What Quants make what money?

[IntoDarkness]

really... where is that 700k all in first year hedge fund analyst pay????

 

[NumeroUno]

1) aka rhetorical question.

1) he/she might have been sarcastic
2) Salary has nothing to do with preparation to a quant career. The advise given might still be valid.

I'm not sure how to respond to this. I'm at a loss.

Is everyone doing this for the money, anyways?

If you watch or read interviews with some of the more successful money managers, the lot of them seem like tremendously compassionate and eloquent people, with a greater sense of purpose than just accumulating wealth.

 

[rnvpx]

I'm not sure how to respond to this. I'm at a loss.

Is everyone doing this for the money, anyways?

If you watch or read interviews with some of the more successful money managers, the lot of them seem like tremendously compassionate and eloquent people, with a greater sense of purpose than just accumulating wealth.

Um being a fund manager is a lot more interesting than calculating VaR that's why

 

[TehRaio]

I'm not sure how to respond to this. I'm at a loss.

Is everyone doing this for the money, anyways?

If you watch or read interviews with some of the more successful money managers, the lot of them seem like tremendously compassionate and eloquent people, with a greater sense of purpose than just accumulating wealth.

marketing?

 

[NumeroUno]

I really don't believe that.

I think that most of these fund managers are just happy and optimistic to begin with, and this ultimately leads them to success.

Being a fund manager requires people to have confidence in you; it requires a tremendous amount of networking and social skills.

I don't think you can just start out as an unhappy, cynical, money-hungry person and just fake your way into success as a money manager. People genuinely have to like you in order to be able to trust you with billions of dollars.

Which of these two seems more likely?

1.) Happiness breeds success. A person who is happy and optimistic sets goals and doesn't let setbacks deter them. They persist and finally achieve their goals. Since they were happy to begin with, they remain happy once they succeed.

2.) Success breeds happiness. A person who is unhappy and pessimistic creates an action plan based solely around obtaining money, at the expense of everything and everyone else. They neglect, or insult, friends and strangers, because they perceive these "things" as a waste their time. They struggle, in isolation, until they make a lot of money, without anyone else's help. Once they become wealthy, they suddenly become happy, because they have wealth and can buy happiness. Or, if they can't buy happiness, they just pretend to be happy to impress people and get more wealth ("marketing"), even though their life is shallow.

Now, of course, there are sociopaths who actually fit quite well into the description of #2, like Bernie Madoff, and countless others. But, one probably doesn't want to aspire to be a sociopath.

I dunno. I could be wrong.

I just hope I don't become as jaded an cynical as many of the posters on this forum.

It might happen somewhere down the line though

 

[TehRaio]

1. nobody is either happy or unhappy. It's the difference between the type of decision boundary you choose: 1st order (straight line) vs 10th order polynomial (highly non linear)

2. You're only seeing one scale of the data: I mean if you look at the progression of someone at t = [0,1,2,3,4,5,...,T] a line may appear linear (happy => success, progress etc...). This is what you deduce from these readings.

Let's say you get a more precise machine/software which allows you to collect data at a smaller scale, and suddenly at t=[0.1,0.2,0.3,0.4,...] the line is non-linear, and, just for the sake of argument, there are huge swings up and down (10th order polynomial!!!). What does that say about the first picture you previously had?

all the pseudo math aside, becareful of survivorship bias: finance and entrepreneurship is full of that. You only hear about those who made it, people don't want to read about failure. They want to read about the top dawgs who made major $$$: these guys know signaling success is also super important for people to trust you with your money...

My 2 cents is this: I'm more concerned with what people who didnt make it were doing that "killed" them. If you can avoid stuff that "kills" you and survive long enough, people will write stuff about you as the next genius, they will highlight all the stuff you did well, never talk about your downfalls etc...

 

[pingu]

I really don't believe that.

I think that most of these fund managers are just happy and optimistic to begin with, and this ultimately leads them to success.

Being a fund manager requires people to have confidence in you; it requires a tremendous amount of networking and social skills.

I don't think you can just start out as an unhappy, cynical, money-hungry person and just fake your way into success as a money manager. People genuinely have to like you in order to be able to trust you with billions of dollars.

Which of these two seems more likely?

1.) Happiness breeds success. A person who is happy and optimistic sets goals and doesn't let setbacks deter them. They persist and finally achieve their goals. Since they were happy to begin with, they remain happy once they succeed.

2.) Success breeds happiness. A person who is unhappy and pessimistic creates an action plan based solely around obtaining money, at the expense of everything and everyone else. They neglect, or insult, friends and strangers, because they perceive these "things" as a waste their time. They struggle, in isolation, until they make a lot of money, without anyone else's help. Once they become wealthy, they suddenly become happy, because they have wealth and can buy happiness. Or, if they can't buy happiness, they just pretend to be happy to impress people and get more wealth ("marketing"), even though their life is shallow.

Now, of course, there are sociopaths who actually fit quite well into the description of #2, like Bernie Madoff, and countless others. But, one probably doesn't want to aspire to be a sociopath.

I dunno. I could be wrong.

I just hope I don't become as jaded an cynical as many of the posters on this forum.

