know performance is best understood in the context of risk, costs, timeframe etc at some point in the process. The question is can portfolio simulator results merit the attention of employers, and, by including those results, is there potential to improve on the alpha pledge asset managers make to investors.