Sector snapshot: Quants
What's happening, who's hiring, and how much are they paying in the world of quantitative analysis?
What's the temperature?
Not hot. Several quant funds performed fairly abysmally when the heat was on in August. For example, Goldman Sachs' quantitatively driven hedge fund, Global Alpha, fell 22% during the month and was down 32% for 2007 at the start of September.
It's not just quant hedge funds that have been suffering at the hands of the mathematicians. Morgan Stanley reported 3Q losses of US$480m on its quantitative equity trading operations. And structured credit desks, which have been one of the more lucrative areas for senior quants over the past few years, look distinctly like they won't be requiring their services (or quite as many of their services) in future.
Who's hiring?
Right now? Hardly anyone. "People are taking stock and seeing where things are going," says Jon Durrant at recruitment firm Selby Jennings. "There are quite a few people stuck at final round interview, and managers are saying they need to delay until Q1 next year."
"It's pretty dead," confirms Rachel Biernacka, head of the quant desk at recruitment firm Huxley Associates. "I'd expected it to be like this at the end of October, but not quite yet."
More interesting is who was hiring before credit markets went into meltdown. Recruiters point to the likes of Wachovia, Lloyds TSB Corporate Markets, Soc Gen, BNP Paribas, JPMorgan and Barclays Capital.
How much are they paying?
According to Napier Scott's last salary survey, a UK-based managing director-level quant working in credit derivatives at a top-tier bank made an average package of just over 1m last year. This year quants are apparently steeling themselves for the same or less. "People aren't sure what to expect any more," says Biernacka. "Most people aren't expecting bonuses to be higher, though."
What future?
It's not all doom and gloom for quants. Some (e.g. those in ABN AMRO's FX team) are even rumoured to have done quite well out of the crisis, while the booming equity and interest rate derivatives markets look set to shore up demand for people to price equity and rates products, at least.
At the same time, quant hedge funds such as DE Shaw and Global Capital, which rode out the August storm, are raising new money. If anything, we think ever-cleverer quants will be required to devise ever-cleverer trading strategies - ITG, a US agency broker, has already developed a new algorithm that seeks to overcome volatility.
