Quant HF vs Discretionary HF
I’m in unique position where I’ve had both FANG tech experience as a SWE and top BB banking experience as an analyst, and I’m considering where I should go from here. It seems to me like I could either go IB -> PE -> HF or go undergrad -> Quant HF, and not sure what I like more right now.
I’m curious what the payoff matrix looks like for these two outcomes. Do non-systematic HF roles end up paying out way more in the long run (assuming above average career success here) or do Quant HF continue to beat out at every level? I know Quant HFs definitely beat out on Banking starting salaries.
So what do people think, assuming you had ability to do both, you just had to pick a path, which would you do and why? Also assume equal person interest in both, maybe just for very different reasons.
Quant HF will beat out banking at every level assuming a similar amount of success, but I think PE and discretionary funds generally will beat out quant funds at senior levels, again assuming a similar amount of success. I think at the senior level of a quant fund it’s difficult to really attach your name to PnL unless you go to a MM and run your own book.
Are there many quant MM? Besides citadel?
Pretty much any large MM and most smaller ones will have several quant pods--Millennium, P72 (Cubist for their quant pods), Balyasny, Schonfeld, etc.
Gotcha, are there any negatives to MM then from a quant perspective? Seems like that’s be the place to be then
MM are “eat what you kill” with 0 job security. If you think you have a great strategy, that can scale, and want the fastest route to managing money then MM is a great place.
But don’t think that the fund cares that much about you. You make money, you’ll have a job and make a lot, you don’t and you’ll be out. There isn’t some big development plan for you, not some mentorship, no real sharing of ideas, etc.
So the down side of MM isn’t specific to quant vs not. It is the same pros and cons as always.
Just wanted to ask. Have you seen any single manager funds(quant or non quant) structure compensation under an eat what you kill model? Would that even be possible at single manager funds since they don't have pass through structures like multi managers?
Gun to my head I would say that fundamental pays slightly more than quant, since your alpha stays in your head vs code that (often) stays with an ex-employer. As a quant you are also more dependent on data, and some of your alpha will be attributed to that. But, within group variation swamps the difference in means, and so I would say go with the strategy type that best aligns with your comparative advantage and/or interests you more.
Though if you are interested in tail probabilities, I would say go fundamental since it is much easier to generate 30+% returns with a concentrated portfolio of high-conviction bets than with diversified quant portfolios. Of course it is also much easier to lose 30%... Since to some extent HF pay is a call option, greater volatility is your friend.
Other things to note include the fact that quants generally have more flexibility in expanding to other asset classes, countries, etc., whereas with fundamental you are a bit more pigeonholed into a sector. Quants also almost always have longer noncompetes, which is great if you love paid vacations, but bad if you like rapid career progression. Additionally, quants generally work fewer hours a week. I knew a quant PM who would work like 25-30 hours a week, which is unheard of for fundamental strats. Personally I'm more like ~50 hrs a week, which is still better than most fundamental analysts.
Very well in depth response. That said I think any quant doing 25-30hr weeks, was doing 60-80hr weeks building their strategy/data/etc beforehand. As mentioned the quant WLB is all over the place, long garden leave but intense pressure if models break. Also most quants do not lose money consistently but as said making 30% or so is going to be very tough.
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