What PhD is Most Relevant for a Low-Frequency Quant Hedge Fund?

[In-the-money]

Hello QuantNet Community,
I have read a lot of articles on the forum, but this is my first official post. I am currently a senior who is majoring in math and finance at a reputable U.S. college. I am contemplating on applying to a PhD program in the near future and later on work as a quant for a low-frequency quant hedge fund (such as D.E. Shaw, Renaissance Technologies, Citadel, Bridgewater Associates, etc). I am not very passionate about computer programming, but I enjoy analyzing data sets and applying mathematical and statistical models. My question is what kind of a PhD program would be most relevant to break into such type of hedge fund. Right now I am debating between applied math, financial math, statistics, operations research, and industrial engineering. What do you think? Any advice would help. Thank you.

 

[Umnik]

Hello QuantNet Community,
I have read a lot of articles on the forum, but this is my first official post. I am currently a senior who is majoring in math and finance at a reputable U.S. college. I am contemplating on applying to a PhD program in the near future and later on work as a quant for a low-frequency quant hedge fund (such as D.E. Shaw, Renaissance Technologies, Citadel, Bridgewater Associates, etc). I am not very passionate about computer programming, but I enjoy analyzing data sets and applying mathematical and statistical models. My question is what kind of a PhD program would be most relevant to break into such type of hedge fund. Right now I am debating between applied math, financial math, statistics, operations research, and industrial engineering. What do you think? Any advice would help. Thank you.

The one you were not kicked out from

 

[In-the-money]

The one you were not kicked out from

This is a fair point, but you know that if you get kicked out of a program, you can at least end up with a master's degree. So then the question becomes which type of master's is most relevant to that job.

 

[Keith Tan]

applying mathematical models without computer programming is like a gun without a bullet.

 

[In-the-money]

applying mathematical models without computer programming is like a gun without a bullet.

That is plain obvious. I can program, but I am just saying that I don't want to get an advanced degree in computer science.

 

[Ian Kaplan]

Just a by-the-way: I have heard that Renaissance Technologies does not hire people with a finance background. They seem to hire world class geniuses, but apparently they don't want your mind sullied by conventional wisdom.

I think that your focus on software engineering is excellent and will stand you in good stead. If you can afford to go to school full time and can get in, the obvious choices are schools with really good job placement programs. These are all in the top five of the QuantNet list.

Here's some food for thought: a Phd is, obviously, going to take you years. At a minimum, four years, but probably more. At that same time you could be working, as a software engineer, if nothing else. If you get a graduate stipend and a tuition waver then you'll be making around 20K-25K, if I understand the current environment. In contrast, in the computer industry you should be able to make at least 80K. So that's at least a 60K difference, times five years is 300K in lost income.

Of course those finance jobs have big salaries and significant bonuses especially for those with quantitative skills. You'll make that back in the first couple of years. Oh, wait... That was seven or eight years ago. Now the salaries of quants are not much better than those for software engineers. A Phd will still have a better chance at a job than someone with a Master's degree. But the salaries are not that much higher.

If you love finance (and there's a lot to love), then the salary issue may not be as much of a problem. But all this is something to keep in mind.

 

[In-the-money]

Just a by-the-way

Thanks for sharing your thoughts Ian. One of the lesson that college taught me is that one should not live for their resume or track record, but should instead do the things he/she is most passionate about and bring him/her happiness. As of now, I am not looking at becoming rich or at carrying a big-name title (e.g. Analyst at XYZ Co.), but at developing my mental capabilities (i.e. becoming smarter). For that reason, I believe that spending 4-6 years on a PhD will cultivate certain faculties in my brain that I am currently underutilizing. Jumping right into the industry might bring much more cash initially (first 10 years), but this is not necessarily true in a longer time frame (20-30+ years). Five years spent in the industry working 70-100 hour weeks and doing brainless, menial tasks can actually impair one's mental potential, instead of developing it to a higher level. I know there will be lots of grunt work in a PhD too, such as teaching classes or grading exams, but there will be at least one little grain of knowledge that will make me smarter (not only more educated).

