7 ms·

Quant Hedge Fund D.E. Shaw Fires 150; 10% of staff

59 points by dbfclark 16y ago

DevX101 16y ago
How much staff is really really needed for these quant shops? After an algorithm is developed isn't it just rinse/repeat? Honest question, as I'm not a finance guy.
- bhiggins 16y ago
  It is a perpetual arms race.
- msort 16y ago
  Just like a technical firm needs to iterate on the products and infrastructures. A trading firm needs to iterate on the algorithms and infrastructures to stay competitive. Market changes constantly. Many trading algorithms are essentially market-data driven and need to adapt to the market or lose.
- rxin 16y ago
  The effective lifetime of a trading algorithm is only weeks. They need to keep iterating to remain competitive.
- known 16y ago
  True. It is called GUAS (Grand Unified Arbitrage System) in DESCO. A highly configurable system where quants constantly try new algorithms.
msort 16y ago
This is sad. Founded by a computer scientist, DE Shaw is perhaps the most tech-focused among hedge funds. I once had a very challenging technical job interview there. Several interviewers had PhD in Computer Science.
- smanek 16y ago
  Yeah. At my interview, I had the guy who wrote the O'Reilly OpenSSH book asking me to derive Fermat's little theorem. Fun times ... IIRC, even the HR person I spoke to had a PhD (russian literature, I think). They are a very impressive firm, and I hope they recover from their recent misfortunes.
  - yurylifshits 16y ago
    As pg mentioned above it is better to channel this talent to startup world :)
    - smanek 16y ago
      I don't know about that ... DE Shaw & Company takes its very smartest people (and a non-trivial portion of their profits) and puts them to work at DE Shaw Research, where they work on protein folding and other computational biology that could help cure cancer and HIV. I think that's a pretty worthwhile use of talent :-D From what I was told, David Shaw is spending most of his time on the research group these days. They ostensibly don't consider themselves a finance firm - they consider themselves a tech firm that will use their skills wherever they can to increase efficiency and make money.
      - IdeaHamster 16y ago
        The problem is that DE Shaw Research made a loosing bet recently when they decided to design custom silicon to solve the protein folding problem while everyone else kept using commodity hardware and worked on improving the software.
        aheilbut 16y ago
        How do you know that this is a losing bet? It's still pretty early days. And aren't they hedged with their work on Desmond, which is MD software for commodity clusters?
pg 16y ago
http://ycombinator.com/apply.html http://ycombinator.com/apply.html
olegkikin 16y ago
Is 10% really that bad? If it's the bottom 10%, it should actually improve company's performance.
- aberman 16y ago
  Unless of course you follow that argument to its logical conclusion...
  - nostrademons 16y ago
    That's exactly what companies like GE and Intel do. I personally think it's terrible management practice, but it seems to work for them, and there's always fresh young blood coming in at the bottom.
    - nostrademons 16y ago
      The downvote seems to indicate a citation is necessary: http://en.wikipedia.org/wiki/Jack_Welch#Tenure_as_CEO_of_GE http://en.wikipedia.org/wiki/Jack_Welch#Tenure_as_CEO_of_GE http://www.geek.com/articles/chips/updated-rumors-intel-layoffs-fab-delays-and-capital-expenditure-decreases-20020716/ http://www.geek.com/articles/chips/updated-rumors-intel-layo... (The Intel practice was also confirmed in Andy Grove's book "Only the paranoid survive".)
      - mian2zi3 16y ago
        Did you read the second article? > Intel announced it will reduce its workforce by 4,000 workers (5%), mostly through attrition or voluntary separation programs. I joined Intel shortly after that article was written (2002). For much of my tenure (3 years), Intel had a US hiring freeze (except through acquisition, how I got hired) and aimed to reduce its headcount primary through attrition, not layoffs. I felt like Intel treated its employees pretty well.
        nostrademons 16y ago
gord 16y ago
I assume their business model is roughly : to implement algorithms that find near-arbitrage opportunities by sifting through vast amounts of market data, then use those to multiply investment funds. This sounds like the perfect domain for a startup.. where a nimble small team of quant/developers would have huge advantages, by being faster to rollout. This is almost a pure software business, so why aren't these companies more like startups? Is it because of the expense of getting fine grained and low latency market data [eg. exchange colocation]? Or is it due to the contacts needed in the biz to get the 'investment' funds to trade with? Or is it because only large financial entities have access to these risky speculative trades? Side note : I see Jane Street Capital use Ocaml, and some other quants use KDB/Q for implementing these kinds of algorithms, so it seems innovative languages give leverage here. I was thinking Node.js + a js BTree api to access streaming data would be a nice dev environment.
- gaius 16y ago
  why aren't these companies more like startups? There are. http://www.forbes.com/2010/07/28/high-frequency-trading-personal-finance-programmer-pay.html http://www.forbes.com/2010/07/28/high-frequency-trading-pers... Incidentally Jane Street isn't a hedge fund, it's a proprietary trading firm.
  - gord 16y ago
    Nice link.. seems like HTG have taken the first step towards a pluggable infrastructure, where the plugin is the quant/programmer + their algorithm implementation. ps. I never really understood the difference - Hedge Funds seem to be more about speculating via leverage than 'hedging'? [using their own proprietary algorithms to do that]
    - gaius 16y ago
      This video explains a bit more about what they do: http://ocaml.janestreet.com/?q=node/61 http://ocaml.janestreet.com/?q=node/61
- msort 16y ago
daylast 16y ago
One thing I always found odd about DE Shaw is how casual the work environment is. It's like google, but in Manhattan. The problem is NY isn't california and quant finance isn't all software. There's a certain pace and overt competitiveness to Manhattan that enforces a discipline and a work ethic onto people. This works quite well in the Darwinian world of finance. But, from what I saw of various parts of DE Shaw's operations there was somewhat a lack of urgency to some fairly critical areas. A good firing spree every once in a while seems to work wonders in putting the urgency back into the workforce.
- beagle3 16y ago
  Google has an office in Manhattan, 15th street and 8th avenue if I'm notmistaken. I haven't personally been to any other google office, but it doesn't look different than the pictures of any of them; All the perks, sleeping pods and cafeteria stuff seems to be there.

