2015 quant job market: CDS is dead, booming data analytics

#1
An Interesting Development of an Offshore Strategy

I was talking to the head of fixed income Strategy at a major investment bank last week. He described their current hiring pattern as follows:
  • Junior quants – campus recruiting
  • Mid-level quants – imported from offshore locations
I thought that latter was really interesting. What a smart move to let talent bubble up through the lower cost regions, then import that talent, a known commodity, to the head office. The strategy provides great career growth for the individuals involved, is less expensive for the firm, and less risky than an outside hire. This strategy has obvious implications for quants in NYC who are considering a lateral move. To be sure, this is one observation, not necessarily an industry trend.

CDS Market is Dead

I wasn’t paying attention, but the CDS market has died. Once the synthetic CDO market disappeared, it turned out there was little demand for CDS. Apparently only financial names continue to trade with any regularity. No wonder I’m seeing a lot of resumes from people who were working on CDS booking systems.[prbreak][/prbreak]

Other Observations
  • Organizations are flatter – the senior ranks have been thinned, there’s less middle management, and everyone is expected to do more. You still need hands-on people to do the work, and that’s where the demand is. There are very few executive director level hires being made, and for every ED opening, there are a lot of good people vying for the role.
  • There’s less compensation differentiation. Firms used to maintain significant compensation disparity between top talent and mediocre contributors. Wage compression has made such differentiation difficult. Feeling screwed on comp? Look around you, everyone else is feeling the same way. One senior executive noted to me that the front-office was still able to differentiate their top 10%, but IT and other support groups have lost that ability to a large degree.
  • Less management means that individual contributors need to be experts. The folks who are doing well in the current market are able to differentiate themselves with their technical skills or subject matter expertise in those areas with high demand.
  • It used to be that prior financial knowledge was highly valued experience. However, in the current market, financial experience is highly discounted. Given the arc of the industry in the past decade, there is currently an oversupply of people in New York with financial experience.
Data Analytics

It’s well known that Data Analytics is booming, and the IT field is proving attractive to many quants who are not seeing career growth in finance.
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One senior quant manager recently told me that in recent years, it’s fairly typical for entry level quants to work a couple of years on the trading desk, get disillusioned, and move to the tech industry to exploit their skills in Data Analytics. Note: NYC area saw $4.2 billion in venture funding in 2014, roughly tied with Boston, though well behind San Fran/San Jose.

As always, you can reach me at peter@affinityny.com. LinkedIn profile: www.linkedin.com/in/peterwagner123
 

CasanovaJ

Active Member
#4
An Interesting Development of an Offshore Strategy

I was talking to the head of fixed income Strategy at a major investment bank last week. He described their current hiring pattern as follows:
  • Junior quants – campus recruiting
  • Mid-level quants – imported from offshore locations
I thought that latter was really interesting. What a smart move to let talent bubble up through the lower cost regions, then import that talent, a known commodity, to the head office. The strategy provides great career growth for the individuals involved, is less expensive for the firm, and less risky than an outside hire. This strategy has obvious implications for quants in NYC who are considering a lateral move. To be sure, this is one observation, not necessarily an industry trend.

CDS Market is Dead

I wasn’t paying attention, but he CDS market has died. Once the synthetic CDO market disappeared, it turned out there was little demand for CDS. Apparently only financial names continue to trade with any regularity. No wonder I’m seeing a lot of resumes from people who were working on CDS booking systems.

