Morning Coffee: Elite quant finance students are on $800k as AI labs want them too. The tech jobs safe from AI firings

Last month, we noted that something startling had happened to pay for the finest quantitative finance graduates. For a couple of decades now, quantitative finance has been trying to deal with a very particular problem – how to attract the top quants, when Silicon Valley can offer similar salaries, more social cachet and the chance of a generational IPO?  For a couple of years, it looked like the problem might have been solved, when Big Tech started to become as unpopular as Big Banking.  But then the AI boom began, and while they’re not exactly universally popular, the frontier labs are able to provide elite researchers with the feeling of being at the leading edge of a scientific revolution, rather than trying to shave a few microseconds off trading latency.

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So, “academic outreach” professionals – that specialised bit of the talent acquisition industry which deals with the very bright indeed – have their work cut out for them.  What can they offer that the frontier labs can’t?  Or perhaps more realisitically, how close can they get to matching the AI offer?

Obviously, money is part of the package. In line with our reporting, Bloomberg says first year hires with PhDs in hot areas like machine learning can ask for compensation packages as high as $800k.  And it only gets better from there – there are quite a few quant firms now where the average comp is in seven figures.  Lots of trading firms prefer to stay private rather than IPOing, but that doesn’t mean that they can’t compete financially.

And money isn’t everything, particularly to genius mathematicians.  While normal bankers can be motivated by cars and watches, the greatest luxury for a top quant is to be given a lot of time and freedom to do maths, and elite intellectual company to do it with.

So firms like Qube, G-Research and CFM, a Paris hedge fund founded by a professor, are building labs and sponsoring PhDs with “complete academic freedom” and “no expectation of work applicable to finance”.  The idea seems to be partly that this selfless contribution will cast a positive light on the employer brand.  But more subtly, it means that top PhDs and postdocs will continually be seeing people at global academic conferences who are proudly wearing the swag of a quant trading firm, and who have “technical staff member” (the new cool title) on their business cards.  That’s likely to give them a bit of conference that if they were to join a quant firm, they would still be able to participate in the global research community, and wouldn’t necessarily have to give up their dreams of a Fields Medal.

To some extent, it’s a bit sneaky to try and give young students the idea that trading is all about intellectual challenge.  The life of most quants involves a lot more perspiration than inspiration – a surprising proportion of the job has always been the checking of datasets for bank holiday dates.  But the challenge is real – as Alex Davies of Jump Trading puts it, the difference between market models and language models is that if you achieve a perfect translation, your competitors don’t start changing the language to make it harder for you.  The competitive element is what makes finance so frustrating and fascinating, and in the end, it’s likely to be the recruiters’ secret weapon in the war for PhD talent.

Elsewhere, Microsoft has launched a “buyout offer” (an invitation to take voluntary redundancy) to a quarter of its employees.  A similar offer made in July resulted in 8,750 headcount reductions; the company apparently expects “far fewer” to go this time.  So perhaps the interesting thing to look at is not who the offer is being made to, but who is specifically excluded from its scope.

It’s not as simple as “AI versus not-AI” – people working on CoPilot are eligible.  The core revenue generating product staff working on Windows are eligible, as is the finance function.  The employees who are excluded from redundancy are those working on data centres, cybersecurity and quantum computing. (And sales and marketing, but this is quite normal – companies don’t cut sales functions unless things have really got bad).

Microsoft describes this as “employees who are engaged on the hard problems that it’s trying to solve”. Which means that the read through to finance jobs is a bit difficult to assess -  apart from cybersecurity, the banks have different problems.

Meanwhile …

It’s not clear exactly what’s going on, and the company hasn’t commented, but news organisations are reporting that Weil Gotschal have retained a lawyer of their own, after the rash of senior partner departures may have left them in need of restructuring services.  When the most valuable assets are people, resignations can be contagious. (FT)

Sequoia, Citadel Securities and OpenAI have teamed up to sponsor a poker tournament for university students and recent graduates.  Not to play themselves, but to code, from scratch, a “pokerbot” capable of playing 10,000 hands of no-limit Texas Hold’em.  (pokerbot.sequoiacap.com)

The New Zealand poaching case between Barrenjoey and Jarden continues. Bankers have been accused of “behaving poorly”, which is quite a strong condemnatory statement in context.  (Bloomberg)

After a short “AI Winter” in which it looked as if business insight was about to be commoditised by chatbots, it looks as if the management consultancy industry is back on the front foot.  Base pay is up at McKinsey, BCG and Bain for the first time since 2022, revenues are growing again and McKinsey aims to hire 12% more graduates this year than last. (FT)

The Baltic Exchange is running into huge problems with maintaining a crucial shipping price index (with billions of dollars of derivatives written on it).   Conditions in the Strait of Hormuz mean that pricing is now based on rumours in WhatsApp groups, and one energy trading firm is complaining to the FCA. (Bloomberg)

Some people think that they lose all respect for you if you’re constantly giving them treats.  Others say that this is garbage, and you just need to firmly impress on them who’s the boss. Who knew that the world of dog training had so much in common with managing junior bankers?  (WSJ)

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