Quant grad conveyor belt stalls as banks retrench

Jobs market is long quant graduates, short vacancies – but hiring freeze shows signs of thawing

In many ways, Wencai Zheng took a textbook path through financial academia. He won a place on a quantitative finance programme at New York University’s prestigious Tandon School of Engineering. He earned his master’s degree in the summer of 2020, spent some time working as a graduate assistant, and then took a job as a quantitative analyst at model risk boutique Omni. Now, he has landed his first big assignment: working as a consultant with Societe Generale, building risk models and analysing trade data.

Of course, Omni never really sent Zheng anywhere – he’s been working in his bedroom since he graduated. Four months on from his ‘arrival’ at SocGen, he still hasn’t seen some of his immediate work colleagues in person.

Like thousands of other quant finance graduates this year, his future looks still more uncertain. Many banks and financial firms have cut back on hiring new quant talent in the last 12 months, leading to some students receiving offers which were summarily withdrawn before they could be accepted, and many struggling to find work at all amid widespread coronavirus-induced turmoil.

“Hiring fell off a cliff. The main issue was the uncertainty: a lot of institutions wanted to take stock of the situation and see what was happening,” says one senior consultant at a top recruiter specialising in placing financial engineers. “A number of institutions I’m normally busy with – big US firms – slowed down dramatically. Goldman, JP Morgan and Barclays were all a bit quieter last year; and Bank of America is one that shut down totally.”

Some firms did keep hiring through the pandemic, he adds. Citi and Morgan Stanley were two banks he saw as particularly active last year. NatWest Markets also has added its usual number of quants through 2020 and 2021, the bank reports.

A Goldman Sachs spokesperson denied that it had paused or slowed down on new hires, and said the firm has “ramped up” its hiring of quant finance specialists since the start of the pandemic. Bank of America and JP Morgan declined to comment.

Hiring fell off a cliff. The main issue was the uncertainty: a lot of institutions wanted to take stock of the situation and see what was happening

Senior consultant at a recruitment firm

The senior consultant recalls one candidate who was accepted for a junior role at Bank of America, but the offer was withdrawn while the candidate was still weighing it against the merits of a front-office post at NatWest.

“She never got the NatWest offer, either,” the consultant says. “Now, she’s still in China.”

They’re still in touch, he adds, and hopes that a role will be found. The problem is a lot of other grads will be up for the same job. Large numbers of international students who had been accepted to US programmes deferred their places until 2021 – 120 at Tandon alone, versus 96 enrolees in autumn 2020 – a huge financial blow to the country’s storied universities, for whom quant finance master’s programmes have become a reliable and lucrative source of income.

Master’s students generally start interviewing for a permanent job early in the programme’s cycle. So, towards the end of this year, 2021’s cohort will funnel into the jobs market, increasing the competition for a limited number of openings.

Vladimir Piterbarg, head of quantitative analytics and development at NatWest Markets, has already seen this effect in his own firm’s recruitment efforts. Quant vacancies beginning in 2021 have attracted three times the average number of applications, he says.

(Nearly) a sure thing

Statistically speaking, a place on a top quant master’s all but guarantees a job in the financial industry. Among the top 10 programmes in the most recent Risk.net Quant Master’s Guide, the mean employment rate in a financial sector job six months after graduation is 96.8%. The average size of the leading courses by student intake is fairly low: among the same 10 programmes, the mean student population numbers just under 60.

But the pandemic may have changed things, if only temporarily. For Zheng, the story of the unlucky jobseeker passed over by both Bank of America and NatWest is familiar. He recalls friends from his course at NYU receiving offers of employment from financial firms which were subsequently withdrawn before they could be accepted.

Zachary Flood, head of credit services and risk management at Madison-Davis, a New York-based recruiter, says that although hiring of engineers by financial firms for the year as a whole was “just on par” with the year before, in the first quarter, “some companies were scrambling”.

Some, he says, were not prepared to hire quants at the usual scale without the option of in-person interviews.

“It’s surprising to say this when we’re talking about billion-dollar institutions, but they didn’t have the appropriate systems in place to be able to hire somebody remotely. The process of setting up compliance around a video interview wasn’t even in place at many institutions,” he says.

