Quant hedge fund career progression

I've been working in a major quant hedge fund as a researcher for almost three years now and I thought it would be a nice idea to lay out my thoughts about the quant space, and maybe give a bit of a contrast to the overwhelmingly positive image quant shops get. Also, any advice on career choices appreciated.

Let's first take a look at the business model. The firm I work for has a multi-fund offering and each fund is somewhere along the life cycle I'm describing below.

It usually starts out with a good strategy (And a fair amount of luck, as with trend following which worked splendidly in 08). As time goes by and track record is built, AUM follows suit and the capacity of the strategy is soon pushed to its limit. Sure enough, returns start dwindling down and the high-water mark starts to be so far out of sight that you no longer care about it. This is when management fees kick in, with an increasing amount of time spent to cater for the clients expectations in an effort to raise more assets. You are no longer selling alpha, you're selling an exposure to a precise mandate. The army of PhDs that you've hired is reduced to a number to show clients how many physicists and mathematicians you have. Bad performing alternative alphas are kept if they make for a good marketing story that will differentiate yourself from your competitors.

The position of a quant researcher in such a firm is considered to be front office, and you are given responsibilities. One of my projects 6 months in oversaw a reshuffling of a portfolio that involved a turnover of a few yards over a week of trading. Work life balance is nice, I show up at work at 9am, sometimes take a lunch break and leave no later than 7pm. When a model breaks though, it's not uncommon to spend a sleepless night debugging and trying to beat the close of whichever market is still trading.

I believe those previous points extend to many quant HFs, although what may be different is the culture and the quality of management. Though this job definitely has more of a tech culture, it can still be ruthless. Front office jobs are cut on the slightest flicker of PnL, usually conveniently before the bonus. You can't trust anyone in management and they will not hesitate to lie to your face. They most definitely will try to fuck you over your comp as I've had it happen to me. Non-competes are just silly long. Potential for progression is small, people are given bullshit titles instead of a raise to do the same job (we now have several co-heads of whatever department, which makes absolutely no sense).

As I write this post I am myself doubting whether to stay in the business. The PM route is a long one, and as I grow more experienced and my comp increases, so is the likelihood that I will be the next one to get canned. The backstabbing culture doesn't really help either to trust an older colleague to share his advice or experience.

Thoughts ?

Comments (33)

May 3, 2019 - 12:28am
whitewalker, what's your opinion? Comment below:

This sounds like AQR. If so, I think it is a firm specific issue, just hop firms. Hopefully they pay something during the non-compete period.

May 3, 2019 - 12:03pm
QuantSprinter, what's your opinion? Comment below:

I have a similar experience. I guess that's common for those large CTA style funds which have not really made money for a long time and are focusing more on asset raising rather than finding alpha and empowering innovative employees.

My goal is to move into a PM seat. I have been quite fortunate by having worked very closely with an experienced PM and getting exposure to some more innovative approaches, rather than just maintaining a trend following system. Nevertheless this change is super hard as basically you need PM experience to get a PM position... Maybe I will first try to move into a "number 2" position in a multi strat or something similar to a sub PM position where I can manage risk on some of my strategies.

If anyone has advice on how to make this move I would appreciate their input.

May 4, 2019 - 8:20am
veryBadShort, what's your opinion? Comment below:

In my experience PM is also a title that has been blurred to some extent. Each fund has its own so investors can put a face on it, but only a few call the shots. Also the research process is oftentimes not directly driven by the PM, so they have less of a claim to PnL than to asset raising.

I think a siloed hedge fund such as Millenium is the best starting option. A lateral move beats waiting years to go up through the ranks.

May 5, 2019 - 4:43am
QuantSprinter, what's your opinion? Comment below:

Yes you are right the title "PM" can mean different things at different places and at some places it is more of an asset raising role. What I mean is someone who manages risk, is accountable for a set of strategies and has some decision power on them. For this I suppose multi manager is my best shot. However, I am aware that this can be a very risky move.

