It was some time back in 2009 when we first predicted that in a world in which central banks have taken away the "fun" from fundamental analysis (having effectively nationalized capital "markets"), that in the not too distant future quants - or "traders" whose only value added is to react rapidly after the news and/or be the fastest to chase any given momentum wave - would be paid far better than plain-vanilla fundamental analysts - those who use conventional financial analysis to make price forecasts, and whose work has traditionally been highly prized by hedge funds, yet are now on their way to becoming obsolete in the New Normal.
For the likes of Dan Loeb, and his Third Point, once a staunchly fundamental-analysis only driven hedge fund, that time has arrived.
According to Bloomberg, Dan Loeb will pay Matt Ober, a quant, pardon "data scientist" who left WorldQuant for Third Point more than $2 million according to a breach of contract claim filed by his former employer.
Matt Ober is smiling
Ober, 32, who starts next month as Third Point’s "chief data scientist", i.e., head quant, said in a filing that he will be paid a base salary of $200,000, the same as WorldQuant gave him, plus bonuses, and disputed that $2 million in compensation is guaranteed.
As Bloomberg adds, Loeb is joining other hedge fund names in developing big data and quantitative investing to boost returns, i.e., phasing out fundamental analysis in favor of simple quant-driven trading.
Scientists and coders who mine, clean and model information are in high demand after being relegated for years to back office status. Experienced data scientists can earn $500,000 to $700,000, and as much as three times that for those with extensive backgrounds, according to recruiter Alexey Loganchuk.
“It is too early to call data scientists the new masters of the universe but they are on their way there,” said Loganchuk, founder of Upgrade Capital, a New York recruiting firm that focuses on alternative data. “Because of how new the space is, the transition from entry level to management can happen quickly. There are several people out there making seven figures in their mid-twenties.”
As Bloomberg's Saijel Kishan notes, Ober joined Igor Tulchinsky’s WorldQuant in 2011 as a data product analyst and was later promoted to co-head of data strategies at the Old Greenwich, Connecticut-based hedge fund, according to the filing. He sought out data from vendors for use in trading.
Ober will help Third Point more quickly get up to speed with bid data, helping identify which datasets could be used for specific trades, according to the filing.
Meanwhile, as quant compensation soars, hedge fund managers and senior analysts are facing smaller paychecks. Those with seven years of experience expect a 14% decrease in total compensation to about $685,000 for 2016, according to a September survey by Odyssey Search Partners.
Winton Capital Management in London said in April it’s starting a data science center in San Francisco and plans to hire some 40 scientists. Citadel in Chicago picked its former chief risk officer for a new role of chief data officer in September.
And soon, once Ray Dalio manages to upload his brain into a computer and others reverse engineer how he did it, all the quants, pardon "data scientists" will be just other computers, paid nothing, who trade against other computers in a market in which - since logic and common sense no longer matter - humans are no longer required.