I currently work in a pod as a dev, and cant help but wonder how much time we waste doing the mundane stuff which 50 other teams are doing- i.e. building the whole infra/backtest/data/execution pipelines from scratch. It seems like a huge waste of man power, like reinventing the wheel. It also limits the potential of what you can do as a small pod - as 1 dev can hardly build a cutting edge trading system. Will the pod shops remain attractive for systematic trading 5y down the line? And how can 5-6 person pod build cutting edge tech and compete with the likes of collaborative shops like Qube, or Jump, JS, HRT which are increasingly getting into MFT? Would love to hear thoughts on this, I suppose this mainly affects the big 3 - M/P/B as these have completely siloed pods. Building a good systematic equities/options/macro business requires lot of good infra. It almost feels like pod model was more for discretionary teams where you dont need so much infra, and can start trading quickly.
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Based on the most helpful WSO content, the pod shop model does face challenges, particularly for systematic trading teams. Here are some key insights:
Infrastructure Challenges: As you mentioned, building infrastructure from scratch in siloed pods can be inefficient. This is a common critique of the pod model, especially for systematic trading. Collaborative shops like Jump, Jane Street, and HRT have a significant advantage here, as they centralize infrastructure and resources, allowing teams to focus on strategy development rather than reinventing the wheel.
Scalability Issues: For a 5-6 person pod, competing with larger, more collaborative firms is tough. Cutting-edge systematic trading requires robust infrastructure, access to high-quality data, and significant computational resources. Without shared infrastructure, smaller pods may struggle to scale effectively or innovate at the same pace as firms with centralized resources.
Pod Model's Strengths and Weaknesses: The pod model was originally designed for discretionary teams, where infrastructure needs are less demanding, and teams can start trading quickly. For systematic teams, however, the lack of shared resources can be a bottleneck, limiting the potential for innovation and execution.
Future of Pod Shops: While pod shops will likely remain attractive for discretionary trading, their appeal for systematic trading may diminish unless they adapt. To stay competitive, pod shops might need to:
Opportunities for Systematic Teams: Smaller pods can still thrive by:
In summary, while the pod model has its limitations for systematic trading, there are ways for smaller teams to adapt and remain competitive. However, the increasing dominance of collaborative shops with centralized resources may make it harder for siloed pods to attract top talent and achieve long-term success in this space.
Sources: Sales and Trading - A Comprehensive Guide, Physical Trading: Best commodities to be in?, Are we at peak pod shop?, Physical Commodity Trading, Credit - Pod Shop/MM vs. Distressed/Special Sits HF
I agree. I just feel like js/hrt care about sharpe and “smart” bets while hedge funds and pods in particular only care about pnl and sometimes they do splashy bets or somewhat not very rigorous
Big reason the prop shops have dominated MM. Many strategies used by hedge funds aren't as time or latency sensitive, so the level of infrastructure is less present. QRs get by. In MM, every tick matters to some degree, so you really want to have the best infrastructure possible. Hedge funds haven't had that in a while, and banks are off crying in the corner.
I could realistically see newer funds trying to be more collaborative, but the culture at the big pods is so dominant by individual performance culture that I doubt you'll realistically see major changes there. I completely get what you're saying though. I worked at a prop shop before my current gig, and it did seem like I could just go up to a dev or a researcher and ask for a tool, or a change to some system and it would be built out. I just don't get the same vibe from pods, and banks tended to be pretty siloed too.
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