Comments (17)

  • Investment Manager in HF - Other
Jul 25, 2020 - 10:08pm

Yes this is happening, but really only in the more sophisticated pensions (think Canadian funds and the typical big names). They are building out their capabilities to do quant, but they have restrictions and different time horizons.

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  • Investment Manager in HF - Other
Jul 25, 2020 - 10:47pm

The differences will mainly be:

  • pay: pensions funds will pay less. Not saying they won’t pay well, but at junior levels you are looking at 20-30% and senior levels more
  • time horizon: in general pensions funds have longer time horizons, so the stress will be a bit less and the strategy will be more long term focused, so in some cases you’ll be less looking at the short term opportunities and be more focused on how to use the quant/analytics to run a stable portfolio for a long term gain (with minimal drawdown)
  • stress: will be less at pension fund. A lot less cutthroat, you aren’t fired if you have a bad month.
  • tech/infrastructure: will be worse at pension fund, it will feel a lot more “homegrown” and mostly just trying to get things working rather than tech being the edge, that being said this is starting to change
  • data: mixed bag, since pensions funds have so many investment teams (quant, fundamental, private, etc) and also allocate to HFs you have a lot of access to data and discussions with key funds, but you also won’t have the same budget for high priced data (goes hand in hand with the tech)
  • culture: pension fund will normally be a bit more structured.

EDIT: sorry on the restrictions some pension funds may have rules on what they can and can’t do (instruments, trades, etc).

Jul 26, 2020 - 10:56pm

the biggest jobs that quants have at pension funds/endowments/etc. are in asset allocation and portfolio construction. how much to allocate to us equites vs international equities vs fixed income vs private equity vs municipal bonds (it goes on). asset allocation can become a pretty sophisticated optimization problem when you are trying to optimize risk adjusted return with many constraints (which generally pensions have).

this type of work is pretty different from the type of work that a quant at two sigma or citadel would be working on. there might be some crossover in terms of portfolio construction and optimization techniques but the application is very different. I don't think any of the big asset owners are running their own systematic market neutral equity hedge funds in house.

probably some might be running internal long only systematic strategies that are straight forward smart-beta/factor based strategies. folks who work on those types of strategies will be more similar to quants at HFs.

Broadly speaking there are a lot of types of jobs that fall under the umbrella of "quant analyst" in an investment firm. Only a small slice of those are working on signal research for long/short strategies.

Jul 28, 2020 - 4:53pm

Probably some do but it obviously depends if the pension fund has a team that does direct investments in MBS. Not my area but as far as i know that type of stuff is pretty specialized knowledge. Factor/AA stuff much less specialized and easier to learn given requisite math/stats background. As a result I think most LPs just go with external managers for MBS. I work for a large LP (though not a pension) and we do not have an internal MBS team, just allocate to blackrock or whoever and forget about it.

In addition to asset allocation, a lot of LP quants will provide quant/analytics support to direct investment teams. My firm has a sophisticated fundamental IG/HY fixed income team that several quants support.

Jul 27, 2020 - 9:54am

In short, yes, for the pension fund I work at, we use quant strategies. Not quant trading (which I assume means automatic trading based on signals). Some of the strategies used are: in equities (smart beta, factor driven strategies, quantamental, small caps, minimum volatility products); in fixed income (government/high yield/investment grade, alternative credit/CLOs, emerging markets hard and local currency); in derivatives (CTA/managed futures). These are all products run in house.

A quant career depends on where you are in the firm, but as the poster above said, there are various quant positions, although it's quite fluid and people can move around between teams. Basically, we have quants in asset allocation (we call them strategists), fixed income, equities, and risk. We also have a central AI/data science team which works on projects with other teams. They mainly focus on research and don't own any P&L.

From a quant in any of the asset classes you can move up from analyst and become a quant PM and then head of team. As someone else posted, you can expect less stress and working hours vs a hedge fund, but also lower pay. That's the main tradeoff.

Jul 28, 2020 - 4:15pm

interesting. I was approached by a PM for automated trading strategies.

Suppose a pension invests in MBS. Do they do have quants managing the curves & model prepays or is it more general, asset allocation/portfolio optimization quant work?

Jul 29, 2020 - 5:41pm

At my firm, we have only a few quants working on asset allocation. Most of the quants (like 5 to 1) sit in asset class investment teams (eg. fixed income, equities and alternatives) and do almost no asset allocation work (unless it's allocation to strategies within their asset class). So quite different from the set up DeepLearning has at his firm. We don't have a specific MBS team, although I know from talking to the fixed income team that we have investments in CLOs, ABS and structured credit (I assume there are some MBS investments there, but not to the extent where 1 PM would focus only on that). The quants in fixed income will likely be building or maintaining the models for all credit products, including ABS.

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