Winton Capital Management, the hedge fund which originated in the UK's Oxford and now has offices in London, Zurich, Tokyo, Sydney, Shanghai, Hong Kong, New York and San Francisco, has several things going for it as an employer.
Firstly, it pays well - average compensation per head was $455k for the last year in which pay figures are available (2013), and founder David Harding is thought to have earned $150m last year. Secondly, it runs an analyst programme to train juniors (for which it is now accepting applications). Thirdly, it boasts an office environment which it describes as 'more like a university campus, or creative agency', than an investment management firm. And fourthly, it's growing. After outperforming the market consistently since 2001, Winton says it's hiring "across all areas of the business".
Winton has a reputation for hiring PhD-level scientists with data and research backgrounds. However, it's not averse to hiring former bank staff. Recent recruits in the UK include Bhavik Shah, former head of quantitative solutions in Europe at Nomura, who joined in December 2015, and Benjamin Lamping, former head of structuring at J.P. Morgan's structured funds, who joined last June.
If you want to work for Winton - or are interviewing at another systematic fund, you might want to familiarize with a new highly simplified guide sponsored by Winton (and produced by the Pension and Lifetime Savings Association) on how a systematic macro hedge fund works and why the strategy is a success. These are the key things you need to know.
This is what that process looks like:
While some hedge funds restrict themselves to particular products (equities or fixed income), Winton points out that systematic macro hedge funds are "truly multi-asset" and look for patterns in price movements across multiple products. Witness the chart below (click to enlarge).
The strategy most commonly pursued by systematic macro hedge funds is "trend following". Historic trading data is analyzed to identify past trends. Those trends are used to predict future trends and to algorithms that place trades in anticipation of a market rising or falling.
At its most super-basic, trend following looks like this:
However, thanks to the wonders of short selling, hedge funds like Winton can also make money in falling markets - just so long as markets are falling in a predictable way.
It's not just about playing trends, however. It's also about looking for trends that won't continue and betting against them. These are known as 'counter-trend' strategies and are based on the expectation that a trend will overshoot once it's passed an average point.
Systematic look for 'relative value trends' too. These apply to fixed income securities and involve, for example, looking at the differences in yields of different currencies and predicting the way in which they're likely to converge in future.
Seasonal trends apply to seasonal patterns in prices, trading volumes and volatility, and apply especially to the agricultural, energy and equity markets.
Lastly, there's a reason why Winton likes scientists and mathematicians over economists: it's not interested in theory but in historical fact. 'Rather than using deductive reasoning from economic ‘truths’, systematic macro funds look to empirical evidence from which they can make statistical inferences,' says Winton's new brochure. Never say you're interested in economic theory when you're attending a systematic trading interview.