are non-quant PMs, Props and MMs still relevant?
Good day,
Can anyone comment as to the relevancy of non-quant portfolio managers, prop shops and market makers? Is it even possible to extract any alpha in the short/mid term with all of these quants? Are there any examples of non quants that have persistently collected alpha even ~75% of the yes without having been endited by some regulatory agency? To me non-quant pms, props and mms are increasingly seeming like basic beta collectors incapable of even mitigating ~5% of their downside.
*mm as in market makers...
Prop and MM: Must be quants these days.
HF: It depends.
Don't need to be quants if they specialise in strategies with high degree of ambiguity like distressed, merger arbs, activist, etc. Or having extended holding period of assets to the point fundamentals matter more.
The rest, yes, will have to adapt.
I wouldn't consider firms like Virtu to really be quantitative but they are certainly still a significant HFT market maker in many markets. I would say scalable technology, understanding of microstructure dynamics and client/retail flow is all very relevant for algorithmic HFT market making but is not especially quantitative even if it uses relatively simple statistical models. If your execution can avoid too much adverse selection you can profit off of bid/ask spreads even without much or any alpha as well. At a smaller scale ultra low latency hardware trading is also not really quant but would typically use some statistical modeling.
I see, what about vanilla entities trading public markets; do you see them as having any edge? Any long term good performers?
For a scalable platform I wouldn't think they would have a lot of alpha for short term trading but it's certainly possible some talented/experienced individuals can still generate some pnl. I do not understand the space well but I think macro/news trading is one area where humans will still have some edge against the robots.
Yea they are all still relevant, to start quants have lost their edge on alpha in the last 5-10 years cause everyone else has become more quant. As mentioned scalable technology and deal flow is what separates many firms these days.
If we are talking discretionary, in the last three years probably quant PMs have had to adapt way faster as we exited zirp and global supply issues emerged. Lines getting blurred.
Was a good thread on “factor weights” a while back where it became clear how some firm’s approach it vs others is much much more quant. But the theory behind it is not quant at all.
Yes! Very good point, at the end of the day quant Is monsterously (if not entirely) reliant on past data; as such new events, new environment fries them; ironically change is our saviour from change.
I don't think so... non-quant a lot of the time means some kind of technical analysis chart magic or reckless punting on a fundamental view... market-makers have a tough time in today's market because new players are horning in on their business such as MMHFs
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