May 3, 2019 - 3:13pm
Undercover meme, what's your opinion? Comment below:

Could you PM me? Im out, but I would really like to ask you a few questions.

"one for the money two for the better green 3 4-methylenedioxymethamphetamine" - M.F. Doom

May 3, 2019 - 3:21pm
faceslappingcompilation, what's your opinion? Comment below:

do you have replicatable knowledge of any profitable trading strategies...to the point where you could walk across the street and rebuild them, but where you own the P&L?

if yes, then why not go for a PM seat at a multi manager quant firm?

just google it...you're welcome
May 4, 2019 - 8:45am
veryBadShort, what's your opinion? Comment below:

I've had a fair amount of exposure, although it still feels like a bit of a leap of faith.

May 11, 2019 - 7:17pm
coffeebreak, what's your opinion? Comment below:

You sound like you want to leave the industry altogether. Or is it rather you want more responsibility?

Also, are you at a multimanager or a large quant fund (>3B)?

The issue as I see it is that a lot of the large quant funds attract fantastic talent which languish without having any exposure to alpha generation. Would this describe you?

May 13, 2019 - 10:52pm
guy_incognito, what's your opinion? Comment below:

if you know how they generate alpha, perhaps alphas that may work with less capital shoved into them, you could be very valuable to a smaller fund. its counterintuitive, but you could make more at a smaller shop.

May 15, 2019 - 9:19am
cp5670, what's your opinion? Comment below:

This seems to be a common story these days. I had the same experience at another, smaller quant fund. The managers were very friendly and academic on the surface, but had all kinds of hidden agendas. You had to spend more cycles thinking about what was going on in their heads and what they were plotting instead of what was happening in the markets. Everything was siloed despite being a single manager fund without individual PnLs, and each researcher was only given access to parts of the codebase related to what they were doing. The focus of the place had changed to gathering assets and people were hired to put on a show in front of clients. It was common for well regarded people to just vanish one day, usually near the end of the year, even though the place was small and rarely hired anyone. The pay and bonuses were low, significantly less than what the tech world pays these days, and that's assuming you didn't get fired before the end of the year.

I don't think all the quant shops are like this, but the ones that are consistently profitable are either big and corporate (and hire mostly for non-core groups) or are smaller and have no need to hire anyone at this point.

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Most Helpful
May 19, 2019 - 1:31pm
cp5670, what's your opinion? Comment below:

Unfortunately, it's not easy to do any of those things today. As a researcher you rarely interact with institutional clients directly, and these types of funds run high capacity strategies that would not be easily portable elsewhere. Beyond a point, the real edge is in sales and being able to attract AUM. I got kicked out eventually myself (again right before the bonus time) and left the industry. I interviewed at some other shops at the time, but got the sense that they were not really looking to hire anyone and just wanted information on the strategies I previously worked on.

Frankly, quants are a commodity these days and are viewed as easily replaceable, maybe more so than fundamental L/S analysts. Most of the quants who actually made money in these places got started 10-20 years ago when the industry was much less mature than it is today.

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May 20, 2019 - 8:17pm
mike78787, what's your opinion? Comment below:

This is one of the first realistic views I have seen on this website of the quant/HF industry. Like it or not, being a quant is becoming commoditized, in the same way that writing software has. Sure, there are still elite software engineers, but the vast majority just arent that special. I received a few offers in the space and found that FB/Google were always able to match the compensation. Not only that, but they also offered better work life balance and working environment. The compensation still has higher potential in finance, but clawing your way up to the seven figure money requires much more than being an experienced quant.

May 22, 2019 - 9:55am
cp5670, what's your opinion? Comment below:

I think that kind of money can only be made as a quant PM at a platform fund, which is like being an entrepreneur and has a similar risk/return profile. It's also more suited for people who have been in the industry for many years, since they have more savings to fall back on if they get fired (from back when the industry in general paid much more) and can afford to take more risks with their own careers. I've seen a few funds that do seem to pay very well and are not platforms, but they have a tiny number of employees who have been there from the beginning. They never hire anyone and their funds are at capacity, with no need to attract clients. At the big, single manager funds that you hear about and recruit at academic conferences every year, the pay is not only low but arbitrary, and is linked to neither your nor the fund's performance. You also learn little of value for running your own portfolio in the future.

