Are pension funds using quant strategies now?
It seems that bigger pensions are doing this.
Wondering about the status of quant trading in pensions and the career as a quant @ a pension vs a MM
It seems that bigger pensions are doing this.
Wondering about the status of quant trading in pensions and the career as a quant @ a pension vs a MM
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Yes this is happening, but really only in the more sophisticated pensions (think Canadian funds and the typical big names). They are building out their capabilities to do quant, but they have restrictions and different time horizons.
What's the difference compared to a quant working at a hedgefund or asset manager? (I assume the tech will be crap)
What kind of restrictions are you talking about?
The differences will mainly be:
EDIT: sorry on the restrictions some pension funds may have rules on what they can and can’t do (instruments, trades, etc).
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the biggest jobs that quants have at pension funds/endowments/etc. are in asset allocation and portfolio construction. how much to allocate to us equites vs international equities vs fixed income vs private equity vs municipal bonds (it goes on). asset allocation can become a pretty sophisticated optimization problem when you are trying to optimize risk adjusted return with many constraints (which generally pensions have).
this type of work is pretty different from the type of work that a quant at two sigma or citadel would be working on. there might be some crossover in terms of portfolio construction and optimization techniques but the application is very different. I don't think any of the big asset owners are running their own systematic market neutral equity hedge funds in house.
probably some might be running internal long only systematic strategies that are straight forward smart-beta/factor based strategies. folks who work on those types of strategies will be more similar to quants at HFs.
Broadly speaking there are a lot of types of jobs that fall under the umbrella of "quant analyst" in an investment firm. Only a small slice of those are working on signal research for long/short strategies.
you'd think you'd have teams of quants working on signal research given the sheer amount of seemingly infinite data for market signals.
yes, I get the sense pension quants are more AA specialists and not at the cutting edge compared to HFs.
Besides factor investing, do pensions quants work MBS curve & prepay risk that a bank quant would work on?
Probably some do but it obviously depends if the pension fund has a team that does direct investments in MBS. Not my area but as far as i know that type of stuff is pretty specialized knowledge. Factor/AA stuff much less specialized and easier to learn given requisite math/stats background. As a result I think most LPs just go with external managers for MBS. I work for a large LP (though not a pension) and we do not have an internal MBS team, just allocate to blackrock or whoever and forget about it.
In addition to asset allocation, a lot of LP quants will provide quant/analytics support to direct investment teams. My firm has a sophisticated fundamental IG/HY fixed income team that several quants support.
In short, yes, for the pension fund I work at, we use quant strategies. Not quant trading (which I assume means automatic trading based on signals). Some of the strategies used are: in equities (smart beta, factor driven strategies, quantamental, small caps, minimum volatility products); in fixed income (government/high yield/investment grade, alternative credit/CLOs, emerging markets hard and local currency); in derivatives (CTA/managed futures). These are all products run in house.
A quant career depends on where you are in the firm, but as the poster above said, there are various quant positions, although it's quite fluid and people can move around between teams. Basically, we have quants in asset allocation (we call them strategists), fixed income, equities, and risk. We also have a central AI/data science team which works on projects with other teams. They mainly focus on research and don't own any P&L.
From a quant in any of the asset classes you can move up from analyst and become a quant PM and then head of team. As someone else posted, you can expect less stress and working hours vs a hedge fund, but also lower pay. That's the main tradeoff.
interesting. I was approached by a PM for automated trading strategies.
Suppose a pension invests in MBS. Do they do have quants managing the curves & model prepays or is it more general, asset allocation/portfolio optimization quant work?
At my firm, we have only a few quants working on asset allocation. Most of the quants (like 5 to 1) sit in asset class investment teams (eg. fixed income, equities and alternatives) and do almost no asset allocation work (unless it's allocation to strategies within their asset class). So quite different from the set up DeepLearning has at his firm. We don't have a specific MBS team, although I know from talking to the fixed income team that we have investments in CLOs, ABS and structured credit (I assume there are some MBS investments there, but not to the extent where 1 PM would focus only on that). The quants in fixed income will likely be building or maintaining the models for all credit products, including ABS.
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