59 points by dbfclark 16y ago

How much staff is really really needed for these quant shops? After an algorithm is developed isn't it just rinse/repeat? Honest question, as I'm not a finance guy.

bhiggins 16y ago
It is a perpetual arms race.
msort 16y ago
Just like a technical firm needs to iterate on the products and infrastructures. A trading firm needs to iterate on the algorithms and infrastructures to stay competitive. Market changes constantly. Many trading algorithms are essentially market-data driven and need to adapt to the market or lose.
rxin 16y ago
The effective lifetime of a trading algorithm is only weeks. They need to keep iterating to remain competitive.
known 16y ago
True. It is called GUAS (Grand Unified Arbitrage System) in DESCO. A highly configurable system where quants constantly try new algorithms.

msort 16y ago

This is sad. Founded by a computer scientist, DE Shaw is perhaps the most tech-focused among hedge funds. I once had a very challenging technical job interview there. Several interviewers had PhD in Computer Science.

smanek 16y ago
Yeah. At my interview, I had the guy who wrote the O'Reilly OpenSSH book asking me to derive Fermat's little theorem. Fun times ... IIRC, even the HR person I spoke to had a PhD (russian literature, I think). They are a very impressive firm, and I hope they recover from their recent misfortunes.
- yurylifshits 16y ago
  As pg mentioned above it is better to channel this talent to startup world :)
  - smanek 16y ago
    I don't know about that ... DE Shaw & Company takes its very smartest people (and a non-trivial portion of their profits) and puts them to work at DE Shaw Research, where they work on protein folding and other computational biology that could help cure cancer and HIV. I think that's a pretty worthwhile use of talent :-D From what I was told, David Shaw is spending most of his time on the research group these days. They ostensibly don't consider themselves a finance firm - they consider themselves a tech firm that will use their skills wherever they can to increase efficiency and make money.
    - IdeaHamster 16y ago
      The problem is that DE Shaw Research made a loosing bet recently when they decided to design custom silicon to solve the protein folding problem while everyone else kept using commodity hardware and worked on improving the software.
      - aheilbut 16y ago
        How do you know that this is a losing bet? It's still pretty early days. And aren't they hedged with their work on Desmond, which is MD software for commodity clusters?

