Is HF a dying industry?

Aug 9, 2020 29 Comments

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  • Citadel Securities / Other
    Quant192

    Go to company page Citadel Securities Other

     Quant192
    Absolutely not. We're destroying it this year. It's definitely more competitive and unequal though. Fewer and fewer firms are making all of the profits. And we're not just "adjusting the nobs -- New strategies are being deployed all the time.
    Aug 9, 2020 14
  • If you're talking about the trading side in quant finance, the markets are getting quite saturated with models that have already been discovered. This doesn't necessarily mean the industry is dying. It just means that the role of quant traders in HF will evolve.
    Aug 9, 2020 6
  • New
    axiomatic

    New

    axiomatic
    I'll answer purely from the perspective of quant funds.

    Over time it seems that the costs of running a quant shop have increased relative to the "easily available" alpha sources. This means that larger players can compete very well, but new players need to establish themselves at a certain size to be viable (~$1bn), whereas in the past (2000s) people were launching with much smaller vehicles.

    In the higher frequency space, we've seen a large number of players consolidate too, but there the amount of capital needed is lower. Conversely the tech requirements are far higher.

    The end effect of this is that quant finance is likely to be dominated by a few large funds, moreso perhaps than it is now. Firms like AQR manage a lot of capital yes, but their strategies look increasingly similar (from a marketing standpoint) to ETFs. Similarly trend followers have underperformed expectations for quite some time.
    Aug 10, 2020 2
  • Imperial Capital
    vodkawater

    Imperial Capital

    vodkawater
    There’s been a record number of new HFs started this quarter
    Aug 10, 2020 0
  • Imperial Capital
    WLR1

    Imperial Capital

    WLR1
    Probably strategy specific. More macro funds may have trouble justifying their fees in the coming years if they don’t beat their benchmarks
    Aug 9, 2020 0