- Quants have developed from a niche practice to a dominant player – the world's largest and most important hedge funds are heavily influenced by, or fully committed to, computer-based strategies.
- The future of quantitative investing is in question as a growing group of experts demands more machine learning techniques to move away from the models that have made so many people successful.
- This year was not friendly to quants as the volatility caused by the pandemic earlier this year hit many systematic funds that could not keep up.
- The rulers of this finance area will be the ones who will lead this ever important part of the industry into the next phase.
- This list is a combination of longtime billionaire players, hit under the radar and entrepreneurial founders with reputable family trees.
- You can find more stories on the Business Insider homepage.
The future of quant investing is the future of finance.
Quants are now kingmakers in the $ 3 trillion hedge fund industry, with almost every large fund providing ample resources for space, whether it's capital for strategy or resources for hiring and data feeds. And these strategies, which have become increasingly popular over the past decade, don't work in a vacuum.
The rapid and unemotional trade with them has prompted investors like billionaires Stanley Druckermiller and Leon Cooperman to argue that they are distorting the markets. In the meantime, unprecedented market volatility in March caused many well-known quants to lose money as their models struggled to keep up.
Funds such as Coatue's data-driven systematic strategy and Credit Suisse's QT fund were closed due to the volatility and unreliability of the data at the beginning of the US shutdown.
Additional information: Credit card details are incorrect. This forces hedge funds and banks to rethink one of the earliest legacy data games.
What Quant Investing will look like in the next decade is largely determined by the rulers on this list – a combination of billionaire Stalwarts, heavy hitters under the radar of well-known funds and new founders.
And there are some general disagreements about what Quant's next development will look like. Marcos Lopez de Prado, former head of machine learning at AQR and professor at Cornell University, believes that quants must move away from models and focus on "nowcasting" to respond quickly to new data. Artificial Intelligence and Machine Learning Techniques have spread across the industry to handle the vast amounts of data feeds that are the lifeblood of the industry. others are trying to retire the quant strategies that worked so well on stocks.
Lopez de Prado said in a recent webinar that the biggest challenge for the industry is: "How can we understand the enormous amount of data that we have today that wasn't available three to five years ago?"
Those in power in the industry are often part of the company's data leadership if they don't hold the wallets of their data budgets themselves. The way they process, structure, and clean the data will be one of the biggest differentiators from their competitors.
The talent to do all of this is of course not cheap. It's one of the few pools of skilled workers where the hedge fund industry can't always make the most lucrative offer, as top hedge funds often have to compete with Silicon Valley for the best of the best.
The list is also an indication that despite the outward promise of the wealth management industry to increase diversity, the top of the room is still overwhelming, male and white. While many of these companies have women who develop systems and strategies, the management of the space is not very diverse at all.