Other Observations
  • Organizations are flatter – the senior ranks have been thinned, there’s less middle management, and everyone is expected to do more. You still need hands-on people to do the work, and that’s where the demand is. There are very few executive director level hires being made, and for every ED opening, there are a lot of good people vying for the role.
  • There’s less compensation differentiation. Firms used to maintain significant compensation disparity between top talent and mediocre contributors. Wage compression has made such differentiation difficult. Feeling screwed on comp? Look around you, everyone else is feeling the same way. One senior executive noted to me that the front-office was still able to differentiate their top 10%, but IT and other support groups have lost that ability to a large degree.
  • Less management means that individual contributors need to be experts. The folks who are doing well in the current market are able to differentiate themselves with their technical skills or subject matter expertise in those areas with high demand.
  • It used to be that prior financial knowledge was highly valued experience. However, in the current market, financial experience is highly discounted. Given the arc of the industry in the past decade, there is currently an oversupply of people in New York with financial experience.
Data Analytics

It’s well known that Data Analytics is booming, and the IT field is proving attractive to many quants who are not seeing career growth in finance.

One senior quant manager recently told me that in recent years, it’s fairly typical for entry level quants to work a couple of years on the trading desk, get disillusioned, and move to the tech industry to exploit their skills in Data Analytics. Note: NYC area saw $4.2 billion in venture funding in 2014, roughly tied with Boston, though well behind San Fran/San Jose.

As always, you can reach me at peter@affinityny.com. LinkedIn profile: www.linkedin.com/in/peterwagner123
How are you defining "quant job" exactly-- does this include Risk jobs (including model risk, regulatory), or is it just trading + strats?
 
#7
re: An Interesting Development of an Offshore Strategy

Silly move by the company. Word will get out and then no Jr will join the company since they will not be paid in the future (since the company is advertising that they are paying less for mid people). Or they will join, and then leave once they are "trained" since they know they will not be paid. Also, who is training the off shore people? The company will end up with a bunch of poorly trained, but cheap mid level people, only Jr people that no one else would hire, and Sr people wondering what the heck they are doing there.

Kind of like Barclays recent announcement that they were going to bump Jr people's comp at Mid people's expense. Never saw so many good resumes from jr/mid level people coming out of a single company since Bear or Lehman. Of course Barclays goal was to cut expenses at any cost, but now they have big holes at the mid levels
 
#8
>booming data analytics
It would be very interesting to get more specific info on what is booming.
Since credit risk becomes more and more significant I can suppose that there are a lot of analytics in scoring.
Another area is StatArb...
Finally, there is a BigHype about BigData but I doubt that it is applicable to anything other than retail bank/insurance business (like e.g. detecting credit card or medical insurance claim fraud)
 

jcchien

New Member
#9
peter, I can agree with this statement. I entered in financial engineering field over 7 years in my country, Taiwan. The traditional "Quant" is less and less, especially on synthetic production with credit. Only link with Interest rate or FX and few equity are still exist. In contrast, data science is more and more hot recently years...... Take for example, When I had back from US in 2006, R isn't so popular as it did. Today, R language is more and more spread out all field in data analytic. By Josh, Quantitative Risk Analytic.
 
#10
I have traded CDS for a few years at a investment bank in London, and in the last year our management has decided to exit the business completely due to MIFID III. Maybe we need those synthetic CDOs and CLNs to come back in force but my feeling is regulatory pressures have killed this market for good..
 
#11
thanx Peter

1- I didn't understand this point (it’s fairly typical for entry level quants to work a couple of years on the trading desk, get disillusioned, and move to the tech industry to exploit their skills in Data Analytics.)

2- Do you think that FE/QF was just a boom and the universities just use it to collect money from those students dreaming of a wealth ticket ? You know ; Why almost all universities don't offer any kind of financial aid/ scholarships / financial support in their FE/QF master degrees opposite to their other master degrees : isn't that sketchy ? it raise questions in my mind !
3- What is your perspective about FE/QF ?
4- What kind of jobs still required in the QF/FE disciplines ? Is quant trading / algo trading / HFT has any chance ?
5- Do you think that QF/FE recruitment died ? will die ?
6- How do you compare Data Analytics to FE/QF ? Which one is more helpful into Quant Algo Trading ?
7- What you think about Data Analytics ? Is it in the same phase of FE/QF 15 years ago ?? is it the new bubble ?
 
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