Most meritocratic hedge fund?

Hello fellow apes

I'm a final-year condensed matter physics PhD thinking about what to do after I graduate.

One thing that's majorly annoyed me about academia is how political it is. Criticising important people's ideas must be done with great care, when writing articles you have to cite your allies regardless of how relevant their work is to yours, conferences are often somewhat of a circle jerk and so on. There's just too much ego-driven nonsense that detracts from the actual science.

Don't get me wrong, academia is great in many other ways. You meet many very intelligent people, get exposed to fascinating ideas every day and you get to learn a wide variety of skills. But, at the end of the day, academia is just far too political for me to enjoy a career in it. 

I hear that trading-oriented finance is however pretty meritocratic. "Eat what you kill" and all that. Is this true? If so, are there any quant hedge funds/prop-shops in London or Europe that are particularly known for being places where one can openly exchange and criticise ideas and where the leadership isn't up their own asses? Maybe something ala Renaissance Technologies in the US? It'd be really cool to work in a place where the focus is on solving problems, understanding markets and making money instead of dealing with insecure egos.

Cheers :-)

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Comments (35)

  • Intern in PropTrad
Aug 27, 2021 - 8:10pm

Well prop shops tend to have flat organisational structures and are much more open to criticising and helping people with strategies and ideas. Jane street tends to come to mind as one which exemplifies this culture fairly well. There will always be a few tough personalities though. Finance, even quant/prop, has a huge degree of pure randomness when it comes to recruiting. You don't really pick where you go. Apply everywhere you can and go wherever you get an offer, although I've seen people in prop land multiple offers and negotiate off the back of that in some rarer cases. 

Aug 28, 2021 - 12:23pm

Well prop shops tend to have flat organisational structures and are much more open to criticising and helping people with strategies and ideas. Jane street tends to come to mind as one which exemplifies this culture fairly well. There will always be a few tough personalities though. Finance, even quant/prop, has a huge degree of pure randomness when it comes to recruiting. You don't really pick where you go. Apply everywhere you can and go wherever you get an offer, although I've seen people in prop land multiple offers and negotiate off the back of that in some rarer cases.

I heard Jane Street, Hudson River Trading, Two Sigma and similar firms mostly do HFT. I suppose that means they essentialy do tech, not finance, and therefore have similar cultures and (lack of) hierarchies to tech companies? 

  • Intern in PropTrad
Aug 28, 2021 - 1:39pm

eh sorta. HFT is a bit of a buzzword and a few firms out there don't especially specialise in developing the fastest executing strategies/algorithms but are still latency-sensitive. You are correct though culture-wise, firms like JS, Optiver, 5R, Akuna etc (basically prop shops) are moreso tech/maths companies than they are finance and the culture reflects that. Although, the culture does vary firm to firm so its hard to put an exact stamp on it; I think the prop space is going to be the most meritocratic whilst still being within finance.

  • Research Analyst in HF - Event
Aug 27, 2021 - 11:57pm

I guess from a pnl perspective you could see trading as meritocratic, but management at senior levels of any company, hedge fund or not, is highly highly political. Leadership at most funds are usually stingy and sometimes worse, and the larger the fund, the harder it is to maintain culture. I feel also like a lot of funds are more meritocratic when things are bad than when things are good, but that might be because it's easier to see consequences on a down year.

That all being said, the best traditional asset managers, prop shops, quant shops tend to be fairer - mixed results as you delve more on the finance side rather than quant. Two Sigma is one that in particular I've heard good things from a fairness and culture perspective.

Aug 28, 2021 - 12:19pm

I guess from a pnl perspective you could see trading as meritocratic, but management at senior levels of any company, hedge fund or not, is highly highly political. Leadership at most funds are usually stingy and sometimes worse, and the larger the fund, the harder it is to maintain culture. I feel also like a lot of funds are more meritocratic when things are bad than when things are good, but that might be because it's easier to see consequences on a down year.

That all being said, the best traditional asset managers, prop shops, quant shops tend to be fairer - mixed results as you delve more on the finance side rather than quant. Two Sigma is one that in particular I've heard good things from a fairness and culture perspective.

Thank's a lot mate. Totally agree that the senior positions are highly political everywhere – just a law of human nature, I suppose. Also, you make an interesting point in that "funds are more meritocratic during bad periods". Isn't that when they typically cut their employees? 

