World's most amusing quant advocates for hedge fund jobs, procreation
If you're quantitatively inclined, should you aspire for a job with a hedge fund or an electronic market making firm? And should you raise a large family, despite the travails of parenthood?
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Giuseppe Paleologo, the wryly humorous quant currently on gardening leave before joining Balyasny as head of quant research, opined on this and more in a Reddit AMA last week.
Paleologo has had a varied career. He's worked in risk for IBM, Citadel (twice), Millennium and for high frequency trading firm Hudson River. He's been an academic. He has a PhD. He's well placed to advise other quants, young and old, on finding jobs in financial services.
Writing on Reddit, Paleologo said that outside of banks, quant jobs are increasingly bifurcated between top multi strategy hedge funds and the top electronic market making platforms. The winners in both categories are eating the rest. "It's a competition between the top 5 [hedge fund] platforms and the top 5 MMs [market makers]. Everybody else is priced out," he declared.
Who are the top five in each category? Paleologo didn't say. However, he has in the past listed the top market makers as including the likes of Jane Street, Citadel Securities, Flow Traders, Hudson River, XTX and Jump Trading. And the top multi strategy hedge funds include Citadel, Millennium, Balyasny, Point72 and DE Shaw.
Together, these firms own the market. "Barriers to entry are prohibitive," said Paleologo. "For stat arb, it takes two-three years from inception to trading, assuming you have ops already established, and assuming that the management is experienced. Fundamental firms starting in stat arb don't know what they are setting themselves up for."
Paleologo thinks hedge funds are more desirable employers than the market makers. Hedge funds are cash rich, he says. They're also "Sharpe poor," and will seemingly tolerate lower risk adjusted returns than market makers. He says this can make it easier to do index arbitrage at scale. By comparison, market makers are "monoliths", he says - implying bureaucracy.
Paleologo says quant jobs have changed much during his time in the industry. Years ago they were all about stochastic calculus and pricing derivatives. Now they're about, "Portfolio management, hedging, optimal execution and execution research, understanding crowding, managing large data sets and computationally efficient data analysis for investments." They're also about AI. "Quant jobs will eat the [financial] world," Paleologo predicts.
Despite this, he says that given the choice he probably wouldn't go into finance again. He would, however, have had more children. "Having children is great and sadly underrated," he reflects.
If you're a quant who wants to be like Paleologo and to break into finance mid-career, he says you'll need technical excellence, adaptivity, intelligence and luck. It helps to have great academics. It also helps to be highly accomplished in areas like cloud computing, AI engineering, systems engineering, video game programming, and chip design. Even then, he says you probably won't get the most desired jobs as quant researchers or algo writers. If you ultimately want to become a quant portfolio manager, you'll need to be particularly gifted and particularly fortunate.
And if you do somehow penetrate the inner quant sanctum? Paleologo says it might be less exciting than some people think. Dark pools, for example, are not what they seem. "Despite the name, it's pretty plain stuff," he says. "The Batman doesn't work there."
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