The Blagger’s Guide to Quant Hedge Fund Recruiting
No one can know everything there is to know about their recruitment area. With so many companies, acronyms, and bits of legislation to piece together, how do you find the time to actually recruit? That’s where we come in: regardless of how long you’ve been recruiting, we’ll guide you through the complexities quickly to have you sounding like an expert in no time.
Today, we’re going to look at quantitative hedge funds and how they fit into the financial services industry. We’ll be giving you info into how they function, who they hire, and the specific lingo you may run into.
What They Do
Despite being relatively new on the financial services scene, quant hedge funds have had a meteoric rise over the past 20-25 years to become a staple of the investment world. Quant hedge funds are a specific type of investment firm, which raises funds from investors within a certain criteria (a net worth exceeding $1 million, or an annual income which exceeds a certain amount, for example) and uses a particular strategy to invest them.
Like other kinds of investment firms, quant hedge funds can specialise in any kind of investment: long-term or short-term; high-risk or low-risk; private equity or derivatives. It all depends on the flavour of investment the company is looking for. Though some of their methods may overlap, the main thing that sets apart a quant hedge fund is they rely upon Quantitative Analysts to create strategies based upon quantitative analytics. Man, that’s a lot of quant.
How They Do It
Quantitative Analysts take large sets of historical data and use analytical software and mathematical and statistical methods to find patterns and make predictions for the future. They can then use machine learning to create algorithms, which are sets of rules a computer must follow. By doing this, Quantitative Analysts can make a computer automate decisions based upon data. In football terms, this makes Quantitative Analysts the playmakers.
Quant hedge funds need Quantitative Analysts to assess data on how the thing they are investing in will perform in future. They can also get Quantitative Analysts to design algorithms for their investment strategies, partially or even fully automating their investments. Why is this so important? By backing their investment strategies with data, quant hedge funds can remove some of the risk inherent in investing, making their returns a lot more likely to succeed.
A quant hedge fund won’t just be made up of Quants, though; after all, it takes a village to spend a fund. Quant hedge funds can also use strategies based upon other forms of data analysis, even combining two or more strategies to really diversify their portfolio. Some will still employ more traditional investment methods based upon the discretionary decisions of Fund Managers. These strategies usually take into account multiple kinds of qualitative research (like legal, political, financial, etc.) to understand the risks of an asset.
Since there’s some mixing of the cutting edge with the traditional, there’s still a need for the good ol’ fashioned investment roles in quant hedge funds. Roles in research, risk, strategy, even manual stock trading, are still required for those quant hedge funds who want to cover all their bases and keep their investments varied, so they never put all their eggs in one basket.
The Perfect Candidate
As you’ve probably guessed by now, quant hedge funds really, really like Quantitative Analysts. Don’t be thrown by the many different names funds may give their quant roles, though. Quantitative Analysts requires in-depth knowledge of data management and mathematics to be successful, so your candidate will almost definitely need an educational background in Mathematics, Data Science, and/or a science subject.
Some funds may also want their Quantitative Analysts to have experience in Computer Science, or at least evidence of working with a specific programming language. This is because they may need them to develop and maintain their data management platform. These skills are transferable to other roles in a quant hedge fund too, like a Software Developer or Computer Programmer. If your candidate doesn’t quite fit a company’s quant job description, they may just find their place in a different team.
Though Quantitative Analysts are critical for a quant hedge fund, it doesn’t mean that more traditional investment roles aren’t just as important. A quant hedge fund will still need operations, risk, and strategy staff, as well as Portfolio and Client Managers. Whether or not they need experience in managing a quant fund will be up to each company.
If you’re ever in doubt over what exactly a quant hedge fund is looking for in a candidate (they can be notoriously tight-lipped), take a look at their investment strategies. Those funds which actually have websites will usually say a few words about how they choose what to invest in. If you can find out where their focus is, you can focus your search for a candidate.
The Major Players
A major player on the quant hedge fund scene is D. E. Shaw (not the author, if you go to search for them). They have three specific fund strategies: one based upon quantitative, fundamental, and technical analysis; one based upon discretionary decisions; and one combining the two, commonly referred to as a “hybrid” strategy.
Established in 1988, the firm currently have around 1,300 staff around the world, spread across seven offices in the US, two in Europe, and three in Asia. These staff range from the more traditional investment professionals, like Portfolio Managers and Traders, to the more data and technology-heavy, with Quants and Analysts galore.
While D. E. Shaw is a major name, Renaissance Technologies is one of the largest quant hedge funds around. Founded just six years earlier, Renaissance’s flagship fund is as old as the company itself and is famed as having the best track record on Wall Street.
