What are some differences between HFT, Quantitative Trading Firm, Hedge Fund etc?
Sep 11
17 Comments
Please explain with examples in the space. Thank you.
Please explain with examples in the space. Thank you.
comments
Quantitative trading = use statistics to build models of strategies to trade on (quant research)
Hedge fund = a fund managed to hedge bets to minimize losses.
And now an institution can have their hands in all of the above.
HFT is a way of trading where you hold positions for very little time and you make money due to regulatory environment that mandates it.
Quantitative trading is just using math to automate the trading process in some way.
EDIT: Too late, Bill Ackman already did it
Jane Street and some others like Volant also have both prop trading and client execution.
Banks have securities divisions which primarily do market making, prime brokerage (think Fidelity or Etrade for a big institutional investor) and used to do a lot of prop trading but that's been tightly regulated since Dodd-Frank. Most of them also have hedge funds and PWM services that are completely separate.
Jump, Tower, HRT are HFT shops that started with prop trading (using HFT strategies) but now have all opened internal "hedge funds" which use stat arb strategies like AQR and Two Sigma use. They might advertise this as "medium frequency". Probably only partner money in it.
The common thread is all of them try to buy and sell stuff while turning a profit, the differences are how fast (the slower, the longer you hold and the more risk) and with whose money. PWM = 1 unaffiliated rich persons money which gets outsourced to other funds, hedge fund = many rich people or pension funds/whatever plus employee money, prop trading = partner's money, bank = bank's money, long only asset manager = same as hedge fund, mutual fund = many poor people's money.