Welcome to the Age of the Quant. The past decade has seen a true shift in the way buy-side traders do their jobs. The telephone and fax machines have been replaced by millisecond electronic platforms and inter-connected global markets. And the buy side has seized control of its trading, developing the complex formulas and algorithms needed to seek out liquidity and find buyers in the blink of an eye. The playing field has been leveled. Trading near the speed of light -- once remarkable -- is now commonplace in buy-side firms across the globe.
The last time we published a Quant Gold Book in the pages of Advanced Trading, in 2008, we focused on the top students from the country's leading quant programs. This year we looked at quant firms hailing from as far as Clearwater, Fla., and Sausalito, Calif. Back then, quant trading was limited to the major Wall Street banks and hadn't yet become a household (four-letter) word. Today, it's as common at small shops around the United States as it is at the top trading houses on Wall Street, and the barriers to entry are lower than ever before. (Now all you need -- besides a tidy $500 million in seed money -- are some high-speed computers, a few smart formulas and a brokerage that can connect you to any exchange in the world.)
In this year's Quant Gold Book, the editors of Advanced Trading profile four buy-side leaders from a broad swath of smaller firms, including a tier-two global investment firm, who revel in the high-speed chase. While some use algorithms provided by brokers and sell-side firms, a few like to create their own algorithms -- and to update their own code. This is a hands-on crowd.
Julie Connard, for example, runs her quant firm, Algorithmic Insight Capital Management, with her husband, Mark Connard, in Clearwater, Fla. She creates her own trading tools, research solutions and algorithms. Todd Hurlbut of Everett Capital Management trades cash equities, commodities, futures and more with broker algos from Fidelity and Goldman Sachs. Chris Hehmeyer of HTG Capital focuses on futures (his firm is based in Chicago, after all), trading about 5 million shares a month. And then there is AllianceBernstein's Dmitry Rakhlin, who uses an entire host of sell-side algos to trade both long- and short-hold strategies.
Even among this diverse group, however, we found some common traits. Our 2011 Quant Gold Book honorees remain enthusiastic quant traders, and they embrace the fast lane.
And the volatility that is driving the capital markets' rollercoaster ride? Bring it on, they say. Today's high-frequency traders love the drama (not to mention the opportunity for profit), and they secretly hope the volatility doesn't end any time soon. Find out more about our 2011 Gold Book honorees in this slideshow.