The quant trading industry has played out at this point. Most hiring in the single manager funds now is for non-core groups who are not doing frontline work, or to replace people who left (meaning they were not paid well enough to retain) or were fired. It's also common for funds to just keep interviewing quants without hiring anyone to learn new ideas and strategies. There is always a need for software engineers, but those roles pay roughly the same as in the big tech companies, with less job security or career growth.

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May 23, 2019 - 6:02pm
veryBadShort, what's your opinion? Comment below:

Many thanks for your answers all, seeing a different perspective has helped me think things over.

Roughly two options have been outlined so far, although you could say the first point leads to the other:

  • Getting closer to the alpha and move laterally: it comes with some amount of risk and the payoff can be accordingly great. I've seen it happen more than a few times though on different scales, with former disgruntled employees from the competitor next door being treated like kings as they implement the exact same strategy they were managing previously.
  • Moving closer to the fund's clients: this seems a bit far-fetched as only extremely senior employees are allowed near them.

Also of the few thoughts you guys had, some resonated more than others.

It has also been my impression that quants are particularly commoditized. If you have not been exposed to clients so that your name is linked to a strategy, you are at risk. The likelihood of getting fired goes up with your compensation.

Judging from the comments, my experience does not seem to be an isolated one. One could hardly argue that the grass is greener and it would be foolish to expect that working in a different place will change my mind about the flaws of this industry.

Finally as coffeebreak pointed out, I am considering quitting the industry. Even if scenario 1 or 2 were to pan out, I will have to endure for a while which makes me question whether it's worth it. cp5670, I am very curious as to your exit strategy.

May 25, 2019 - 10:01am
cp5670, what's your opinion? Comment below:

I went to a research group in a big tech firm. I spent some years in industrial research labs before entering finance and have several papers in machine learning and related areas. I work 6-7 hours a day and like my colleagues, with higher pay than my quant role (even if I had gotten the bonus). The actual work here is a mixed bag, but it's not very demanding and I spend part of my time running my own portfolio. I keep getting contacted by recruiters to interview at other funds or HFT shops, but haven't really explored it.

For what it's worth, I know of 4 or 5 others in my phd cohort who joined quant funds, and they all got fired too and left the industry. They became either academics (with tenure eventually), software engineers in the big tech firms, or are just unemployed. The other researchers at my old fund also want to leave but are trapped by H1B visas. Everyone I've seen who actually got rich and had a good career in this space started a long time ago. Today, you would probably have a better finance career in PE, distressed debt or something similar with high barriers to entry, but that work is all about relationships and negotiation, and a typical quant would bring nothing of value and would find it hard to break in there.

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May 25, 2019 - 10:13pm
2128701630, what's your opinion? Comment below:
Today, you would probably have a better finance career in PE, distressed debt or something similar with high barriers to entry, but that work is all about relationships and negotiation, and a typical quant would bring nothing of value and would find it hard to break in there.

Or exotics/structured products.. which hire quants but require some ppl skills

Jul 23, 2019 - 9:25pm
technologically_Finance, what's your opinion? Comment below:

Late in the forum, but with the final statements from cp5670 I cannot conclude how PE or VC funds would not find quantitative, tech skills applicable. How about simple capital attribution, i.e. what organization has a good invention or not? You can have a great sell on the product but then who will be able to look at how it's built ? Quants, scientists, engineers

Jul 25, 2019 - 9:10am
cp5670, what's your opinion? Comment below:

I think VC funds do hire some experienced technologists, but they are not really quants as such and bring in deep expertise of an industry rather than just math/programming skills. VC partners are often former startup founders who had successful exits. PE funds seem to hire only IB analysts (not quant) or MBAs and have a more traditional career ladder. Private markets are more about building relationships and having access to key people, which means not just anyone can get into it, unlike quant trading.

