Quant traders working in investment banking are not happy. Why?
Quant traders working in investment banking are not happy. Squeezed by regulations that curb investment banks’ prop-trading activities and by cost-cutting that means that pre-crisis compensation packages have been consigned to history, job dissatisfaction is at an all-time low, according to industry observers. Quantitative PhDs who would have usually gravitated towards high-paying roles in the financial sector are looking for alternative career paths, while those already working in banking are seeking to move on.
Where are they going? The obvious answer is to strike it out alone. The fact that 60 quant traders from Barclays’ nQuants division are kick-starting their own hedge fund is part of a broader trend of Wall Street’s rocket scientists looking for riches in smaller operations. Mark Standish, the former co-head of capital markets at RBC, and Richard Tavoso, who oversaw global arbitrage and trading at the firm, are also starting Taursa Capital Partners.
“Startup costs for a quant manager or team to go independent are falling very rapidly,” says John Fawcett, founder and CEO of quant community Quantopian. “That decrease is driven by the rapid adoption of lower cost technology services and access to open-source analytics and computing packages. At the same time, quants have less compelling incentives at large banks.”
The Barclays and RBC traders had one thing in common, though – a strong and demonstrable track record, which would prove attractive to potential investors. Fawcett believes that aspiring quants straight out of university will also increasingly look to go it alone, using online portals (like Quantopian) to match quant talent with investors with a desire to gain exposure to these strategies.
“Historically, this group would be the most likely to pursue a standard investment banking career track – but today that talent is looking more and more favourably on Silicon Valley, and more critically at Wall Street,” he says. “They see peers with the same computer science degrees who go into the software/internet space taking big risks, being more entrepreneurial and enjoying a more independent lifestyle as a result. I think the next generation of quants is going to be even more influenced by these.”
