science

SumZero

SumZero is a science topic covered in the lgStudy science library. This page brings together a partial reference excerpt, illustrations, worked examples, real-world applications and a short study plan, so you can understand SumZero rather than just read about it. In short: SumZero is an online community for professional investors (collectively referred to as the "buyside"), which hosts investment research, job opportunities, and capital introduction services. Buyside professionals are granted membership per an application, where they must be on the research team at a hedge fund, mutual fund, private equity fund, or investment banking proprietary trading desk.

Key takeaways

SumZero belongs to science; place it in that map before memorising details.
Learn the definition first, then one example that makes the definition concrete.
Connect SumZero to a quantity you can measure, compute or draw — that is where exam questions come from.
Reproduce the core statement of SumZero from memory before moving on to harder problems.

Reference excerpt

SumZero is an online community for professional investors (collectively referred to as the "buyside"), which hosts investment research, job opportunities, and capital introduction services. Buyside professionals are granted membership per an application, where they must be on the research team at a hedge fund, mutual fund, private equity fund, or investment banking proprietary trading desk. SumZero is a closed, application-based community, which currently has over 16,000 buyside members and over 60,000 'Basic' users. Roughly 75% of buyside applicants for membership are rejected. Members gain access to SumZero's Research platform and approximately 12,000 long-form theses on publicly traded securities. SumZero's ancillary products include Cap Intro and Job Vault.

History The site's co-founder and current CEO Divya Narendra came up with the idea for SumZero in April 2007, while working for the hedge fund Sowood Capital in Boston. Narendra and college friend Aalap Mahadevia subsequently launched SumZero in March 2008. In June 2012, Winklevoss Capital made an angel investment of $1.05 million into SumZero. In October 2012 the site announced its first Annual Investing Challenge, jointly organized by SumZero and the Value Investing Congress. The top three ideas were pitched on the CNBC television show Fast Money and winner Ryan Fusaro presented his investment idea at the Value Investing Congress on October 1, 2012, alongside the portfolio managers Bill Ackman, David Einhorn, and Barry Rosenstein. SumZero hosted a co-branded research idea contest with Institutional Investor in November 2014. The event was hosted at the Bloomberg Tradebook headquarters in NYC. Over 250 SumZero members attended for live 4-minute presentations of stock pitches from 20 emerging managers, judged by a panel of professional investors. In March 2017, SumZero announced the Van Biema Small-Cap Challenge in conjunction with van Biema Value Partners and the Royce Funds. The contest called for research ideas on international small- and micro-cap stocks from funds managing less than $50 million. Massif Capital, a NY-based long/short equity fund was selected as the final winner of the Challenge for founder Will Thomson's stock pitch on Lucara Diamond. The winner received allocations from the family offices of Chuck Royce and Michael Van Biema, as well as operational advice from Van Biema Value Partners. The site opened applications for the Van Biema Small-Cap Ex-US Challenge in March 2018 and selected 5 finalists in May 2018.

Products SumZero's product suite consists of three sub-platforms: Research, Cap Intro, and Job Vault. The Research platform contains over 11,000 actionable recommendations on publicly traded securities. Approved ideas are about 2,000 words in length and include valuation, risks, and catalysts. The contributing analyst or the analyst's fund typically has a direct position in the idea. The Cap Intro platform allows emerging fund managers to raise external capital by connecting them with a community of pre-vetted Allocators. The allocator pool includes single- and multi-family offices, endowment funds, and fund of funds. Cap Intro operates a reverse solicitation model in which allocators reach out directly to funds. The Job Vault allows SumZero members to apply for buyside job opportunities submitted by firms on the site. All applicants must already be SumZero members and thus represent a pre-screened pool of candidates.

2012 study A paper by Wesley Gray of Drexel University, Bryan Johnson of Creighton University, and Rice University’s Steven Crawford and Richard A. Price III, "Do Buy-Side Recommendations Have Investment Value?”, analyzes a subset of SumZero's Idea database, which is composed of 2,135 long and short calls on U.S. equity securities submitted to the website by 1,112 buyside analysts from 910 different funds. This study shows that short recommendations from these analysts generate an immediate and significant decline in price, and long recommendations have positive short-term returns and exhibit a positive drift. The collective evidence presented in the paper suggests that buy-side recommendations have investment value. The paper also documents that broad institutional ownership decreases significantly for buy-side recommendations, but increases for the buy-side analysts’ employers, suggesting there is a wealth transfer between the broader institutional market and buy-side firms in the sample.

References

External links Official website

Worked examples

Example 1 — a first encounter with SumZero

Start with the simplest possible case. Write down what SumZero claims or describes in one sentence, then invent the smallest concrete situation in which that sentence is true. In science, the smallest case is usually a single object, a single equation or a single measurement. Check that every symbol or term in your sentence has a meaning in that case.

Example 2 — changing one variable

Take the situation from Example 1 and change exactly one quantity: double it, halve it, or set it to zero. Predict what should happen to SumZero before you calculate. Comparing your prediction with the result is the fastest way to find out whether you understand the idea or only the words.

Example 3 — an exam-style question

Typical questions about SumZero ask you to (a) state it precisely, (b) apply it to given data, and (c) explain a limitation. Practise writing all three answers in under five minutes; the third part is what separates a full-mark answer from an average one.

Applications of SumZero

In research: SumZero appears in science research whenever the underlying quantities have to be modelled precisely. Papers usually cite it as a starting assumption and then explore where it breaks down.
In technology and industry: Engineering practice reuses SumZero in design rules, simulations and safety margins. Knowing the idea lets you read a specification sheet and understand why the numbers look the way they do.
In the classroom: SumZero is common in secondary-school and first-year university syllabi. It links to neighbouring topics Economics websites, Financial services companies based in New York City, Internet properties established in 2008, so understanding it makes those chapters shorter.
In everyday life: Look for SumZero outside the textbook — in sport, cooking, traffic, electronics or the sky above you. An example you found yourself is remembered far longer than one you were given.

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How to study SumZero in 20 minutes

Read the reference excerpt below once, without taking notes.
Close the page and write down what SumZero means in your own words.
Compare your version with the excerpt and mark what you missed.
Work through the three examples above with pen and paper.
Explain SumZero out loud to somebody else — or to Teacher Smith in the lgStudy chat.

Frequently asked questions

What is SumZero in simple terms?

Why does SumZero matter?

Because it connects several science ideas at once: it gives you a definition you can apply, a quantity you can calculate, and a way to check whether a result is plausible.

How should I study SumZero?

Read the excerpt, restate it from memory, then work through the examples and applications listed on this page. The five-step study plan above takes about twenty minutes.

What does this page cover?

It gives you a compact reference excerpt plus original lgStudy explanations, examples, applications and study material on SumZero.