pg 16y ago

http://ycombinator.com/apply.html http://ycombinator.com/apply.html

olegkikin 16y ago

Is 10% really that bad? If it's the bottom 10%, it should actually improve company's performance.

aberman 16y ago
Unless of course you follow that argument to its logical conclusion...
- nostrademons 16y ago
  That's exactly what companies like GE and Intel do. I personally think it's terrible management practice, but it seems to work for them, and there's always fresh young blood coming in at the bottom.
  - nostrademons 16y ago
    The downvote seems to indicate a citation is necessary: http://en.wikipedia.org/wiki/Jack_Welch#Tenure_as_CEO_of_GE http://en.wikipedia.org/wiki/Jack_Welch#Tenure_as_CEO_of_GE http://www.geek.com/articles/chips/updated-rumors-intel-layoffs-fab-delays-and-capital-expenditure-decreases-20020716/ http://www.geek.com/articles/chips/updated-rumors-intel-layo... (The Intel practice was also confirmed in Andy Grove's book "Only the paranoid survive".)
    - mian2zi3 16y ago
      Did you read the second article? > Intel announced it will reduce its workforce by 4,000 workers (5%), mostly through attrition or voluntary separation programs. I joined Intel shortly after that article was written (2002). For much of my tenure (3 years), Intel had a US hiring freeze (except through acquisition, how I got hired) and aimed to reduce its headcount primary through attrition, not layoffs. I felt like Intel treated its employees pretty well.
      - nostrademons 16y ago

gord 16y ago

I assume their business model is roughly : to implement algorithms that find near-arbitrage opportunities by sifting through vast amounts of market data, then use those to multiply investment funds. This sounds like the perfect domain for a startup.. where a nimble small team of quant/developers would have huge advantages, by being faster to rollout. This is almost a pure software business, so why aren't these companies more like startups? Is it because of the expense of getting fine grained and low latency market data [eg. exchange colocation]? Or is it due to the contacts needed in the biz to get the 'investment' funds to trade with? Or is it because only large financial entities have access to these risky speculative trades? Side note : I see Jane Street Capital use Ocaml, and some other quants use KDB/Q for implementing these kinds of algorithms, so it seems innovative languages give leverage here. I was thinking Node.js + a js BTree api to access streaming data would be a nice dev environment.

gaius 16y ago
why aren't these companies more like startups? There are. http://www.forbes.com/2010/07/28/high-frequency-trading-personal-finance-programmer-pay.html http://www.forbes.com/2010/07/28/high-frequency-trading-pers... Incidentally Jane Street isn't a hedge fund, it's a proprietary trading firm.
- gord 16y ago
  Nice link.. seems like HTG have taken the first step towards a pluggable infrastructure, where the plugin is the quant/programmer + their algorithm implementation. ps. I never really understood the difference - Hedge Funds seem to be more about speculating via leverage than 'hedging'? [using their own proprietary algorithms to do that]
  - gaius 16y ago
    This video explains a bit more about what they do: http://ocaml.janestreet.com/?q=node/61 http://ocaml.janestreet.com/?q=node/61
msort 16y ago

daylast 16y ago

One thing I always found odd about DE Shaw is how casual the work environment is. It's like google, but in Manhattan. The problem is NY isn't california and quant finance isn't all software. There's a certain pace and overt competitiveness to Manhattan that enforces a discipline and a work ethic onto people. This works quite well in the Darwinian world of finance. But, from what I saw of various parts of DE Shaw's operations there was somewhat a lack of urgency to some fairly critical areas. A good firing spree every once in a while seems to work wonders in putting the urgency back into the workforce.

beagle3 16y ago
Google has an office in Manhattan, 15th street and 8th avenue if I'm notmistaken. I haven't personally been to any other google office, but it doesn't look different than the pictures of any of them; All the perks, sleeping pods and cafeteria stuff seems to be there.