Tales from the Quant Side — Episode I
4 Stories of Post-Financial Crisis Quant Hiring
One of the fields which is and has been undergoing significant flux is that of quantitative finance. The front office quant hiring space has changed significantly from the 2006 heyday to the alien landscape of 2021. Back then, there were not enough candidates to fill the need of banks and hedge funds for mathematical minds.
Universities responded in lock step with the demand just as the bubble was about to burst inadvertently creating a glut of incoming quants. Schools such as Columbia (Financial Engineering, Mathematical Finance) and Rutgers (Quantitative Finance, Mathematical Finance) led the way in terms of providing high quality, high caliber quants.
Since the financial crisis however, how have these quants fared? How has the landscape changed? Here are four stories of some of the brightest quantitative minds in my network and how they are faring in this post-crisis world. Pseudonyms were used and companies omitted for anonymity.
Do more degrees lead to a trading desk?
Alexei came from Eastern Europe to the United States for his undergraduate studies where he majored in mathematics and immediately enrolled in a mathematical finance masters degree. During the fall of 2011, he worked diligently to secure employment as a quant on a trading desk. However, the only role he was able to secure was at a bulge bracket bank’s technology analyst program in 2012.
His story is not unique. In fact, not one person in his graduating class secured a role in the front office. Many aspiring new graduates are getting a huge wake up call. Those front office positions are much harder to attain because of two reasons. The first is that the old guard hunkered down, dug in, and is not letting up their grip to new talent. The second reason, more touted by the media, is that trading today is not what it used to be given Dodd Frank and the Volcker Rule.
Despite it being a different world, there are intermittent trading quant roles which do appear. However, two years of working in back office technology made it exponentially difficult for Alexei to make the jump onto a trading desk; not without getting a second masters he says. He admits that he may actually have to go back for an MBA to make use of recruiting capabilities in order to get on a trading desk.
What do you think: Does having multiple graduate degrees help or hinder in breaking into front office?
Networking to the Desk
A classmate of Alexei’s was Bob, who actually graduated with his bachelor’s in math at age 19 and a masters in mathematical finance at 21. Bob is a truly brilliant quant who had even worse luck than Alexei by graduating earlier in the recovery in 2010. The market was still reeling from what happened in the fall of 2008.
Given that Bob had no prior work experience, he was forced to take the first job he was offered which was at a technology firm. This firm made full use of his tech and math skills, however did nothing in the way of providing him a path to a quant career. Bob advanced in his role very quickly to become director of research by age 25.
Like Alexei, Bob would also like to make the jump to a trading desk as a quant. While he admits that further schooling could be beneficial, he is attempting to make the jump without another degree. He admits that it is a difficult road ahead but he aims to make full use of his contacts to do so.
What do you think: Is networking the best possible route to a trading desk and how can one navigate this path?
Designations as a Path to Trading
Unlike both Alexei and Bob, Sam has a PhD in economics. After 4 years of serving our country in the United States Marine Corps, he worked for 4 years in technology before going back to school to gain his doctorate. During graduate school, Sam interned and consulted at various companies in statistical, mathematical, and technical roles.
His struggle to make a trading desk was the inspiration for a previous article of mine (5 Problems with Quant Interviews and How to Correct Them). Given his credentials, extensive experience, and relevant research, he aimed to secure roles at the major banks. Instead of verifying his credentials and experience, interviewers aimed to disqualify him.
Just like Alexei and Bob, Sam also wound up in technology, working as a statistical developer at a financial software company. He admits to being lucky to even get a job, though he still clamors to make the jump to become a desk quant. Using professional designations as his approach, he has already passed the first two levels of the CFA in hopes that the designation will lead to a desk quant job.
What do you think: Does a professional designation such as a CFA help or hinder in breaking one’s way onto a trading desk?
Breaking Down the Barriers to the Desk One Step at a Time
My story begins “in the heyday” in 2005. I was a fresh graduate with absolutely no focus or idea of what career I may want. In my first post college role, I worked as a fund accountant where I first learned of financial derivatives, which was my first foray into the world of derivatives trading. A particular trait of mine, perhaps that of all quants, is to pick the most difficult possible task and then excel at it. Viewing quantitative finance as highly challenging, I decided to undertake a career as a trading desk quant. Being very risk averse and not wanting to put all my eggs in one basket, I accepted not only one masters degree but two; economics and quantitative finance.
At the time, I believed this gave me a huge advantage. I did manage to knock down a few doors, but this was the fall of 2010 and the market was still in recovery mode. I trucked on and managed to secure a quant role at Bank of America. Since spending 3 years working in various quant capacities in the credit risk space, I have a much better understanding of the market and thanks to this experience, I believe I am much closer to the trading desk than I ever was.
Key Lessons
The landscape has changed in two significant ways. The glut of incoming quants has been a bonanza for technology companies. Taking Bob and Sam under its wing, the technology industry has been quietly stealing quantitative talent away from Wall Street. As Karim Abouelnaga points out in his recent article, technology is giving these aspiring quants more freedom and more opportunity than Wall Street has. Rather than disqualifying aspiring quants’ credentials during interviews, technology companies take them as given and gobble up candidates as Wall Street is left struggling to keep up. There is talk that banks are apparently raising salaries and benefits (Wall Street Banks Dig Deeper to Keep Best and Brightest Junior Bankers) to keep their workforce happy, though I have not seen much tangible evidence of this with anyone in my network.
The second change to the landscape has been in dealing with new regulation. Changes in regulation have specifically shrunk opportunities for aspiring desk quants, but they have massively expanded back office/compliance opportunities such as what I was placed into back in 2011. I grew alongside the industry, riding a wave. Utilizing the risk space to gain a foothold in quantitative finance however, I leveraged my experience to move into structuring new index products at Nasdaq and analyzing the size and composition of the SOMA portfolio; much more “front officey” roles than before.
What is your take these four approaches? I encourage the readers of this article to post their stories or stories they have heard about the quant and trading hiring market of 2021!
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