QUANT FUNDS - NEED ADVICE
TGIF. I have questions pertaining to potentially running my own portfolio based on quantitative analysis. I am a student at a top 15 undergrad business school in the US. I have a 3.9 GPA majoring in finance and I am currently interning as a junior analyst at a fundamental driven long/short equity hedge fund in Dallas. Quantitative analysis seem more impelling to me than channel checks and talking to management ((I fucking love numbers, can plug away all day). I have gained a rather odd interest in quant funds in the last two months and I would love to try it out on my own portfolio. I have roughly $20,000 available (sports betting/online poker).
Onto my questions:
Should I bother to try this strategy in my own portfolio with only $20,000?
Do you think extensive research on methods/guides would be enough exposure for a beginner to dabble with these strategies?
I'm sure as hell not switching my major, and I don't have any time to add math or comp sci as additional minors. Does anyone have any tips about getting exposure to these strategies, possibly an internship leading to a job?
Lastly, is this industry declining? This question wont affect my interest, but I'm curious to see what everyone's been hearing.
Filed under sign of the top #4782
Not sure what you're saying, yes I'm a newb :/
I worked at a quant hedge fund for four years before going do business school where I am now. Have you backtested the strategy and determined that it outperforms the market on a historical basis? I'm not sure I understand the "only $20,000" piece, and how anyone other than you can tell if it's worth it to invest in this unspecified methodology. If it's good and you know it makes money, then do it.
but i'm really skeptical that it does make money.....
Sorry I didn't make this clear. I don't have a specific strategy yet, I was just wondering whether or not $20k was enough money to invest in using a quant strategy. I know commissions are relatively high, and I'm not sure that trading intra-day 10-12 times with 10$ trade commissions is worth it :/
Yeah if you don't have a specific strategy...then tough to tell if the strategy will work! You do have a fair point though - retail commissions are high and basically preclude any quant/systematic strategy working. I falsely assumed you had a good strategy, and had people who could put you on an institutional platform on which commissions (though still high) should run at 1/5th of a penny per share all in.
Also looking for some tips/guides people deem worthy enough to research/catch up on. Also, as I said, I'm a finance major, and I know from recent threads that quant funds take math/comp sci majors/minors seriously, I was wondering if anyone has any suggestions getting my foot into the door of a quant fund without having these majors/minors. I'm currently majoring in finance with a concentration in alternative assets. I also have an econ minor and a french minor.
Have you done any testing of strategies?
I had the same curiosity that you did back in freshman year and the first thing I did was backtest shit... I first started a club to have compsci kids to backtest my ideas until I became proficient in programming and then took off after. Just test, test, test, find something interesting, run it over to a bunch of quants and you should be good.
I'm not even near an expert, but it would definitely be worth doing depending on what strategy it is. There was recently an article on Seeking Alpha about a quant fund strategy that only required investing in two stocks (to hedge eachother) daily and rebalancing to 50/50 plus fees. This strategy returned something like 900% in four years, so it really depends on what type of investment strategy you're employing. If it works well in practice, there is always the option of selling the idea off to another entity.
Yeah, that's a convenient strategy if you discount the piece where you turn over your whole portfolio every single day...
If you're interested in quant funds but don't have a hardcore math/CS/stats background check out Dimensional Fund Advisors (located in Austin in case you're in Texas full-time and wish to stay there). I believe they have entry-level roles for undergrads in the portfolio management group. They're basically the mutual fund implementation of Fama's research (efficient markets, small stock and value factors). More of a passive strategy, but you'll get to see what it's like to manage portfolios based on academic research.
In terms of learning, you don't need to switch your major, but ultimately you're going to need to know some math (linear algebra, statistics/econometrics) and some programming (at least Matlab/R). From there, like Macro Arbitrage said, you'll need to backtest some strategies and try implementing some of that in your portfolio. Data mining is an issue here. If you try 1000 ideas, probably a few will look good in the backtest. If you're putting your own money at risk, it's less likely you'll select "Saturn's 3rd and 5th moons lined up with the sun" just because it worked before.
Just so you know, you will be required to maintain a $25K balance in your account in order to day trade.
^ unless if cash account, IIRC
"When a thousand hungry lions fight over one scrap of food, small dogs should hide with whats in their belly."
Finish your schooling and focus on internships and getting employed. Don't risk getting your face ripped trying to add an additional bullet point to your resume.
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