Morning Coffee: Today's hottest hedge fund jobs didn't exist five years ago. JPMorgan's new hiring fetish
One of the big steps in the development of a brand new industry is when it becomes important enough to sustain its own trade show. On that basis, “alternative data” has certainly arrived – the consultancy Battlefin is now staging four “Discovery Days” every year for the compilers of proprietary datasets – from satellite images to real estate listings to automatically generated counts of the use of the words “great quarter guys” in conference calls. And according to Business Insider, vendors are paying between $3,000 and $10,000 each for the right to appear at one of these shows, and there were over a thousand tickets sold.
They’re paying for the possibility that they might bump into someone like Roberto Jedreicich, the “chief data buyer” for Credit Suisse’s internal hedge fund, who has a budget running into the millions and the responsibility to spend it on datasets that can actually be turned into profitable trading rules by the quants back in the office. For someone with a track record at picking winners, this can be a highly lucrative career; litigation over a non-compete between WorldQuant and Third Point revealed that a data buyer with a good track record was being paid $2m a year back in 2016.
How do you succeed in data buying? It seems to be partly a matter of understanding quant models and having an intuition for the value of proprietary data, and partly a matter of good old-fashioned haggling. Mr Jedreicich doesn’t personally rate or buy satellite imaging data – he thinks it’s too difficult to interpret and usually too expensive. He’s also highly wary of data providers who claim strong back-testing results, as it is by no means unknown for unscrupulous players to go back into their data series and edit it a bit to make it match up to market movements more exactly. On the other hand, data providers can be just as paranoid and tend to be unwilling to hand out free samples or trial runs. Even the usual tactic of buying what’s popular doesn’t necessarily work; the best datasets are ones that only a few people are signed up to.
When it comes to the contract stage, the pricing of a dataset is an art all of its own. Lots of data providers have literally no idea what their data is worth; if it’s capable of generating sustainable alpha for a big fund, the theoretical value could be huge, but how can you prove that without giving away the advantage? According to Mr Jedreicich, “everyone thinks they have a million dollar idea [and] I don’t like insulting the vendor, but I know what it’s worth”, and his decisions to hand out contracts often seem to be based as much on long term trust and relationships as on quantitative analysis and backtesting.
According to Deloitte, the current market for alt-data is $7bn a year and growing fast, and the tendency of datasets to lose their value (or turn out never to have had any; a panellist suggested that there was more than 50% attrition from one year to the next) means that the buyers are likely to be kept busy.
Elsewhere in the financial tech world, we noted back in February that Seattle had been chosen by JPMorgan for the location of its global cloud computing centre, against competition from other locations. It now seems that JPM feels like it made the right choice in rejecting Dublin and Hyderabad, and that the cool factor and alternative lifestyle potential of the Pacific Northwest has rather grown on them. The facility has completed its original target of 100 hires and has now signed leases implying space for as many as 350 more. As well as developing the bank’s own “private cloud”, staff are partnering with all three of the big public cloud players (Amazon, Google and Microsoft), Added to which, a new cybersecurity team is locating there.
This last team might point to the reason why JPM is so keen on Seattle (as well as the availability of pot and coffee). Cybersecurity and cloud computing are notoriously tight hiring markets, and although Jamie Dimon might have preferred to build capability in a financial centre (like the super secret tech team in London), sometimes you have to go where the people are.
He’s back! Nemesis of Barclays investment bankers, Anthony Jenkins, has gained an investment from JP Morgan in his fintech startup (Sky)
It feels like something in the cycle might be turning when a major CEO feels able to criticise the banking supervisor in a public forum. Sergio Ermotti has described the SNB’s “Swiss Finish” approach to gold-plating international regulations as a “biting headwind” and accused them of believing “big is bad, small is good” (Bloomberg)
A warning to those London bankers left who think that “equivalence” with EU regulation post Brexit will be a stable basis to do business; the EU authorities are playing hardball with the Swiss equivalence recognition, seemingly to gain concessions on other trade issues. (FT)
And after a brief pause to regroup after the uncertainty of March, banks have restarted their Brexit job move plans (Financial News)
A hundred Google employees have written to the organisers of Pride in San Francisco, asking the parade to ban their own company’s float, as a protest against the failure to deal with homophobia in YouTube comments. Google will still take part, and has told employees that they can only protest against Alphabet entities while walking on their own. (Bloomberg)
Researchers from a leadership consultancy have used their database of 360 degree reviews to find that female employees are usually scored higher than male on a variety of leadership skills. They also find that while young men are generally much more confident in their own ability than young women, this gap closes by the age of 40, after which male confidence tends to decline while female confidence increases (Harvard Business Review)
The most industrious bank robber in the USA, and his secrets to (initially at least) not getting caught (Bloomberg)
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