It might happen somewhere down the line though

I don't think you have been around a lot of fund managers. They cover the full spectrum, from full blown a-holes to nice guys and some in between.

Now, regarding the two points you highlight:
1) that's completely wrong. It's a fairy tale somebody has been feeding you. Read "Only the paranoid survive" from the ex-CEO of Intel. Nothing to do with happiness.

2) Another dose of BS.

If you like to live by those believes, it's ok but be certain humans behave in very strange and unpredictable ways.

 

[Andy Nguyen]

As we are on the topic of money/success/happiness, I guess different people may have different or naive idea of those criteria but it's ok. If you are one of those that do not conform to mass thinking, be like Elon.

 

[NumeroUno]

I agree with the above replies. I realize the post I made is oversimplified. Thanks for contributing.

TehRaio makes an interesting point:

'I'm more concerned with what people who didnt make it were doing that "killed" them. If you can avoid stuff that "kills" you and survive long enough'

Is there a book that covers spectacular failures in wealth management? This would certainly interest me.

pingu: Do you think "Only the paranoid survive" is applicable to wealth management, or is it mostly about running a corporation?

Finally, regarding Elon, has he had any tremendous setbacks?

 

[Andy Nguyen]

Finally, regarding Elon, has he had any tremendous setbacks?

 

[Ken Abbott]

I’ve been watching this thread with some interest. This is a topic to which I’ve given some thought.

Finance isn’t necessarily a business driven by altruists or idealists. At the end of the day, there’s a profit motive and you don’t find too many folks who are trying to choose between the Peace Corps, non-profit fundraising, and finance.

That said, I’ve seen two type of people enter the business. The first type are the people fascinated by the economics of it all. The markets are really interesting and some people want to step back watch the way the various actors behave the way an entomologist might stare at an ant farm. Yeah, they’re not doing it for charity - they want to make money, but that isn’t the only factor. These people want to be in the game. They often work late mot because they have to, but because the want to - the work is that interesting to them.

The second type are generally interested primarily in the money. There's nothing inherently wrong with that - it's just different. They’re not any less intelligent or driven, but finance, consulting, tech - they could be just as happy doing any of these. Many of these people are quite successful, but they may be at a disadvantage. At the margin, the person with a genuine interest in market economics and modeling will be more motivated to put in the extra effort. This can make a difference when the heat is on and the workload is a grind.

Happiness is relative, and I believe that it's more than just the absence of pain. It's also more than the number of toys you have when you go to the great big trading floor in the sky. In my late 50s and considering retiring (soon) to teach, I find myself thinking about success more in terms of Kipling's "60 seconds' worth of distance run." For me, finance has been interesting, fulfilling, and last (and perhaps least) financially rewarding.

 

[pingu]

'...
Is there a book that covers spectacular failures in wealth management? This would certainly interest me.

pingu: Do you think "Only the paranoid survive" is applicable to wealth management, or is it mostly about running a corporation?
...

I can answer these two questions.

There are plenty of books that cover spectacular failures. "When Genius Failed" is on of the most recommended.

Yes, it applies to running any enterprise of any size when there is competition.

 

[Daniel Duffy]

The Klondike Gold Rush wasn't a spectacular success.

 

[wkdwnstjdTprtm]

I’ve been watching this thread with some interest. This is a topic to which I’ve given some thought.

Finance isn’t necessarily a business driven by altruists or idealists. At the end of the day, there’s a profit motive and you don’t find too many folks who are trying to choose between the Peace Corps, non-profit fundraising, and finance.

That said, I’ve seen two type of people enter the business. The first type are the people fascinated by the economics of it all. The markets are really interesting and some people want to step back watch the way the various actors behave the way an entomologist might stare at an ant farm. Yeah, they’re not doing it for charity - they want to make money, but that isn’t the only factor. These people want to be in the game. They often work late mot because they have to, but because the want to - the work is that interesting to them.

The second type are generally interested primarily in the money. There's nothing inherently wrong with that - it's just different. They’re not any less intelligent or driven, but finance, consulting, tech - they could be just as happy doing any of these. Many of these people are quite successful, but they may be at a disadvantage. At the margin, the person with a genuine interest in market economics and modeling will be more motivated to put in the extra effort. This can make a difference when the heat is on and the workload is a grind.

Happiness is relative, and I believe that it's more than just the absence of pain. It's also more than the number of toys you have when you go to the great big trading floor in the sky. In my late 50s and considering retiring (soon) to teach, I find myself thinking about success more in terms of Kipling's "60 seconds' worth of distance run." For me, finance has been interesting, fulfilling, and last (and perhaps least) financially rewarding.

I completely agree

 

[TeenPhilosopher]

Why does it seem like people in investment banking make significantly more money than those working in quantitive finance (with the possible sole exception of a quant trader)? They may clearly be different skill sets, but one requires only basic mathematics and good social skills, while one requires you to know niche fields of mathematics in depth, (generally, though not always) needs a PhD, and a deep familiarity with programming and CS? Why is it that the first one is paid so much more than the other (one would think quants would get paid more than the traditional finance guys)?