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  • Research Analyst in HF - Event
Aug 28, 2021 - 2:03pm

My point was just that most managers are typically reluctant to reward (share more of the pot) even when they make money but eager to cut (pay or job) when they lose money. You see it also in PE when you're a senior associate, and every year they promise next year you'll get carry but never actually deliver if they're not contractually obligated.

Aug 28, 2021 - 1:45am

Read "Principles" by Ray Dalio. He is a fervent believer in meritocracy. And his hedge fund, Bridgewater (which I'm sure you've heard of), at least according to what I know (having spoken to former employees) actively lives out a truly meritocratic culture. I think perhaps it's exactly what you're looking for, but of course its enormously famous and hard to break into. Maybe start your research there. Good luck man, sounds like you've got an interesting background and a great intellect.

Aug 28, 2021 - 12:17pm

Sinner G

Read "Principles" by Ray Dalio. He is a fervent believer in meritocracy. And his hedge fund, Bridgewater (which I'm sure you've heard of), at least according to what I know (having spoken to former employees) actively lives out a truly meritocratic culture. I think perhaps it's exactly what you're looking for, but of course its enormously famous and hard to break into. Maybe start your research there. Good luck man, sounds like you've got an interesting background and a great intellect.

Cheers buddy. So Bridgewater is a so-called "quantamental" firm and quite collaborative? I like the sound of that. It's typically a good thing when people of different backgrounds are put to work towards the same goal.

Aug 28, 2021 - 1:48pm

Exactly. Even if you don't read the book, google "bridgewater baseball cards" and "bridgewater dots", they have a totally unique culture of collaboration, radical transparency, and feedback. Not super familiar with the intricacies of their investment strategies but I think they have a variety. I know a math PHD student who interned there who loved it

Aug 28, 2021 - 6:06pm

Gonna offer a counter point here that I have heard Bridgewater operates more like a cult and is perhaps the most political investment firm on the street. The whole radical transparency bend sounds like it can lead to a lot of internal bickering and sharp elbows, and not everyone likes having their mistakes put on blast by their coworkers with 100 people cc'd. 

Most Helpful
Aug 28, 2021 - 1:07pm

Millennium on my opinion - here's your payout, here's your drawdown limit, here's your risk parameters - her's your tech/research budget. Now F off and you'll hear from us if you lose money.Pretty purely meritocratic at the PM level at least and that filters down below PM on most good/large teams, just by nature of the arrangement.

Remember though the purity of meritocracy isn't the only important metric. It's a meritocracy SUBJECT to strict conditions, the best investor may not be the best market-neutral portfolio manager - and when they blow up they'll tell you it wasn't their fault, bad luck etc. It's a meritocracy, but in who is the best at a particular thing and with a lifestyle risk profile that is worth considering. If I tell you to run a 100meter dash against my 3 friends, winner get $20m and everyone else gets their feet cut off - are you excited to join my meritocracy?

That said, while I may sound negative, it's only to address/temper what sounds like a touch of idealization in this thread (not specifically OP). I love this industry, and I think Millennium is one of the best places for a PM to work, but meritocracy is self itself the specific goal.

Most of the industry is pretty meritocratic. Funds with great performance are likely to be more meritocratic, because great performance comes from great teams and great teams comes from great talent and great talent is aware of market rate in a competitive field.

I'd argue integrity/portability/verifiability of track record is the key to participating in the meritocracy of the industry, you'll generally paid not "the value you are worth" but rather "the value you can verifiably/confidently be expected to deliver on a forward basis" with consideration to supply/demand. Just like a stock or anything else.

Aug 28, 2021 - 1:26pm

Anchor

Millennium on my opinion - here's your payout, here's your drawdown limit, here's your risk parameters - her's your tech/research budget. Now F off and you'll hear from us if you lose money.Pretty purely meritocratic at the PM level at least and that filters down below PM on most good/large teams, just by nature of the arrangement.

Remember though the purity of meritocracy isn't the only important metric. It's a meritocracy SUBJECT to strict conditions, the best investor may not be the best market-neutral portfolio manager - and when they blow up they'll tell you it wasn't their fault, bad luck etc. It's a meritocracy, but in who is the best at a particular thing and with a lifestyle risk profile that is worth considering. If I tell you to run a 100meter dash against my 3 friends, winner get $20m and everyone else gets their feet cut off - are you excited to join my meritocracy?

That said, while I may sound negative, it's only to address/temper what sounds like a touch of idealization in this thread (not specifically OP). I love this industry, and I think Millennium is one of the best places for a PM to work, but meritocracy is self itself the specific goal.

