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Hedge Funds v. Silicon Valley, The Battle For Quant Talent

Talent is distributed around the globe, opportunity is not. Visit to a finance-sponsored 'datathon' to find the next generation of quantative wizards.

Taking notice at MIT
Taking notice at MIT
Nishant Kumar and Katia Porzecanski

CAMBRIDGE — On the warmest February day on record in Cambridge, about 60 students at the Massachusetts Institute of Technology opt to stay inside a dimly lit lobby, crunching data and churning out pages of analysis, rather than enjoy the sunny, summer-like Friday afternoon.

No, it isn't mid-term time. The students — handpicked from 400 applicants — are competing in a datathon hosted by the $26 billion hedge fund Citadel. Ken Griffin's firm is upping the ante in the industry's chase for data scientists and engineers, hosting 18 competitions at universities across the U.S., Britain and Ireland this year. The prize in the final data championship: $100,000.

"We need strong, analytical thinkers who can work through big, complex data sets," Justin Pinchback, head of talent strategy at Chicago-based Citadel, said in an interview during the MIT datathon. "If you limit yourself to one region or one school, you won't get as good a look at the entirety of the talent market, and that's what we're trying to do."

Hedge funds, which have long used fat pay checks to lure employees, are improvising with new approaches to recruit technologists amid fierce demand for them across the economy. Traditional hedge funds like Tudor Investment Corp. have been chasing quants as their lackluster performance and pressure on fees makes them less enticing places to work.

Google and Facebook

Even the most technologically advanced hedge funds like Two Sigma, whose Compass Cayman Fund has outperformed rivals for the last four years, vie for talent. They are up against sexy tech giants like Google, with its self-driving cars, and Facebook, which claims billions of users.

"The trouble is to find the people who are capable of innovating," Luke Ellis, chief executive officer at Man Group Plc, said at the Milken Institute's London summit in December. "They are not particularly driven by money, they have got lots of financially interesting offers and so you have to find other ways of trying to attract them."

The rivalry for talent in quantitative research, big data and analytics has never been more intense, according to John Hindley, a partner at recruitment firm Heidrick & Struggles. The traditional hedge fund fast-buck culture, which is anathema to the experimental ways of science, can make recruiting even harder. So hedge funds are wrapping themselves in academic robes and pitching their firms as research centers where teamwork is prized, complex problems are solved and papers are published.

There's fantastic osmosis

Omar Iqbal, head of human capital at London-based Winton Capital Management, likens the quantitative hedge fund to CERN, the nuclear research center in Switzerland.

"It's a bit like CERN where scientists worked together to discover the Higgs particle," Iqbal said about Winton, the $31.5 billion quantitative firm. "The reason that it was successful is because thousands of people came together and each person did their thing to a very, very high standard. Similarly, we think of Winton as a collective project."

Two Sigma, which was co-founded by David Siegel, a Ph.D. in computer science from MIT, has many trappings of a university. The $41 billion computer-driven firm, which produces scientific papers and encourages staff to teach classes, will soon actually move onto campus. In September, Two Sigma will take over "The Bridge," a space on the new Cornell Tech campus on Roosevelt Island in New York, where engineers and entrepreneurs with work.

AI focus

The hedge fund staff will collaborate with Cornell students and professors on machine learning and data science projects, creating a pipeline of academic talent to the firm. Job candidates will put on virtual-reality glasses to watch a video that explains how the hedge fund sees the world awash in data.

Two Sigma is following Man Group, which started the Oxford-Man research center on the university's campus in 2007 and revamped it in August to focus on artificial intelligence, creating a hunting ground for recruits.

"By having our employees able to sit in the same room, share the same coffee with the academics, we find that there's a fantastic osmosis," Ellis said. "It's very good for being able to recruit people, it's very good for getting new and innovative ideas, which we have been able to turn into the real world, practical, money generating things."

