Attracting and retaining the top tech talent is now tougher than ever for hedge fund managers, as competition for data engineers, coders and computer scientists intensifies.
Hedge fund firms of all stripes and strategies are preparing to ramp up their tech expertise over the next 12 months, according to a Hedgeweek survey conducted for this report. A poll of some 30 hedge funds on both sides of the Atlantic probed firms on how technology, data and systems are reshaping their business models, and how managers are adapting to this shifting environment.
Quizzed about their plans to add more specialist staff – such as coders, data engineers, and programmers – within their firms, some 47 per cent of respondents said they intend to hire more expertise in this area over the next 12 months. In contrast, some 33 per cent said they had no plans to hire any additional technology-focused personnel, while a further 20 per cent were unsure.
Specifically, survey respondents pinpointed programming, machine learning, data science, and research as areas they were looking to strengthen, as well as adding algorithmic trading coders and software developers.
Laurent Laloux, chief product officer at CFM, says that the newly-emerging tech stacks, alternative data and cloud capability is influencing hedge funds’ hiring process, adding that the emergence of data science is bringing a newer and younger profile of recruit, “people already well-trained in managing data and extracting features from data.”
“We are definitely hiring a lot of data scientists – these people are bridging the gap between data seen from a purely technological perspective, in terms of volume acquisition and distribution, and data seen from the quant research perspective, in terms of assessing the value of a company,” Laloux says of the importance of data scientists within the overall investment process.
“Between the two, you need this expertise which helps compress the massive amounts of data into features which makes sense for researchers and provides alpha in a meaningful way.”
This rush to bolster technological firepower is driven by a series of overlapping trends, according to industry participants on the frontline. These include an ongoing “electronification” of financial markets which, in turn, is offering more analytics tools and computing capabilities which potentially may offer systematic funds a competitive advantage. As a result, allocator interest in systematic strategies is piquing, particularly as quant-based hedge funds continue to make inroads into certain markets and asset classes – such as corporate bonds and less liquid emerging markets that traditionally did not fit well with electronic trading.
Laloux notes how CFM’s culture was built with deep academic roots, with a focus on PhD, hard science and physics and mathematics, adding that these elements have formed the core focus of its hiring approach since day one. Today, the firm’s hiring focus includes data scientists and he concedes that recruitment in this space is currently “very tense”. “You really have to fight for talent – the big tech firms, the fintechs, the banks and the asset managers, everybody is fishing for data scientists,” he explains.
“Pretty much everyone in our team – from me as portfolio manager, from the execution traders, all the way through to the people in the back office – is a proficient coder,” says Paulo Remião, partner and portfolio manager at Broad Reach.
“One of the key questions for anyone we are hiring now is, ‘can you code?’,” he says. “We really want to ensure that people can be familiar and converse on the technology side.
“Everyone needs to understand well how the databases are structured; the execution trader understands what data needs to be collected when they are executing, how that data should be structured in the database, and later processed by the system in order to generate the signals and refine, for instance, the transaction cost-modelling. It really requires a level of understanding customisation, which goes beyond a lot of the more off-the-shelf systems.”
Expanding further on the evolving challenges that underpin the hiring process, Bin Ren, founder & CEO at SigTech, notes that the demand for tech talent is “significantly higher” than the current supply.
“Congruent with what is going on in most other industries, we see a general trend for “quantification” in the hedge fund industry,” he adds. “Another reason why it can be difficult for hedge funds to hire tech talent is that many hedge funds are not technology-driven companies, whereas many engineers prefer working for firms that are 100 per cent driven by a technology strategy.”
Acknowledging how digitisation is spreading across all industries beyond financial services and asset management, Razvan Remsing, director of investment solutions at Aspect Capital observes: “I don’t think the profile of the candidate we look for has changed much. But our competition for that talent pool has changed. We’re no longer competing just with the other hedge funds; we’re competing with fintechs and technology companies as well. I think we look for the same type of characteristics – people who love a challenge and are naturally inquisitive, with a background in a numerically complex field.”
Read the full A Tech Revolution: How machines are reshaping hedge fund investment Insight Report here.