Most of the industry is pretty meritocratic. Funds with great performance are likely to be more meritocratic, because great performance comes from great teams and great teams comes from great talent and great talent is aware of market rate in a competitive field.

I'd argue integrity/portability/verifiability of track record is the key to participating in the meritocracy of the industry, you'll generally paid not "the value you are worth" but rather "the value you can verifiably/confidently be expected to deliver on a forward basis" with consideration to supply/demand. Just like a stock or anything else.

Wise. Thanks a lot.

Aug 28, 2021 - 1:45pm

Just to add, every PM that blows up, lost. The job is to win, and if you lose, you didn't do your job and that meritocracy.

People seem to think meritocracy means the smartest or hardest worker wins. Incorrect, the most capable to win, wins. Again public markets are generally meritocratic to a high degree everywhere, any claims they aren't are ego-preservation "I underperformed, but MUH fed!"
 

Since meritocracy can be generally assumed in public investing, your focus should be on:

- game selection: work for/with the teams/institutions/strategies that best play to your capabilities. At junior levels it's not a pure meritocracy and many capable future stars never reach meritocracy level (imo PnL linkage) because they spend the early years churning under bad PMs. Who you work for is the most important choice, not the pay - if you have that choice and choose incorrectly it's on you, if you don't have the choice - well I will recognize the meritocracy is less direct at junior recruiting stages (hence why prestige weighs more heavily, less results to work off of) but whatever that's not my purview. 
 

- as I said, meritocracy is measured specifically by ability to win. But There are considerations, most importantly high integrity/character, which are arguably could be neutral/negative on a short horizon, but are critical on a long horizon, both objectively and subjectively. Cutting corners re: ethics is for those incapable of truly performing, because doing it the right way is dramatically higher return in the long run. P72 probably has the best compliance around these days, but how much investment talent has avoided them over the past decade due to the taint of past? 

Aug 28, 2021 - 3:46pm

Anchor

Just to add, every PM that blows up, lost. The job is to win, and if you lose, you didn't do your job and that meritocracy.

People seem to think meritocracy means the smartest or hardest worker wins. Incorrect, the most capable to win, wins. Again public markets are generally meritocratic to a high degree everywhere, any claims they aren't are ego-preservation "I underperformed, but MUH fed!"
 

Since meritocracy can be generally assumed in public investing, your focus should be on:

- game selection: work for/with the teams/institutions/strategies that best play to your capabilities. At junior levels it's not a pure meritocracy and many capable future stars never reach meritocracy level (imo PnL linkage) because they spend the early years churning under bad PMs. Who you work for is the most important choice, not the pay - if you have that choice and choose incorrectly it's on you, if you don't have the choice - well I will recognize the meritocracy is less direct at junior recruiting stages (hence why prestige weighs more heavily, less results to work off of) but whatever that's not my purview. 
 

- as I said, meritocracy is measured specifically by ability to win. But There are considerations, most importantly high integrity/character, which are arguably could be neutral/negative on a short horizon, but are critical on a long horizon, both objectively and subjectively. Cutting corners re: ethics is for those incapable of truly performing, because doing it the right way is dramatically higher return in the long run. P72 probably has the best compliance around these days, but how much investment talent has avoided them over the past decade due to the taint of past? 

Yep ethics and honesty is definitely a must. How are you supposed to do collaborate with people you don't trust, or respect bosses who actively screw clients/colleagues over? 

Any particular firms to avoid? I don't know what happened with P72, but I've heard bad things about firms such as G-Research (you get silo'd and they'll sue if you try to leave) and major American banks like Goldman (vampire-squid).

Aug 28, 2021 - 1:55pm

To most succinctly answer your question, the most brilliant and successful investors I've met invariably sought out critical feedback and alternative views as basically a central tenet of their personality. 
 

When I was a college intern at a large extremely well performing under-the-radar single manager, the Founder asked me to make two post-mortem  criticism decks of their investment failures - it was a quarterly process for them. It was very uncomfortable to present a deck picking apart the missteps of absolute industry thought leaders (imo). But it was very instructive for me to see their relentless self-review and humility - it's not a coincidence, it goes hand in hand with being a good forecaster and it's also why I love the industry  

Academia is far from a meritocracy of ideas. Much respect for the knowledge they bring to public sphere, but increasingly alarmed at the damage they do as well - maybe due to decreasing alignment between funding and truth vs. public narrative influence. Nothing pisses me off more than seeing people disregard anything that doesn't come from an "expert" as defined by titles and degrees. Titles and degrees may by good predictors of who is most likely to produce reliable knowledge, but academia has elevated the titles beyond the objective truth. If Joe Hillbilly does robust and reproducible research, the data is the data. The rapidly accelerating trend to dismiss or believe any conclusions, solely based on the degree/title of who put it forward with almost no consideration of the primary data/research is the scariest and most disappointing trend of my lifetime. 
 

edit: I wrote "to answer you succinctly and then wrote another novel, bad habit sry!"