It’s surprising to say this when we’re talking about billion-dollar institutions, but they didn’t have the appropriate systems in place to be able to hire somebody remotely

Zachary Flood, Madison-Davis

Flood adds that, where his firm did place quants over the past year, the positions were in areas such as risk analytics, model risk and market risk. Jobs included posts in model governance, model validation and enterprise risk analytics. Other areas were operational, third-party and credit risk. The senior consultant says he saw quant hires in areas such as e-trading, fixed income research and risk analytics.

The consultant says the intensive nature of the interviewing process for quant roles made switching to a virtual model a tough ask for some banks.

“The interviewing in the quant space is technical,” he says. “There’s coding and financial maths, and often even your old-school pen-and-paper stuff. Clearly, it’s difficult to do that [virtually], and there had to be a pause while firms figured out the best way to test these individuals on the technical side.”

Vladimir Lucic, head of volatility quantitative investment strategies at Macquarie Group based in London, tells the story of two junior quants who joined his team from programmes at Ecole Polytechnique in France. Lucic, who also teaches as a visiting professor at Imperial College London, says the new starters began work without setting foot in the UK. This created some administrative hurdles for the firm, he adds; the compliance department had to perform a large amount of due diligence before the pair could start work.

Aside from the practical difficulties that employers have faced in screening candidates, Trump administration-era changes to US immigration practices raised an extra barrier for foreign hires. Zheng, who is a Chinese national, says “unstable” H-1B visa policies have contributed to a reluctance among some large companies to hire international students.

He adds that concern over the US government’s early handling of the pandemic prompted some foreign graduates to return home.

“Treatment here is hard for international students; after graduation and before employment, there is a gap in your health insurance. As far as I know, a large portion of graduates went back to China or other countries – that portion is larger than last year or the year before,” he says.

Stick or twist

Now, with vaccine drives progressing in the US and Europe and economies reopening, industry and academic quants say – albeit, in some cases, with caution – that the outlook for financial jobs is improving. Recruiters share the view, with some anticipating a bounce as major economies continue to recover, and banks report bumper profits on the back of see-sawing markets.

Tamar Hofer is a career development consultant, having worked with both Tandon’s popular Master of Science in Financial Engineering and the neighbouring Columbia University’s highly regarded MS in Financial Engineering. She says that while the hiring situation is getting better, the job market for recently qualified quants is still a fair distance from normality.

“Folks are not being overly bullish or overly generous in terms of hiring numbers – opportunities are out there, but there are fewer,” Hofer says. “There’s a large amount of talent, so firms can be picky.”

Hofer says candidates are being more pragmatic in their job search. Many are opting to secure an early offer of employment rather than gambling on a better opening down the line. Previously, it was common to see students “waiting until the last moment” to accept customary offers of employment from firms that had hosted internships. If the position or the company was perceived as less glamorous, or the salary below par, graduates would often hold out for as long as possible in the hope of receiving an offer from a bigger name.

“I didn’t see as much of that running down the clock this semester,” Hofer says. “People wanted to stick with a sure thing.”

The senior consultant says “far more” opportunities have come up so far this year compared with 2020, and points to a number of positions opening up on the buy side. Hedge fund Citadel is one firm that has shown a strong appetite, he says, as well as Maven Securities, which has shown an interest in quant grads to fill prop trading-related posts.

Ali Hirsa, co-director of Columbia’s MS in Financial Engineering, shares this optimism. A professor of practice – he’s also a partner at New York-based hedge fund Sauma Capital – Hirsa says the job environment his graduates are entering is now “much better” in comparison to April or May of last year.

“I’m noticing that things are picking up,” he says.

Piterbarg at NatWest Markets says his team tends to add 10 new quants yearly, and that number has been met for both 2020 and 2021. His theory for why the firm has received much more interest for roles this year compared with average is that applicants found it easier to ‘attend’ virtual career days, enabling them to cast a broader net than usual.

“You didn’t have to go to the presentations on campus, and so on; the barrier to entry became lower, so people went for a wider range of options,” he says.

For Zheng and his peers, their careers have started in unusual, and in many cases secluded, circumstances. He says it has been hard to make work friends, and he regrets that he had to miss out on the “exciting” orientation experience that he was supposed to have.

With firms in major financial districts planning for the post-pandemic return to the office, it might not be too long before he makes those connections in the flesh.

Editing by Alex Krohn