Qualitative versus Quantitative 
(Baboon, 107 
Points) on 5/26/09 at 1:38pm
I'll be a sophomore at a target in August. I'm facing a dilemma right now with regard to major choice. I had planned on majoring in economics with a minor in math. However, for someone who dreams of heading a large hedge fund one day, I have been encouraged to be more quantitative, with possibly pursuing a major in physics and/or math.
I know the general trend for HFs the past years has been increasingly toward quantitative methods. Do you guys think that in the next 10-20 years HFs will be dominated by quants? Is there still a place for qualitative research and methods?
Don't Major in Econ
by yesmanI'd advise majoring in math, minoring in econ.
As an econ major, I feel I could've learned the most (only) important concepts in the 5-6 courses it would've taken to minor than the 10-12 it did to major. I had a math minor, and I wish I would've majored in it. If you have a sound quantitative base, you can learn any economic topic. I'd also advise some coursework (perhaps another minor) in computer science.
Reflecting on my BA major in econ, I think it was a waste of time. I should've majored in math. PM me if you want more commentary.
Well there are many more
by ReadLineWell there are many more qualitative HFs than quantitative HFs. Stuff like event-driven, global macro, distressed has been the most profitable strategies and none use much quantitative expertise.
The future though- I don't know. But I have one piece of SUPER IMPORTANT advice. Whatever you do- you have to be the best in it. If you try to do a whole math major (which will include stuff like abstract algebra and proofs which have no relevance at all in finance) without 100% interest/dedication you will fail. And even if you slough your way through with it, the value of sucky/mediocre quant skills is close to nill. (e.g. As of last year very few quants graduating from quant finance/fin engineering programs could even get jobs. And beyond those there are plenty of engineers/scientists with MS/PhD's who could do the work with greater zeal.)
If you do decide to do the math major don't expect the undergrad math to open up a whole new view on things. It's all been done and commercialized. In fact if you're really going to be quant then I would say you should go to the PhD level at the least to be able to add new perspective.
P.S.- However even if you wont become quantitative it's still helpful to know some math. If you know stats, multivariate calculus, and a bit of linear algebra then you will be able to understand 99% of standard modern finance. don't bother with the rest of the math major unless you're going to go all the way (to graduate level).
P.S.S.- oh but I also agree that econ sucks. I am guessing you are in arts & sciences. Well if you dont do anything quantitative you might as well do econ though.
I've got the same exact
by REAGANRULEZI've got the same exact problem as the original poster, only I'm not even going to a target school (think Northwestern, Emory, Tufts). Does this mean I should drop my econ major even faster for quantitative econ or math?
For those of you that dream
by trade4sizeFor those of you that dream of one day running a large Hedge Fund first you need to focus on getting into the game. Once you are in the game you need to prove your value by your P&L. Stop trying to get to step F before you have done steps ABC.
Major in whats going to provide you with the best opportunity. The risks associated with majoring in math such as the application of proofs and abstract algebra like a previous poster mentioned could more than outweigh the marginal benefits.
I say you major in what will yield you the highest expected value in life.
PS: I hate math outside of statistics.
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I think Philosopher has the
by yesmanI think Philosopher has the right idea - whatever you do, you need to do well in it (though I wouldn't start obsessing over being the 'best'). That generally means you need to be interested in it. Most people don't go into careers for which their college major has substantive value (ie - you use what you learn). Instead, a college degree is a screening mechanism - shows you work hard and have good analytical skills, and maturity. If you want to land a good gig anywhere in finance, make sure your GPA is competitive. I would add that math majors are generally viewed very positively in the screening.
If you want to go quant, you need to have solid math skills and comp sci - no way around it.
But as a sophomore, I don't think you can have a good idea of what you truly want to do - I went to Wharton and still knew very little about all the roles in i-banks. Bearing this in mind, I wouldn't choose a major based on your current career aspirations. You can always pick up a minor, teach yourself comp sci, etc. - you need to manage your GPA. So even if you're drawn towards a useless major like econ (I was genuinely interested in it), you'll be fine if you do well.
My advice: take what you're interested in, leave enough electives to pick up minors/double-majors later on.
good advice in this thread.
by MarginCallinggood advice in this thread. I would add that ppl with experience in math and physics have a huge advantage in getting hired in the hf industry - simply because it's trendy to hire those kind of ppl. at one fund i know they've hired in the past several ppl with third/fourth-tier MS/PhD in math or physics who had absolutely no finance/econ skills or knowledge (like, not even knowing what a bid/ask is) just because it sounds cool. obviously there's some merit to hiring math/physics ppl - since in theory they're smart and should have a scientific mindset - but i think it's gone out of proportion in the industry. i would rather hire a pack of hungry MBAs with no feelings any day.
my advice for the OP is to at least do the minor in math. switching to physics may be extreme but do some stats work.
