Sellside quant trying to understand more about how the quant buyside works
I'm a quant in BB and want to move to the buyside in the long term. I tried reading up on what they do but havent been able to form a good mental picture. Would be great if someone could shed light on what exactly quant hedge funds do?
You want to start a hedge fund but don't know what a hedge fund is?
I know what a hedge fund is. I understand the basic definitions of what a fund is, what different strategies they employ and so on. But I don't know the technicalities actually needed to start a fund from scratch.
I havent asked here "what is a hedge fund?".
If you want to leave for the buy side leave now. You're not learning anything that's going to help you there where you are now.
Based on a couple of years on sell side as a quant doing similar shit to what you're doing, followed by jumping to the buyside and a decade or so there at this point.
Could you expand a bit on what kind of funds are you talking about when you say SS quant work wont be relevant? Like for example would the work of an analyst at a fixed income relative value arb fund not have any overlap with the kind of work that a rates derivatives modeling quant does?
I guess I understand that funds which employ purely fundamental strategies would require the kind of finance theory I'm not getting exposed to here but like funds that employ a mix of both quantitative and fundamental; at least such funds would have an overlap with my current work I am guessing?
Also could you elaborate a bit on what kind of fund you work at and what strategy they employ? What skills and knowledge are important for you in your role and how are funds in your space doing in terms of performance ?
The relevance of work you've already done to the buy side will depend heavily on the type of strategy that the fund employs. What I'm saying is that a year or so of exposure on the sell side is going to give you almost everything you're ever going to get from your position. "A few years down the road" you're going to know very little of relevance that you don't already know, and are just going to he viewed by potential employers as more expensive, less flexible and with lower upside.
Try getting into HF where there have been SS quants. Think millennium or citadel for example. They want to trade rates exotics products.
IMO ( never worked on rates buyside), they want to provide tools to help assess RV and manage risk across crvs, currencies, and spreads.
Phd's are specialists, if the prob is in their ballpark, then why not use their training? Otherwise even game.
Some questions I have for you.
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Look at Ironnchef's answer. He summed it up.
No HFT in OTC
go search through forum posts these questions have all been asked and answered many times before. your lack of knowledge is going to hurt you in any interview or any conversation with a headhunter even.
I understand your point. I guess I am not able to find the right sources to even start with my research. However I just found a really insightful guide online yesterday and I'm clearer about how the industry is structured.
look for keywords and go from there
https://www.wallstreetoasis.com/search/site/quant i would suggest reading every link that looks even remotely related
if you see the name of a quant firm, search for that and read until you learn nothing new
i'm guessing you are perhaps located in the India or Budapest office (lots of quants in Budapest and India for some reason....i think they are cheaper than US quants).
Sellside banks use quants for pricing and portfolio modeling. They do this because customers force the banks to take positions as market makers, where the banks often cannot exit the position...and so they have to hedge with things that behave similarly.
Buyside firms don't have that problem....they can buy or sell just about whatever they want, within reason...and perhaps paying a wider bid/ask spread for the more exotic stuff.
The more exotic stuff (that requires quants to model) is more of an issue for the bank, because the bank generally doesn't want that risk...which is why they hedge. But often a perfect hedge does not exist....so the quants look for the best hedge available.
If you look at it from the buyside perspective....quants are more looking for ways to express an idea...and then the trader or PM calls a sellside bank and asks for a price on that structure. the bank then needs to be able to model the structure...and figure out how they would hedge this thing that has no direct hedge.
So, if you want to join the buyside, the major task is not knowing how to value some exotic structure....the hard thing is knowing "what exotic structure should i want to buy" and that is a different (but related) skillset vs what you are doing now. Coming up with the idea of what structure to buy, when the universe has unlimited options is a harder thing to do...requires creativity, and also the ability to picture where markets will be in the future..taking both time and the path of future prices into consideration. You are probably not learning how to predict the most likely path of future prices at time right now...because thats not necessary to figure out how to hedge....you are generally given a structure where somebody else made a prediction...and now you are asked "hedge this".
The original idea creation (with a track record of being right) is where the value lies on the buyside. The sellside wuant experience gives you a taste of structures that are available to buyside Portfolios...but you have not yet learned how to decide "what should i do now" because the world is always changing....history does not repeat.,..but it often rhymes, as they say.
All is not lost tho...you now need to find a way to explore the undiscovered country...which is a land filled with economics, market history, crowd theory, and all that fun market prediction stuff. Will take years to learn how to be that kind of PM (and be good at it). The best teachers are probably PMs on the buyside...so yes, ideally you go work for one and they teach you. Good luck finding that..
slightly off topic, but are you still in markets @ironnchef?
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