The Skills of the Future
So what skills does the new breed of buy-side trader need to successfully supplant yesterday's order taker? In the good old days, an MBA was the degree de rigueur. But today, a master's in quantitative mathematics is more likely to gain a trader entry to the Street.
"Any kind of programming would be a bonus, but you don't have to be a great programmer to be a good trader anymore," according to Vaiciunas, the consultant. "There was a time in the late '90s when that would be a great thing to have but not so much today." Today's technology is so advanced, he explains, that one person can't fill the roles of trader and programmer. "You're not expert enough at either role or able to spend enough time to do a really good job at one of them."
Nuveen Investments' Lindh says the new trader must have an "almost ridiculous attention to detail" to thrive in today's markets. "You can't make mistakes," he stresses. "If you make mistakes, it takes hours of effort and forms to be filled out [to mitigate] — no matter the dollar amount."
But while traders must adapt in order to survive, they still have a vital role to play in creating value inside hedge funds, prop trading shops and traditional asset management firms. Whether the trader is empowered to do his or her job, however, comes from the people who lead the fund, says Vaiciunas. "It's a cultural issue in the firm, whether this empowerment comes from the top where the trader is part of the team," he comments. "That has to come from the top, and while it is easier to do in a smaller firm, larger firms are starting to take note. They realize where alpha generation comes from."
Joe Wald, managing director at Knight Capital Group, agrees that the trader has a big part to play in alpha generation. "If you're looking at executing a large trade at a smaller firm, the trader's interaction and the trader's decision plays a huge role in alpha generation where you have this collaborative approach," he says. "When the trader is empowered and can have an impact, either positively or very negatively, that's when you see the value of a trader's interaction with the sell side."
[Are Google and Facebook stealing the Street's future quant stars? Check out AT's related story.]