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Quants in finance explain what makes them feel special

If you're a quant working for an investment bank or a hedge fund, you may feel slightly inadequate alongside your counterparts working in, say, healthcare right now. Don't. Leading quants, speaking at this week's Quant Conference Digital, have been explaining that even though working in finance might appear bereft of a higher purpose, this is absolutely not the case. 

"The questions I started out by asking in life were not, 'How can we use financial markets to make money, but how can we use our knowledge of the economy to make life better for people," said Ashley Lester, head of systematic investments at Schroders. In this way, quants have a higher purpose, Lester suggested. 

While some quants remain in academia or work in areas where they can demonstrably do public good, Lester suggested that quants in finance are also doing the right thing in their own particular way. By creating liquidity and reducing liquidity premia, finance quants "make it cheaper for people in the real world to do useful things," said Lester.  

To quants questioning what the higher purpose of a finance career is, Lester said the answer is therefore that, "financial markets exist to efficiently allocate capital across competing uses.

"There is not enough capital in the world to do what people want," he said.  By allocating capital efficiently and cutting the cost of doing so, Lester said quants make it possible to fund things that might not be funded in less efficient systems of allocation. This includes projects that have a "big social payoff." 

Environmental, Social, and Corporate Governance (ESG) investments can also benefit in other ways from quant input. If you're a discretionary investor with an ESG investment basket you can simply point to factors you "took into consideration" in making your decision, said the panelists. As a quant, you can point to the data underpinning decisions, to the counterfactuals, and to the impact on portfolios. And this can encourage investment in ESG.

The upshot is that quants in finance are socially motivated. They are not bad people; when you work in a hedge fund you can do good things too even if they're a bit more nebulous than in other sectors.

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Photo by Torsten Dederichs on Unsplash

AUTHORSarah Butcher Global Editor
  • wa
    7 November 2020

    "good people"

    good one

  • Am
    6 November 2020

    Someone please tell Ashley Lester what she think is wrong. The so called efficient capital allocation using quant methodology will lean toward big companies as they have more history and data points. If we just let quant and data allocate capital, then poor people who lack of financial history will be very hard to access capital. If you just let quant and algo allocate money, that just create more inequality and make big companies bigger. I not surprised she say this because she did work for a big company.
    Under one condition this will work, charge rich people her 60%+ tax. That will facilitate fair wealth allocation. I am glad Biden is doing that.

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