Q&A: COO & Head of Trading @ Systematic Quant Hedge Fund

Re AI, how do you think an entry level QR (less than 1yr on the job) can survive without getting outdone by AI? Worried because I don't have much experience yet and haven't had the time to develop differentiation.

Increasingly, these factor tolerances are getting tighter. The reason is 2-fold. The first is that the tighter you are on factor exposure, the more you can guarantee that the strategy returns are actually attributable to Alpha (rather than Beta / Factor exposure). The second is that (especially across a diversified multi-manager platform), even small factor exposures across many strategies can aggregate to significant risk at the firm level. These platforms want every strategy they add to the mix to be orthogonal to their existing alpha from a returns perspective, but also from a risk perspective. Different firms have different approaches and tolerances and levels of flexibility, but overall the key trend is the same.

In my career, factor neutrality as well as low correlation to broad market conditions (and competing benchmarks / existing approaches) has always been a key tenet and core focus. Eliminating beta and factor exposures create a more true and clean return profile which truly exhibits whether you are finding real edge or not.

That attitude is very common in RelVal, Delta Neutral, StatArb type worlds.  However, many thematic / discretionary approaches will use factor exposure as a feature and a way to express their view and I actually have one systematic strategy which specifically targets / replicates a sorely underrepresented factor as the basis of a delta neutral global equities portfolio and that factor exposure is the thesis of the approach.

Not all exposure is bad and needs to be eliminated at all costs, there can be purposes and tolerances. The only bad exposures are unknown, unintended or unmanaged exposure, or exposures which are beta being dressed up as alpha.

1. Might get some heat for this, but leaning from a static, outdated printed resource like a book when you have an interactive tutor with full access to countless whitepapers and resources seems silly nowadays. LLMs let you ask questions, engage, explore, learn and discuss - use them.
2. Same as above, with an important note that you’re going to learn more by DOING and trying and experimenting and figuring out what works and what doesn’t than just reading and studying.
3. Apart from the classic correlation going to 1 and diversification failing during a volatility spike causing a tail risk event, mass liquidation and violent unsustainable drawdowns… the slow death option is over reliance on one or a small number of strategies to drive returns with no alternatives and no progression plan. When there’s a regime shift or that one strategy stops working and there’s no uptick in performance elsewhere and nothing new in the pipeline to replace it.. that’s a very difficult position to recover from.
4. Interested to hear your argument for why
5. Yes, but discovering how to do it without creating overfitting and over-search issues is extremely difficult. Being able to systematically analyse more data doesn’t mean better signals or results - the more you search the more you’ll find false positives and draw conclusions that aren’t real. Targeted, hypothesis based research is necessary rather than broad general discovery,

I have a skill set and education background which gave me the potential to add value outside of a purely 'boxed in' / specialised role, and made a big effort throughout my career to look for and accept roles which gave me scope and ability to exercise initiative and build / create / expend beyond just specialising in a single strategy or approach. Generally, these roles have been 'dual' roles - market facing and trading driven, but with a business development / executive / operations element too. I've alway run portfolios / strategies, but felt like it was limiting to not also explore the scope of what else I could offer to a business. I took alot of pride in breadth of experience and understanding how an equities business works from top to tail.

That approach has worked for me, but it's not always the case and especially now for juniors, I think you need to be very aware that recruiters and HR teams who undertake hiring for big firms are much more comfortable with only hiring someone that has had the exact same job title as the open mandate previously. There's a preference for simplicity, specialisation and standardisation and there's increasingly few in the industry who are willing to think laterally or be willing to look for and find opportunities to add top talent who don't fit neatly into one little box.

As sad as it is, I think nowadays the much safer career bet is to choose one lane and stick to it. Operations roles don't get paid the way trading roles do. Middle office would kill to be front of house. If you're a PM, stick to that.