Finance Battles Tech For Quant Talent

The competition could be construed as science versus money. But ultimately it is about creating for the long term versus reaping in the short term.

Even for quant jocks, personality and psychology may be the final arbiters of such decisions. JL


Laurence Fletcher and Sarah Needleman report in the Wall Street Journal:

“At tech companies, the permeating value is that they’re about trying to make the world a better place, whereas at hedge funds it’s about making more money.” A candidate with a doctoral degree straight out of school can expect a base salary at a hedge fund of around $100,000, plus a bonus of 50% to 100%. Graduates of elite schools or with rare specialties may earn three or four times that. A computer scientist can earn millions at a hedge fund. Tech firms offer a share of the business overall. That can be risky for a new graduate.
The battle for quantitative talent has turned some of the richest money managers into underdogs. Why? Because they are up against the likes of Alphabet Inc.’s Google and Facebook Inc. for hiring the world’s top minds.
“Google is trying to hoover up every data scientist in the world,” said Luke Ellis, chief executive of Man Group PLC, the world’s largest publicly traded hedge-fund manager based in London. “Google has got more money than I have. I can’t compete with Google just on that.”
Man Group attempts to get these data scientists at their source. The firm has donated millions to Oxford University to put its name on a quantitative research laboratory, hoping that prospective employees get acclimated with the firm and its culture early in their career.
The trouble is that across the corporate world—be it hedge funds, tech giants or even the Fortune 500—companies are desperate to hire the same type of people. They seek top graduates or postgraduates who can build software that learns to spot patterns in anything from photos on social media to financial futures markets. To appeal to tech talent, some financials firms offer the kind of office perks common at tech companies.
At Kenneth Griffin’s hedge fund Citadel, the firm pitches candidates on running their own projects hand-in-hand with the company’s top stock pickers, rather than being one more member of a Silicon Valley engineering squad. Citadel can also offer an immediate payday to staffers whose work helps boost the hedge fund’s bottom line—a contrast to the uncertainty of signing up at a fledgling startup.

Man vs. Machine

Hedge funds run by humans have beaten computer-driven funds since the start of 2008

Percentage-point spread between non-quant and quant*

Humans

outperformed

4 pct. pts

0

–4

Quants

outperformed

–8

’12

’13

’11

’10

’09

’16

’14

2008

’15

’17

But, crucially, quant hedge funds

have been far less volatile for

their investors.

Annualized volatility†

Quant

3.95%

Human-driven

7.52%

*Monthly difference between between performance of

HFRI Fundamental Index (non-quant)and HFRI Quant

Index (quant) †Since start of 2008

Source: HFR

THE WALL STREET JOURNAL.

“You get to see the work you’re contributing go into production and be used by our investment teams at an incredibly fast clip,” said L.J. Brock, Citadel’s chief people officer.
Point72, which is building models to process data from the likes of Twitter and elsewhere, lets employees take as much vacation as they want. London-based Aspect Capital rolls out a beer trolley on Fridays. Quant firm Two Sigma hosts a new-hire orientation in which recruits are encouraged to enter a so-called ‘Hacker Lab’ reminiscent of the all-night coding contests popular in Silicon Valley.
Recruiters also may send a personalized gift such as free golf lessons or arrange for a private dinner with the hiring company’s founder, said Boris Epstein, co-founder of staffing firm Binc Inc. “We call it a ‘love bomb,’” he said.
Software engineers often laugh off some of these perks. In the end, it is either about the day-to-day science or money.
“At tech companies, the permeating value is that they’re about trying to make the world a better place, whereas at hedge funds it’s about making more money,” Mr. Epstein said.
Nina Kuklisova, a quantitative associate at a large financial-services firm in New York, said she gets between three and five inquiries a week from recruiters about job opportunities at other finance firms and technology companies. The 27-year-old, while not actively looking for a job, said she is open to switching to the tech sector. However, negative feedback from friends employed in tech gives her pause.
“They worked on projects that turned out not to be used by anyone,” Ms. Kuklisova said. At the bank, she is part of a team that aims to minimize the risk that stock traders take. “We are basically trying to prevent the next financial crisis,” she said.
Recruiters say a candidate with a doctoral degree straight out of school can expect a minimum base salary at a hedge fund of around $100,000, plus a bonus of 50% to 100%. Graduates of elite schools or with rare specialties may earn three or four times that, they say.
The bigger enticement is that after a few years, a computer scientist writing programs that turn out to be moneymakers can earn millions at a hedge fund. Tech firms, particularly startups, counter by offering a share of the business overall. That can be a very attractive package if the firm becomes successful, but it is unpredictable and risky for a new graduate.
“It’s an arms race. The more resources you throw at it, the more chance you have of coming out ahead,” said Kevin Arenson, chief investment officer at Stenham Asset Management, which invests in hedge funds.
To compete, some hedge funds are having to do the previously unthinkable and publish parts of their complex and valuable code. Man Group, for instance, has made its database for collecting vast quantities of trading data publicly available. The reason: computer scientists often prefer the more collaborative culture of academia or tech firms to the secrecy of hedge funds.
Hedge funds also are opening offices in new locations to be closer to talent.
London-based computer trader Winton Group, which manages more than $30 billion in assets, opened an office in San Francisco’s financial district last year to house engineers involved in machine learning and artificial intelligence. The office’s head of data was previously a director of engineering at Netflix and co-founded a gameplay data startup in Palo Alto, Calif.
And, there remain some high-end perks that startups can’t match.
Citadel this year will gift employees tickets to the Chicago and New York productions of “Hamilton,” a person close to the firm says.