Quants is profoundly transforming the investment industry. The grizzled traders of Wall Street of public perception are being deposed by young, brilliant mathematical minds. As financial securities have become increasingly complex, demand has grown rapidly for people who can use mathematical models to price securities, generate profits and reduce risk – enter the quant.
Quantitative analysis positions are found almost exclusively in major financial centres with trading operations. In Asia, many quants are working in Hong Kong, Singapore, Tokyo, and Sydney, among other regional financial centres.
“There’s certainly a talent shortage of quants in Asia,” says Jason Hsu, the founder and chairman of Rayliant Global Advisors, an Asia-focused quantitative equity investment firm. “Asia lacks seasoned quant researchers, and some of the ones here are too ‘local’ in their approach and aren’t equipped to work for international companies.”
Quant analysts apply mathematical and statistical models in the sell-side for derivatives pricing and risk management, as well as the buy-side for statistical arbitrage, algorithmic trading and quantitative investment trading. Harnessing the power of computer science and vast data-sets to make investment decisions is no mean feat.
For decades, investors imagined a day when data-driven traders would dominate financial markets. That time has come – the quant hedge fund sector is experiencing significant growth.
“The widespread usage of derivatives will make returns more stable ... increase liquidity, and new strategies may emerge,” said Wang Feng, a former Wall Street trader and co-founder of Alpha Squared Capital, a Hangzhou-based hedge fund. “The industry will enter era 2.0. The most difficult time may have passed already.”
For the intellectually curious, quants provides applied mathematical and statistical models to the most obscure financial and risk management problems during unpredictable market conditions.
In 2018, the algorithms behind trend-following quants struggled to react fast enough to market volatility caused by President Trump’s tweets and US-China trade tensions, alongside other political maelstroms such as Brexit. In response, analysts at JP Morgan have created and coined the Volfefe Index to predict how “a broad swaths of assets from single-name stocks to macro products have their price dynamics beholden to a handful of tweets.”