Igor Tulchinsky, the founder of WorldQuant, is pitching a perk that breaks the tradition of hedge-fund secrecy. The $5 billion firm is hiring at least 15 teams of quant managers for its Accelerator platform, offering them the right to keep their intellectual property. The quant hedge fund has also opened more than 20 offices in 15 countries, including emerging markets like Russia and Romania, to find engineers. Talent is distributed around the globe, Tulchinsky said at the Milken conference, "but opportunity is not."

At the Citadel datathon last month, teams of students were given multiple large and complex economic data sets and told to come up with a hypothesis and test it with advanced models. Students huddled over laptops for a grueling six hours as they strove to write a technical paper to impress judges and win. Bursts of laughter and chit-chat, flavored with Russian, Chinese and Israeli accents, punctuated the studious silence.

Twin interests

Yuqing Xie's team took second-place and will share in the $25,000 award for winners, who will have a chance to interview for a job at Citadel. Xie said the datathon brought together her twin interests in technology and finance.

"Data science and tech are the future, and everyone's trying to integrate them," said Xie, 24, who's getting a masters in financial engineering at MIT. "Citadel is doing a very good job of combining both and that's exactly the combination I'm interested in."

Eric Munsing, a Ph.D. candidate in civil engineering at the University of California at Berkeley, was part of the winning team at Citadel's first datathon in January. He said the event drew many students with a passion for the complicated computational problems of data science who may not have even considered the possibility of a career in finance.

"The datathons are a really interesting way of opening people's eyes to alternative career paths," Munsing, 30, said. "For me it certainly does seem like an attractive potential path."

While his friends in the engineering department look to work at Google and Amazon, where they might focus on narrow technical issues like optimizing advertising, Munsing is drawn to the broader challenges of finance — how trends and people's emotions impact markets.

"I'm more interested in finding the most intellectually stimulating problems, and then seeing where that leads me," said Munsing.

Citadel will hold 16 more events this year at an array of schools, from the University of North Carolina to the University of Cambridge. The winners will compete again in a final face-off at the end of the year. Victors take home $100,000 in cash.

Citadel's motive for its extensive recruiting effort is made plain on its website. It lists some 90 job openings worldwide, from quant researchers to software engineers.

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The Problem With Always Blaming Climate Change For Natural Disasters

Climate change is real, but a closer look at the science shows there are many factors that contribute to weather-related disasters. It is important to raise awareness about the long-term impact of global warming, but there's a risk in overstating its role in the latest floods or fires.

People on foot, on bikes, motorcycles, scooters and cars navigate through a flooded street during the day time.

Karachi - People wade through flood water after heavy rain in a southern Pakistani city

Xinhua / ZUMA
Axel Bojanowski


BERLIN — In September, thousands of people lost their lives when dams collapsed during flooding in Libya. Engineers had warned that the dams were structurally unsound.

Two years ago, dozens died in floods in western Germany, a region that had experienced a number of similar floods in earlier centuries, where thousands of houses had been built on the natural floodplain.

Last year saw more than 1,000 people lose their lives during monsoon floods in Pakistan. Studies showed that the impact of flooding in the region was exacerbated by the proximity of human settlements, the outdated river management system, high poverty rates and political instability in Pakistan.

There are many factors that contribute to weather-related disasters, but one dominates the headlines: climate change. That is because of so-called attribution studies, which are published very quickly after these disasters to highlight how human-caused climate change contributes to extreme weather events. After the flooding in Libya, German daily Frankfurter Allgemeine Zeitung described climate change as a “serial offender," while the Tageszeitung wrote that “the climate crisis has exacerbated the extreme rainfall."

The World Weather Attribution initiative (WWA) has once again achieved its aim of using “real-time analysis” to draw attention to the issue: on its website, the institute says its goal is to “analyse and communicate the possible influence of climate change on extreme weather events." Frederike Otto, who works on attribution studies for the WWA, says these reports help to underscore the urgent need for climate action. They transform climate change from an “abstract threat into a concrete one."

In the immediate aftermath of a weather-related disaster, teams of researchers rush to put together attribution studies – “so that they are ready within the same news cycle," as the New York Times reported. However, these attribution studies do not meet normal scientific standards, as they are published without going through the peer-review process that would be undertaken before publication in a specialist scientific journal. And that creates problems.

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