Greenfield Quant Pods: how do you deal with building initial research/trading infrastructure from scratch?
Currently working on a newly-established pod of 3 focused on mid-frequency trading.
PM is a phd QR who was a subPM at his previous role on a large quant team. Smart quant, but not a good architect as he is busy trying with day to day. I'm a mid level QR with QD experience and we bought a junior QD in from FAANG to help us out (but he has no finance experience).
We've been running for around 4-6 months now with the PM effectively sponsoring us (I also contributed a few signals) while me and the jr QD build out our research infrastructure (data engineering, market data store, backtester, portfolio optimizer, risk system, etc). My PM came from a collaborative group where he had a lot of support and where the systems were already built for him when he started. I do have experience building these components, but as many know, to do it right you have to spend some upfront investment.
Good news is that we don't have to focus on execution as the firm takes care of that, but all the other piece have to be build by us. Still, I'm wondering if this is being dragged out and we should speed things up.
How do other quants who started on a new pod experienced the initial ramp-up? Any advice would be appreciated.
Good luck - red flag if no one on the team knows how to build out infra/ hasn’t done it before. Either the PM should have first hand experience building out entire quant process or should have enough second hand experience to know who to hire. The fact that the team is already 3 people and no one has built out a research infra before is a bad sign
Well said. I see most successful teams have a clear vision and plan on what to build out for their core strategy, and maybe be a bit more experimental/exploratory with some peripheral add ons. I find the industry competitive enough to be very difficult to figure things out along the way.
How do new quant pods at multi-strats deal with a brand new buildout then?
Is the main concern for you that its taking longer than you expected, or that there's a general lack of understanding from your PM as to how to do this?
I don't think 4-6 months or more for a buildout is unreasonable. The bigger problem would be if your manager were kind of figuring out a plan on the fly, as the above posters noted.
Taking Longer than expected. It's stressful being the lead with so many components to build and little support
your PM is suppossed to know what hes doing and manage the build out and tell u what to do. sounds like hes inexperienced
I would like to hear the experiences of quant PMs. What support/existing systems do multi-strats give you, what do you have to build, etc
u/morgantire
Am I understanding you're starting with virtually no infrastructure, a new team of only 3 people, and after 4-6 months you've already build out a first-round of infrastructure plus found some signals? If so, you're moving extremely quickly. Assuming you're not just replicating a strategy that you already know works because you used it at a different firm, then I would have guessed it would take *at least* a year to build enough bare minimum infrastructure before you can find your first signal worthy of trading (and even that assumes you already know exactly what you need from experience at your previous firm.)
As you are clearly aware, it'll take literally several years before your infrastructure is anywhere near as capable as what an established firm would already have. But the 80/20 rule will hopefully get you far enough to start researching sooner. It sounds like you're doing the right things. I know it's frustrating at this stage, but it doesn't sound like you're doing anything wrong.
In my experience pod shop quants, particularly those who trade lower frequency, are absolutely not going to just sit on the sidelines for a year to build out infrastructure. First of all they want to make a bonus like the rest of us, and second of all it's not good PR to tell your boss you're still setting things up a year into your tenure. So they would rather get some kind of prototype up and running early on and then expand it.
Yeah, that's why it's hard to start a new quant fund. There are no good off-the-shelf quant tools. It takes time to build and there's no shortcut. Also, part of the value of quant tools isn't even the tool itself, it's the thinking that goes in to it. ("What if I looked at dividend announcements? Let's add that to backtester...oh that didn't help. What if I looked at correlation with european stocks? Let's add that to the backtester...Oh that doesn't help either. Maybe I need new visualization tools to see the pattern, let's add that...Wait, maybe I'm thinking about correlation the wrong way, let's change our definition to this other formula...No good yet...What about covariance with asian stocks? Aha, that's a good signal!") The mere act of designing your quant platform is necessary to create the paradigm of how your firm thinks about research and what types of questions you'll pursue. But it takes a long time to get that.
There are a few python libraries for backtesting you can start with, and a few webpages that provide financial data and a quant platform, and beginners can use those and feel powerful ("I did a linear regression on daily prices of stocks and found this trading pair has a .873 correlation -- woohoo!!! Let's short one and long the other!!!") but then you're probably just trading basic stuff like momentum without realizing it.
If it were easy for you to find profitable trading signals with prototyped tools in just a few months, then RenTech and Citadel and TwoSigma and TGS would have already found that signal and already arbitraged it away.
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