Since leverage is the topic du jour: what’s the leverage like at quant shops?
Depends what you are hedging (higher if you are very aggressive about hedging sector and country exposure) but 8-15x would be ballpark given a target volatility of 10-15%
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That’s for a medium to long term equity market neutral strategy (holding period days to months).
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That’s two sided leverage so you might see 5x long side and 5x short side for total 10x leverage. Typically several hundred positions on each side with a single name position cap of 3-5% of AUM (0.3-0.5% of gross book size)
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This is how sell-side guys with good struct desks make $ on swaps. Product 10x lev to hit 12% vol target != 5bps running costs, but 5bps * 10 = 50bps. Fees on gross, so netted positions over multiple products = free $ (negotiable, but many aren't aware they're paying extra)
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Yep financing drag is real! Savvy quant shops will use their wallet wisely — sell side loves to have this business so leverage the spend to get access to balance sheet, repo, management meetings, allocation in blocks/seos — scarce resources that can add value
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