Is there more upside in quant or fundamental hedge funds?
Is there more upside in quant or fundamental hedge funds? Who eventually makes more if you are good at it?
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This gets asked over and over. It doesn’t matter, if you are good and are at a solid fund you will make a lot regardless. The strategy isn’t the thing, the amount of return (risk adjusted) you make is.
At the more junior levels the base comp (and at times overall comp) will vary, many fundamental firms don’t hire students out of undergrad, quant funds will, then they compete with different industries, etc.
But if you are talking about “if I go to a top place and I’m good?” Then focus on working on the type of work you like because that’s where you’ll be good. The money is high in both.
Would you say quant funds are much more intellectual than fundamental shops since they use complex computer science and math to develop their strategies?
It really depends, the term “quant” is thrown around so much that in some cases it doesn’t mean what you think. It has become a bit of a buzzword and some firms use it to “show” they have a “system” for their investments that will give investors confidence, but some of these can be pretty basic. Also, sometimes basic ideas can make money. Finally, some places focus on very advanced math and pricing, etc while others use more basic techniques.
In general though I think the culture is more “intellectual” or at least they are different (I think intellectual is the wrong word). But it is the people you see who were very much into computer science, math, etc but you can’t be that general about it. For the most part the people I know at quant places tend to be very intellectually curious and a bit more introverted, but again some firms have more of this vibe than others.
Fundamental = intellectual (for the most part, obv variance is high) Quant = nerdy
Having had experience with both types of places, yes, I would say quant funds are generally more intellectual.
I don't agree. There's huge path dependency on both sides. I would say for fundamental hiring pool is narrower, and pay is generally higher. On quant, getting in is more technical and depends on hard skills, but places care less about pedigree. Starting pay may be higher in quant but stagnates fairly fast.
Starting as quant PM probably easier as strategies have less vol, scaling is easier, but you tend to hit max GMV earlier than a fundamental PM who can scale to larger size at market neutral seats.
Also, what is a 'top place?' Many places that are top are not necessarily good places to start careers. There are huge swathes of analysts / quants at MMs. A lot comes down to your PM, team and what they are willing to teach you. One case in point, if you start at Coatue or Shaw today good luck climbing to VP level.
Provided you had the skills for both, would you rather be a Quant or Fundamental? I am a math major and I want to become a PM.
I agree with what you are saying about path dependent and I am mostly ignoring that (Purposefully although maybe I shouldn’t) as if you are a top performer you will get paid on the amount of money you and your firm makes.
Now the path to get there is different, and there are pros and cons to each. You hit on many of them.
Also the opportunities are different, so there is a lot more to think about if you are trying to decide which path has the highest probability to land you in a high paying job.
My only point is that the strategy isn’t what differentiates pay. The firm structure does (and you can argue quant firms are siloed). The firm performance does, the payout structure, etc all of that plays in. The simplest example is that if you are a quant manager or fundamental at a MM it doesn’t matter what strategy you run (outside of the usually higher data costs in quant).
When I say top firms I mean firms with solid capital, good ratio of people to AUM, good performance, fee structure, etc
At the top levels all the comp I’ve seen is performance based, and across strategies it is a lot of money at all places. But agree on your points about how to get there.
In discretionary trading it is easier to point out how much money you have made your firm. You can point out the trades you suggested. A quant of course can point to their models, but the performance of a model always needs to be seen in context to the other models that are used and the firm can always argue that it is their great infrastructure that made it possible for you to research and run the model. Plus, if you leave the firm will probably still be able to use your strategy. This makes it easier for talented discretionary traders to get into a position where they actually run risk and get paid a chunk of their profits, which is were the real high payoffs are. Lots of talented quants never get there. Nevertheless it is possible if you take initiative and manage your career proactively. In the end this is highly individualistic and path dependend. Also you need to be careful: A lot of the very successful quant funds are highly siloed. They provide great pay and a great work environment, but as a researcher for the first years you might only work on some very specific alphas and never see the other parts of the trading process such as portfolio construction, trade optimization, etc. This makes it difficult to get into a position where you can run something yourself. Might be better to first join a less prestigious fund where you have full visibility on everything first
Your first point is not true. A fundamental analyst can suggest a good idea but the sizing and timing are decided by the PM. He can also have terrible picks but the PM saves the day by sizing them small. This makes it not so trivial to determine analyst contribution to performance, and often leads to frustration by analysts that don't think they're being comped fairly.
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