Aug 28, 2021 - 4:10pm

Anchor

To most succinctly answer your question, the most brilliant and successful investors I've met invariably sought out critical feedback and alternative views as basically a central tenet of their personality. 
 

When I was a college intern at a large extremely well performing under-the-radar single manager, the Founder asked me to make two post-mortem  criticism decks of their investment failures - it was a quarterly process for them. It was very uncomfortable to present a deck picking apart the missteps of absolute industry thought leaders (imo). But it was very instructive for me to see their relentless self-review and humility - it's not a coincidence, it goes hand in hand with being a good forecaster and it's also why I love the industry  

Academia is far from a meritocracy of ideas. Much respect for the knowledge they bring to public sphere, but increasingly alarmed at the damage they do as well - maybe due to decreasing alignment between funding and truth vs. public narrative influence. Nothing pisses me off more than seeing people disregard anything that doesn't come from an "expert" as defined by titles and degrees. Titles and degrees may by good predictors of who is most likely to produce reliable knowledge, but academia has elevated the titles beyond the objective truth. If Joe Hillbilly does robust and reproducible research, the data is the data. The rapidly accelerating trend to dismiss or believe any conclusions, solely based on the degree/title of who put it forward with almost no consideration of the primary data/research is the scariest and most disappointing trend of my lifetime. 
 

edit: I wrote "to answer you succinctly and then wrote another novel, bad habit sry!"

You are completely right that the search for "truth" is becoming less important in academia. I think a central problem is that the low-lying fruit have already been plucked in most fields. Especially in physics: the remaining problems we need to solve are really damn hard and it's typically completely unclear how to progress. This leads to a flood of research that's not really that important or adding much new information, making it difficult to objectively judge the value of these research contributions. Thus the judgmenet must be subjective, and if it's subjective, politics, sales skills (e.g. being good at writing interesting stories and narratives) and so on will start playing a major role. And when taken to the extreme, e.g. like in this infamous case, it makes the whole thing unscientific and fake. Indeed, I personally know professors who actively write articles in misleading ways to generate more hype and prestige for themselves (and in the process obfuscating the science).

Of course there are exceptions to this and much excellent science is still being done all over the world (mostly in more applied fields nowadays imho), but at the end of the day I'd guess about ~80% of academic papers published in STEM are substandard. I imagine it to be much worse in the softer subjects.

It might be that I'm just being overly cynical and "grass is greener on the other side", though. At any rate, academic research is certainly highly important for humanity, but I just wish the academic incentives were more aligned towards seeking truth instead of growing individual egos. 

Aug 28, 2021 - 4:30pm

I think solely by your line of questioning and responses you'd be happier in investing.

IMO the dif is:

Investing: intellectually honest transparent self-interest (of course there's many fee collecting salesman masquerading)

Academia: truth-seeking hindered by incentives toward self-promotion/salesmanship (of course much honest and good research is done)

Politics: worst of both worlds - self-interest achieved through disingenuous self-promotion (I don't have a caveat on this one)

IMO I prefer the intellectually consistency and alignment/engagement of investing, and if you want to make a difference for the world it's a great engine for charitable efforts (or more cynically - there's always an academic/politician for sale at the right price)

Sep 4, 2021 - 10:00am

If you wanna work for a meritocratic hedge fund then you're more than welcome to go through endless rounds of probability questions until you're one of the last candidates left.  Personally I'd rather do it through networking if possible.

Sep 9, 2021 - 5:41pm

Specialized medicine.

If there are only 5 doctors in the world that have a reputation that can perform a certain surgery successfully every time they can demand outrageous prices. 

Military.

There can be some nepotism sometimes, but for the most part, the military is very impartial in awarding promotions. 

  • Analyst 1 in IB - Cov
Sep 10, 2021 - 9:47pm

This is a joke, right? The military is literally the most incompetent organization on the planet, and promotions are handed out purely on the basis of nepotism and politics all the damn time. 

-someone who was actually in the military for 4 years

  • Research Analyst in HF - Other
Sep 10, 2021 - 9:49pm

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