Of course quantitative funds
by FLICK_OFFOf course quantitative funds will DOMINATE the hedge fund industry. Technology is constantly getting better, and hedge funds will gravitate towards structured products (IRD, swaps, forwards, swaptions, snowballs, turbos, CLOs, etc.) as exchanges start incorporating OTC products into their operations. Citadel has already teamed up with the CME to create an electronic credit swap trading platform. Liquidity for structured products will increase, and quantitative hedge funds will begin building trading models around these products. Demand for qualitative funds will decrease as quant funds reap ever-higher returns, and move from niche to hegemony. The potential for profit exists, it’s just that technology needs to catch up. So, yeah. Quant funds will hold a disproportionate percentage of AUM.
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by ideatingWell there are many more qualitative HFs than quantitative HFs. Stuff like event-driven, global macro, distressed has been the most profitable strategies and none use much quantitative expertise.
Really? Global macro isn't quant? Sure about that?
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im sure he meant global
by untiltedim sure he meant global macro soros style...fundamental analysis on currency etc...
in the end of the day, global macro just means trade whatever you want however you want.
Quote: Of course
by bugattiOf course quantitative funds will DOMINATE the hedge fund industry. Technology is constantly getting better, and hedge funds will gravitate towards structured products (IRD, swaps, forwards, swaptions, snowballs, turbos, CLOs, etc.) as exchanges start incorporating OTC products into their operations.
You don't think as hedge funds hire more quants and build more models that there will be increasingly less money to be made through a purely quantitative strategy?
As tech progresses, quants
by FLICK_OFFAs tech progresses, quants will be fewer.
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on global macro
by endlessrainWell there are many more qualitative HFs than quantitative HFs. Stuff like event-driven, global macro, distressed has been the most profitable strategies and none use much quantitative expertise.
Really? Global macro isn't quant? Sure about that?
Written by Bonarb in one of the big HF threads..
"...on strategies...ie global macro vs long-short equity vs others...it all depends on personality and strengths. I have worked as an analyst in fixed income relative value and an intern at an equity shop so i have some broad exposure and I can say that for me i love macro because it is more artistic and less quantitative. That seems cheesy and it is, but i see the global markets as a really big machine that is constantly shifting based on world events and as you get better and learn all the products it becomes very artistic the way the different markets move in step and react to one other. It is like a symphony of different instruments and at any given moment one section is playing louder and one is playing softer but there is reason to it all and you have to learn to get in step with the markets so you can react quickly."
The thing is, quantitatively
by MichaelHutchensThe thing is, quantitatively trained people can do qualitative analysis but it's unlikely a history or government major could write code or derive an equation. Hence in school, engineers take their required literature courses with English majors but hardly any English major would take an engineering math (or any type of math) class.
Also, without a doubt, the world is dominated by quant funds. The main issue is institutional investors have a large amount of cash to deploy, they want enhanced indexing and low transaction costs.
Rentech, DE Shaw, Citadel, BGI, Bridgewater Associates, GSAM, JPM Highbridge, etc. Also Blackrock and PIMCO are basically quant groups.
There is room for stock pickers like Ackman, Einhorn, Lampert, Loeb, Bill Miller, not to mention the legends: Buffet, Neff, Lynch, etc. Funny that a fundamental investing legend like Steinhardt is basically quant-oriented now for WisdomTree.
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by BondarbThe Quants have taken a big hit in this cycle, and I think any notion that the majority of hedge fund money will be run by quants in the near future is pretty ill-informed. Not only did quants get crushed in the de-leveraging and expose themselves as all basically having the same, fairly simple strategies with basically no risk management aside from “hang on for dear life”, but then they got hit again at the beginning of this year when other groups like fixed income relative value came roaring back. Also some of the funds mentioned above like PIMCO, JPM prop, Citadel, etc. are just not quantitative at all so I don’t know what gave that poster that idea. I would say that pure quant shops compose a very small percentage of current AUM in the business…probably 5-10%, down from probably 25-30% at their peak.
I do think the definition of the word “quant” is hazy. I run money at a macro fund and would rather be called many insulting names then a quant, but that dosent mean I don’t have good math skills and basic programming knowledge. These things are important for basic skills such as testing ideas, creating valuation tools, etc. But a physics degree is just not going to be pertinent to anything useful you are likely to do in the hedge fund business. It may be good for signaling that you are smart, which could help you get a job, but that’s it.
Now of course there are exceptions so please, there is no need to come back with “my cousin is a physics major and trades currencies at (huge hedge fund name) using particle theory and has never had a losing trade” or something like that….