With $110 billion in AUM (Assets Under Management) but a much smaller workforce of 290, Renaissance are known for hiring Analysts and specialists without a background in financial services. Given that the firm’s founder was an award-winning mathematician and former Cold War code breaker (so cool), they put a lot of stock in mathematical and statistical ability over financial experience.
But quant hedge funds aren’t just reserved for the corporate space. A new name appeared last year, following a spin out from Credit Suisse. Qube Research & Technologies began life as a fund within Credit Suisse’s asset management unit, before spreading their wings in mid-2018 to gain independence.
While there’s little information about how the company is doing financially beyond the end of last year, there is info on their hiring trends. Unlike Renaissance Technologies, Qube places great emphasis on technologists and researchers who are experienced in finance. More traditional roles could fall by the wayside here, as they continue to push for technology and automation.
The Market Trends
Quantitative analytics are so in right now. It’s not just quant hedge funds who are looking to recruit in the area; it seems like everyone and their nan is looking to hire a Quant or Strat, as some major companies are branding them. In the case of quant hedge funds, the trend is no different. What is different, however, is the trend of the funds themselves.
As is always a problem with the newest fads in the financial services industry, overpopulation can take the coolest ideas and run them into the ground. While lots of companies offering the same thing opens the recruitment pool for candidates and recruiters alike, this isn’t exactly what we’re seeing in the case of quant hedge funds.
With eye-wateringly large costs to start the fund in the first place, let alone buying the infrastructure to handle all of that data and the people who can interpret it, smaller firms may struggle to get their feet off the ground while the larger firms get larger and larger. A lot of banks and more traditional investment firms have established quantitative analysis-based funds too, or at least employ some quantitative analytics in their existing investment strategies.
These larger and more established companies have offices all over the world, so wherever you’re focused, they’re probably hiring. While the smaller quant hedge funds may not have the same scope, you can bet that their youth and innovation will continue to be a draw for newbies and veterans alike. Keep an eye out for these firms, as you may just find yourself a gem.
Many believe that the demand for Quants and candidates with quant experience will continue to grow over time, as more and more companies and banks include quantitative analytics in their strategies. The beauty of this is that even if the smaller companies get crowded out, the larger companies will be there to pick up the candidates with quant hedge fund experience.
Here we’ll be listing some everyday terms and phrases that quant hedge funds may use, so you’ll never be caught out by the jargon.
|Quant||Refers to a Quantitative Analyst, a.k.a. the person analysing the financial data to predict how a commodity will trend.|
|Quantitative analysis||The type of data analysis predominantly used by quant hedge funds to create their investment strategies.|
|Technical and Fundamental||Two other forms of data analysis which a quant hedge fund may employ alongside Quantitative Analysis. Technical analysis uses data from a specific period of time to make short-term forecasts. Fundamental analysis looks to forecast the long-term.|
|Discretionary||A type of strategy used by investment firms and some quant hedge funds, whereby a Fund Manager will make a decision on where to make an investment. These decisions are usually based upon research into the risks that may affect an asset’s value, e.g. the financial history of a company, the political risks of a specific area or commodity, any legal issues, etc.|
|Hybrid strategy||A kind of strategy employed by hedge funds and investment firms alike, whereby multiple kinds of strategy are combined into one.|
|Alternative investments||Any investment in an asset that is not the traditional cash, bonds, or stocks. Some quant hedge funds will focus on this asset class, which includes art and wine, cryptocurrencies, and precious metals, among others.|
|Benchmark, benchmark index||The standard against which the performance of a security, fund, or Investment Manager is measured.|
|Alpha, alpha-generating, alpha investment||Used as a measure of performance in finance. Also known as an “active return,” alpha means that an active investment has had an excess return on the investment compared to the benchmark index. In other words, that investment is making bank.|
|Securities||Anything with financial value which can be traded. Generally broken down into two types: equity securities, such as stocks; and debt securities, such as bonds.|
|Long-term, short-term||A short-term investment is an investment expected to be held for 3 years or less before selling. A long-term investment will be held for longer than this, potentially up to 10 years or longer.|
And that concludes our Blagger’s Guide on what you’ll need to know to recruit for quant hedge funds. Looking for leads on quant hedge funds that are recruiting? Try searching in your area and selecting ‘Quantitative Analytics’ as a function. Don’t forget to set up a saved search on Talent Ticker if quant hedge funds are one of your recruiting focuses, so you can jump on those leads as soon as they’re live.
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