Is the quant strategy the most effective?

[uvastudent]

I'm very interested in working at a quant hedge fund, but I've seen many people contend that hedge funds, generally, are more based on luck than on skill.

Is this seen as true for quant funds? Obviously there are the top funds like rentech, but they're not representative. Generally, how do quant fund perform vs the market? vs other kinds of hedge funds/investments? Is this strategy really effective, or are people blinded by bias?

 

[pingu]

I'm very interested in working at a quant hedge fund, but I've seen many people contend that hedge funds, generally, are more based on luck than on skill.

Is this seen as true for quant funds? Obviously there are the top funds like rentech, but they're not representative. Generally, how do quant fund perform vs the market? vs other kinds of hedge funds/investments? Is this strategy really effective, or are people blinded by bias?

Does it matter? What's your point?

 

[uvastudent]

Does it matter to me if the career path I'm interested is based on scientifically proven results? Of course it does.

 

[Miles Adkins]

I've been working at a quant fund for 2 years now.

We are currently 20% below our watermark.

My most profitable trades have been ones that are completely based on "hunch" and are mostly reacting to news.

If you are searching for a career with scientifically proven results (engineering), I would not go into investment management. You can still work in sell-side trading though pricing derivatives if you want to be in finance.

The main problem though is jobs with scientifically proven results do not pay that much (150k/yr tops) and usually have a cap.

The real money is in: being skillful/lucky at predicting the future, being a great salesman, or being a business owner

 

[Miles Adkins]

Like the stock markets, the labor market is highly efficient. If there is a job that pays a lot of money, people will go to that niche and the supply will lower wages.

No risk/no return.

 

[mrsteez]

Generally, how do quant fund perform vs the market? vs other kinds of hedge funds/investments? Is this strategy really effective, or are people blinded by bias?

"Quant funds" could be any strategy really: systematic macro, equity market neutral, managed futures... There is no general rule. I believe systematic (quant) funds offer different attributes than discretionary (non-quant) funds, say volatility of returns, beta, etc. No type of fund is better than the other, they just have their good times and bad times depending on market conditions (otherwise there wouldn't be so many). They're just another diversifier in a portfolio. I believe that even though we are tempted to think that quant funds have more scientific validity, finance stays an inexact science.

 

[pingu]

Does it matter to me if the career path I'm interested is based on scientifically proven results? Of course it does.

In Finance, that is called "Fantasy-land".

 

[yetanotherquant]

I'm very interested in working at a quant hedge fund, but I've seen many people contend that hedge funds, generally, are more based on luck than on skill.

Is this seen as true for quant funds?

Generally, yes.
Even if you (or your algo) trade systematically, you need market opportunities, i.e. a special market regime. E.g. if you are a trend follower you need trends

Two more concrete examples:

*my first portfolio "Somewhat better than DUCKS" justifies its name and beats the DAX: https://goo.gl/GZJXW3
However, to make profit I need the luck that DAX goes up (if it goes down, I will likely beat it all the same but having -20% when DAX has -30% is likely little fortune).

*Another portfolio of mine is "Smooth growth faster than bonds":
https://www.wikifolio.com/de/de/wikifolio/smooth-growth-faster-than-bonds
Here I am very risk averse and need opportunities where I can almost surely make profit.
But market rarely provides such opportunities, so though my risk of making losses is small, the risk of not making profit (or being worse than the market) is significant.

 

[Daniel Duffy]

In Finance, that is called "Fantasy-land".

A random walk to boot.