Don't get me wrong -- I'm not saying that there are many people who could do either job (IB vs quant work) equally well, and I'm certainly not saying I'm one of them. I want to get into this field primarily because I find it interesting and rewarding (at least, from what I've read about it and personally worked on). That being said, financial compensation is of course a relevant factor and I would like to end up somewhere where I can trade (partly because of said compensation, but also because it seems more rewarding in an intellectual sense) and take on the responsibility of actually handling the money.

What advice would you give to someone in an undergrad STEM major at a very highly regarded university seeking to end up somewhere with a P&L? Is a PhD an absolute must? What skillset are hedge funds looking for in applicants applying for quant trader roles?

 

[TehRaio]

Finance lags behind the tech industry I feel.
In the tech industry, most if not all, managers have a technical background so they tend to reward people who are like them. It's the same principle in finance, except the managers all have MBAs and Masters in Finance => They give more money to people like them not the mathematics dudes who do the "hard" work.

 

[Ken Abbott]

They give more money to people like them not the mathematics dudes who do the "hard" work.

Managing people (and quants in particular) is much harder work than you might imagine it is.

 

[MRoss]

Why does it seem like people in investment banking make significantly more money than those working in quantitive finance (with the possible sole exception of a quant trader)? They may clearly be different skill sets, but one requires only basic mathematics and good social skills, while one requires you to know niche fields of mathematics in depth, (generally, though not always) needs a PhD, and a deep familiarity with programming and CS? Why is it that the first one is paid so much more than the other (one would think quants would get paid more than the traditional finance guys)?

Because they work 40 hours MORE each week than their quant finance counterparts. No exaggeration.

Not worth it at all imho.

 

[TehRaio]

Managing people (and quants in particular) is much harder work than you might imagine it is.

I actually believe that too, that's why I used quotes on 'hard'.

That question annoys me a little. I've come across multiple versions of it on this forum throughout the years.

Many young students have gotten this idea that doing math is the hardest thing and should be rewarded with the highest salaries.

It sucks to be attracted to a field just because it pays the big bucks, finance has a problem.

 

[MLV]

There is a natural under-representation of non-quant finance professionals in this site, so just wanted to add my two cents.

I have a MSFE and a master’s in Math (from a non-target), started in Securitization Risk, and eventually moved to Investment Banking in NYC.

Yes, the hours are very long, and yes, the salary is very attractive. After my experience in IB I can totally understand why people get burned out. It takes a specific kind of personality to actually enjoy the job. Whether someone would like to be in IB or not, is obviously a function of the individual. To TehRaio’s point, a lot of people in IB are here solely for the money, just like a lot of quants are failed academics who moved to finance only for the big bucks and the quant trading stories they read in a book. Motivations aside, it is not easy to be successful in either job.

Personally, I do not enjoy working 15+ hours a day in power point aligning logos and pictures (luckily, I can often hand that job to analysts). I do enjoy (A LOT) attending client meetings and getting a glimpse of how CEOs think, seeing first-hand how the industry I cover works, and becoming very familiar with different companies and their management teams. In fact, one of the reasons that I moved is because (coming from a family of business-owners), I want to learn as much as I can about business to eventually try my own luck. The level of insight that I get here is something that the quant side of the industry cannot give me. Not that I was a real quant, anyways.

I also enjoy the modeling aspect of the job, and since I have a more technical training than most people in my team, I am usually better at it (modeling is usually limited to LBO, and accretion/dilution). That being said, there are some extremely smart people in IB, even if they don’t know how to solve a stochastic partial differential equation (which at this point, I have completely forgotten), they will run circles around a lot of quants when it comes to just good old fashioned common sense.

There is a lot more than being “sociable” when you are trying to sell / buy a company for hundreds of millions of dollars or drive negotiations a certain direction, albeit all soft skill related. In my very limited experience, I have been lucky enough to be in meetings with CEOs and CFOs of Fortune 500 companies, and with PE professionals that are currently in the Forbes 40 under 40 list. One of my take-aways is that not everyone can carry themselves in a way that will fully assure these people that our bank and our team is the right one to get the job done and earn the millions in fees they will pay. At the end of the day this is a relationship business, and not everyone can build that trust and rapport with clients. Not trying to over-beautify the business though, what we do in an industry coverage team is sales and nothing more.

Obviously, the vast majority of the talking and relationship-building is done by senior bankers, while junior bankers (like myself) will often not even say a single word during a meeting. However, we put together the books and materials for each one of these meeting and have to be extremely meticulous about getting all the information right, and making sure that the numbers on page 5 match those on page 85 (one of the reason why bankers work 40 more hours than quants per week). So we get to talk about the technical aspects of the ideas we present. Personally, trying to rationalize "strategic" advice to a CEO who obviously knows his company / industry infinitely better than me, is not necessarily an easy thing to do. Just like with any other skill, it takes practice.

It has been said plenty of times before in this forum, but don’t take soft skills for granted. Often, quants tend to think that soft skills are way easier than doing math, but ironically will fail to do basic networking to get a good job (i.e. sell themselves and their skills to employers), or just completely depend on your school’s career development office. I myself got a lot of help from MRoss in this topic, he's the man when it comes to networking!