 

[Ian Kaplan]

Thanks for sharing your thoughts Ian. One of the lesson that college taught me is that one should not live for their resume or track record, but should instead do the things he/she is most passionate about and bring him/her happiness.

I think that it is wise to try to do things that you have a passion for. You are unlikely to excel at something you don't like.

There are lots of intellectually challenging things to do. There are vast areas of computer science, computational biology and physics, to just name a few. I love computer science and building software. I plan to write code until I can't write code anymore.

I love finance. I have really enjoyed the topics I've studied, although I have never worked so hard in my life. My take is that the only way you know if you're good in finance is if you can make money. You can be an expert at the theory, but if you can't apply it and make money then you have not really mastered finance, in my opinion. So to me the thing that separates finance from the other intellectually challenging things that I could do is money. And I intend to find out if I can make money in the next few years. We'll see how it goes.

Money also plays out in other ways, particularly in what one recruiter called the "*sshole factor". If someone brings in a lot of money, tens of millions of dollars, there are very few constraints on their behavior. The organization will keep them because they are making their bosses lots of money. Short of doing something illegal or something that will get them sued, these people can get away with just about anything and they do. They can yell at the people who work for them, they can use abusive and demeaning language. In general they will not be reined in. Check out some of the biographical books like Street Freak, The Buy Side and Aifric Campbell's On the Floor. Some people like Emanuel Derman and Fisher Black escaped this environment because they (are/were) really smart and did seminal work in option pricing (see Derman's My Life as a Quant).

Finance evolves fantastically rapidly. This means that jobs are created and lost at a remarkable rate. There's been some other threads here about the layoffs, especially in recent years.

Finance has some of the smartest, most talented people in the world. People who are scary smart. Why do these talented people put up with this environment of long hours, high pressure and abusive bosses and co-workers - money. They hope to be rich. Of course that's harder these days, but all things go in cycles.

I'm not trying to talk you into or out of anything, just to provide some perspective that you might not have seen before.

 

[In-the-money]

Finance has some of the smartest, most talented people in the world. People who are scary smart. Why do these talented people put up with this environment of long hours, high pressure and abusive bosses and co-workers - money. They hope to be rich. Of course that's harder these days, but all things go in cycles.

I have heard that finance is the second most competitive industry after professional sports. So don't you think that if the smartest people in the world go to finance, medicine, law, technology, etc, then there might be some other "alpha opportunities" (other industries) that can still be pretty profitable, but are much less competitive because people tend to overlook them.

 

[kwlmy]

Forget about all the after-PhD plans. If you are serious about doing a PhD, think about what research area you think you want (and can) to do, and then apply to the relevant program. Then see what you get and make your decision. The rest is too uncertain to think about, simply from the fact that it takes many years to complete a PhD - you and/or the world might change.

 

[Ian Kaplan]

Well... There's real estate in states like California. Historically a lot of money has been made by people who are not always the best and the brightest. And the leverage that is, sometimes, available in real estate is hard to find elsewhere.

 

[IntoDarkness]

I have heard that finance is the second most competitive industry after professional sports. So don't you think that if the smartest people in the world go to finance, medicine, law, technology, etc, then there might be some other "alpha opportunities" (other industries) that can still be pretty profitable, but are much less competitive because people tend to overlook them.

my colleague's brother used to work for nasa but somehow started managing rental properties on the side. now hes owning several section 8 housings and an internet start-up... of cos hes already quit the nasa job... and yea, he only has a bachelor...

 

[IntoDarkness]

One of the lesson that college taught me is that one should not live for their resume or track record, but should instead do the things he/she is most passionate about and bring him/her happiness...

i remember dat 2... rite out of college in the company orientation, most of my analyst class talked about passion, life, future, sports. after a year, all we talk about is money and finding job somewhere else...

 

[Daniel Duffy]

In Holland we have a saying "the dumbest farmers grow the biggest spuds".