Quant funds had a tough 2019 and performance could drag this year as well. Meanwhile a lot of talent from the sell-side is instead flowing into private equity and alternative asset managers like Blackstone and Carlyle.
As quant funds recalibrate, market share and revenues are consolidating among the biggest players that have the scale to invest in technology. Quant hedge funds tend to be highly secretive with strong founders so their culture is not for everyone. But they continue to offer career advancement and good pay, provided you know where to look.
DE Shaw tops the rankings for overall employee satisfaction which stands at 98.6% , and career advancement opportunities, according to forum website Wall Street Oasis. DE Shaw moved beyond its roots as a pure quant fund years ago and combines computer-driven analysis with fundamental strategies frrm human stock-pickers, earning it the title ‘quantamental.’ Eric Schmidt, the former Google chairman who owns a 20% stake in DE Shaw is a fan and reckons this approach will be the future.
Two Sigma Investments, which was formed by former senior DE Shaw executives, is a pure quant fund and is the second most highly rated according to Wall Street Oasis (WSO). It is also top of the list for pay to analysts, who earning an average of $186k, rising to $210k for quants, according to WSO. These figures are based on a small sample, so it’s worth looking at other factors. Two Sigma is keen to position itself as an attractive place to work – its offices have recording studios and ping pong tables. In a section about interview tips to prospective job candidates on its website Sigma plays up the fact it doesn’t have a dress code: “Folks come to work in anything from a suit to jeans and a t-shirt – the same goes for you. We recommend wearing what you feel is appropriate and comfortable.”
Citadel Investments runs Two Sigma close in the pay stakes and is third in terms of overall employee satisfaction on WSO’s measurements. Founded in 1990 by Kenneth Griffin, Citadel Asset Management manages $11bn in assets under management (AUM). Analysts an earn an average base salary of $156k rising to $167k for a quant, according to the site.
Point72 asset management which manages $16bn, ranks in fourth place in overall satisfaction. It has endured a rocky time lately after its billionaire founder Steve Cohen moved to embrace the quant revolution with the foundation of Cubist Systematic Strategies. This week, Point72’s head quant – Ross Garon – quit according to a memo sent to investors. Insiders say Garon will stay on until a successor is found, and Cohen is keen to point out that he’s leaving on a high. In the same memo, Cohen said that 2019 was the it was the second-most profitable year in Cubist’s history, bucking the industry trend.
AQR Capital management is the second biggest hedge fund in terms of assets under management but ranks sixth in terms of overall satisfaction according to WSO’s figures. This might be beause it’s towards the bottom of the scale in pay according to WSO with analysts earning an average base salary of $113k. AQR focuses on automated research practices and computer models.
Rival funds can be a bit sniffy about AQR. Speaking at a Quant Conference in London last year, Cantab founder and chief investment officer Ewan Kirk said that all quant funds are destined to become more like AQR in the race to survive as they expand and compete to reduce marginal costs. “The end point of that [process] is AQR,” he said. “That’s all that’s left…and then AQR becomes a utility.”
Ranking after AQR in the employee satisfaction stakes on Wall Street Oasis is Ray Dalio’s Bridgewater. Bridgewater is the biggest hedge fund in the world with approximately $160 billion in global investments for a wide array of institutional clients, corporate and public pension funds, university endowments and charitable foundations.
Approximately 1,200 people work at Bridgewater, which is based in Westport, Connecticut. The 70-year old Dalio who is both co-chairman and chief investment officer, is known for his doctrine of “radical transparency” and wants people who ask questions and are open to being challenged. This makes for a rather unique culture and has led to succession problems. Dalio is showing no signs of slowing down and has been through a number of CEOs, the last one being Eileen Murray who resigned in December after a decade at the firm. In terms of pay analysts earn around $104,000, the lowest of the big hedge funds. The firm appears twice in the satisfaction rankings – once as Bridgewater where it ranks seventh, and again as Bridgewater Associates, which languishes in 32nd position.
The blatant omission from WSO’s satisfaction rankings is Renaissance Technologies. RenTech is perhaps the most famous quant fund and its 82-year old founder Jim Simons is referred to as the godfather of quants. The Man who Solved the Market, a book by Gregory Zuckerman tells the tale of Simons’ ascent and estimates that Renaissance has generated over $100bn in trading profits since 1988. Forbes puts Simons’ fortune at above $21bn, also putting him above Dalio and Blackstone’s Stephen Schwarzmann in the pay stakes. Simons stepped back from RenTech, which has around $68bn of assets under management, in 2010, when he appointed Peter Brown and Robert Mercer as co CEOS, but Mercer left in 2017 after backing Donald Trump’s Presidential campaign.
In January Simons named his son Nathaniel as co-chairman of RenTech’s board and added five new directors, one of whom is his son-in-law Mark Heising. The firm’s secretive reputation extends to employees’ willingess to talk about the working there; Renaissance Tecnologies does not appear in any of WSO’s surveys. H1B salary data for RenTech suggests salaries aren’t great, but it’s not about salaries. – The real lure is the opportunity to invest in the Medallion Fund, which is only open to employees and has generated returns of about 40% a year since it began in 1988…
David Rothnie – Read more on efinancialcareers.com