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Jul 25, 2019 - 10:41pm
technologically_Finance, what's your opinion? Comment below:

Under the umbrella of PE is VC to which this topic coexists and I am considering the teams' analysts. The notion holds. You are a quant, scientist, engineer, since HFT firms have approached and this is like Excel through VBA; if you can pull the invention for analysis you can understand the organization's product better than the next. Financials are common place since its industry's nature or attributing capital. We, if I am mistaken, build consistently, Relationships included and a "deeper' level at that . cp5670

Jul 28, 2019 - 8:42am
veryBadShort, what's your opinion? Comment below:

Hey all,

Small update as some time has passed since I started this thread.

The firm I work in is doing very very very well, and yet redundancies have been made in some departments that were relatively less profitable. I think this only goes to confirm yet again that quants are commoditized and that the high(ish) salary has a price.

There have been two consequences to this last round of firing: first it has created a power vacuum that has had a fair impact on my work. Second and most importantly, it has allowed me to finally talk openly with my now ex-colleagues, some of whom were in management.

One of them made a very intersting point. He is an ex-JP who switched to buyside after a few years at the bank and now has about the same amount of experience working in the hedge fund industry. Typical profile: PhD in math, super smart, extremely driven, ... . Despite all of this, his main worry was that he's now actually too old. He explained that he never owned PnL, and therefore does not bring enough to the table. As a result top-tier funds are less likely for him, and any PM position is a very hard sell. His most likely path is going back to sell-side.

Jul 29, 2019 - 12:03pm
cp5670, what's your opinion? Comment below:

I may have the same issue too. Most quant and prop funds prefer fresh graduates for market-facing roles, and their interviews are set up for this. If you have several years of experience but don't have your own strategy, you are too expensive for what you bring in, and also harder to control or deceive. My old fund preferred quants and traders to be young with no finance experience (tech or academic experience was fine), and the managers once said that finance industry people would have to "unlearn their knowledge" to work there.

It wasn't always like this. 10 years ago, many of these same companies and managers considered quants to be key to their business and went out of their way to keep them happy, even during downturns. Over time, as more and more people flooded into the field, the same dynamic described in the thread "Are hedge fund employees structurally fucked?" has taken place in quant funds.

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Aug 1, 2019 - 9:40am
technologically_Finance, what's your opinion? Comment below:

Hey, I'm going to bring it back to the previous point on PE and/or VC. As was just said, to "unlearn their knowledge", meaning financials (i.e. an IB analyst), balance sheet, debt to equity structures and the financial-like jargon directly contradicts the learning for what an MBA has been. The cost of an MBA is sunk - student debt - and brings it back to my most recent comment. A quantitative, scientists, engineer can view the invention to assess seed money attribution or directly bringing scientific value to the firm. Is the concept hitting home or failing on deaf ears?

Apr 23, 2020 - 12:46pm
iridescent007, what's your opinion? Comment below:

I'm confused. Aren't all quantitative traders and researchers paid very well? They can start at a bank and then go to the buyside, seems like a gorgeous career to me that makes tons of money.

Apr 23, 2020 - 1:45pm
theATL, what's your opinion? Comment below:

For some reason my first attempt at posting here didn't work, so I'll try again.

Quant is an overused and misunderstood term. It can range from "middle office" all the way to PnL generating.

A few things to keep in mind: 1) the high pay jobs (at funds you want to join) are VERY limited 2) many funds use "quants" for risk metrics or pricing models and less on the research side 3) there are essentially two ways to make money in the field: 1. Generate PnL and know the markets or 2. Run a team/work on the portfolio integration (I.e. be senior)

Without getting into the small amount of really high paying jobs (at the top funds) you end up being paid "ok" (400-500k) but taking on a lot of risk (fund risk and risk you become a commodity). If you aren't knowledgeable on markets you'll struggle in most cases (being a "data scientist" type and capping out early).

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Apr 23, 2020 - 4:35pm
iridescent007, what's your opinion? Comment below:

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