🎧 Quant Trading: from Data to Alpha
How Hedge Funds use data and technology to perform sustainably
Hi this is George. As an ex-financial markets pro, I love (re)thinking about investment management, and of course, I’ve got a podcast for that, Investology. You may also know me from the Investorama YouTube channel, where I separate investment facts from financial fiction, with clips from movies and series. My day job is to produce podcasts for smart B2B brands.
This post is based on my Investology conversation with Marco Jean Aboav, PhD CEO of Etna Research. Listen to the episode on every podcast platform, or watch it on YouTube.
Marco is a super impressive guy, with a unique set of experiences across quantitative finance: quant at a big bank, head of asset allocation at a fintech, hedge fund manager, academic… and finally founder CEO. Our conversation made me re-think everything I thought I knew about data, alpha, hedge funds, and active management.
Below are some selected quotes from Marco with my comments:
On Data quality
I knew that many hedge funds would use different datasets, and I remembered that Renaissance Technology spent a lot of resources finding, creating and correcting datasets. But I felt that this was then, and that now, data was just there
Let's say that you want to buy some market data. There are so many providers out there, and you have no idea who is a good one or a bad one. Quality is always assessed by the PM (portfolio manager) who is running the risk. It is never assessed properly by data vendors because they sell the licenses, but don't make the P and L out of the data. So it's always on the PM side, and there will be all the salespeople coming to sell another fancy data set.
So the hunting, meaning filtering, knowing very well who is actually selling good data, there is a lot of in the small details that unless you have spent 30 years in the industry, it's very hard for an outsider to buy data and build stuff on top.
Data strategy and infrastructure
 In most big funds, there is always a team of data strategists, data platform engineers. It's the core layer you need to build everything on top. This is a very complicated, very expensive activity. And even the big guys sometimes struggle. […]
 Even if you have a lot of money, you' are not going to wait three years to get something out.
This setup is hard. Even though hedge funds can be seen as well-funded startups, the concept of a runway doesn’t apply to them, or it’s measured in months. Hedge funds that don’t produce results fast enough don’t survive.
I understand that this speed of execution is essential to the value proposition of Etna Research. As a research team, they could spend years building an infrastructure platform that they can now make accessible to the funds that need results fast.
The Alpha is in the mix
The quality comes from a mix of factors. Being obsessed about data is one. Being obsessed about the quality of the data is the second. Being obsessed about having an infrastructure is number three. So it's a mix.
I was expecting that, but where I found Marco’s approach more groundbreaking was when I asked him about how to make the performance and Alpha sustainable. It’s common for Hedge Fund performances to degrade over time or with an increase in assets. I thought this was an something to deal with over time, but it is a premise in Etna’s approach.
 I'm agnostic. I'm not dogmatic. Markets are inefficient in a nonlinear way. It is not easy to catch these inefficiencies. The efficiency might not last. The inefficiency might be there for certain types of capital to be extracted. The only certainty here is that you need a very strong adaptive approach.
We covered a lot more, including two elements that I think deserve a separate post:
The role of agentic AI in hedge funds’ decision-making
And the big question about the future of active management
Listen to the episode on every podcast platform, or watch it on YouTube.
More information:
Related episodes:
Jim Simons, Renaissance Technologies & The Quant Revolution | Greg Zuckerman
Quant Investing & the Quest for Alpha | Nicolas Rabener - FactorResearch
My Investing & Investment Management channels
Investorama - Separating Investment Facts from Financial Fiction (YouTube)
Investology - Re-Think Investment Management (YouTube)
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