A Guide to Quant Portfolio Manager Interviews

What a Quant Trader needs to know

Quantitative trading can be compared to navigating a complex maze, where the pathways shift unpredictably, and participants must adapt to these changes. The job interview is the first obstacle to overcome in this stimulating field, much like the entrance to a maze.

Job interviews resemble intricate puzzles for Portfolio Managers (PMs) in the quant trading sector. The objective isn’t merely to demonstrate technical prowess and industry knowledge but also to illustrate adaptability, resilience, and a deep comprehension of the field’s subtleties.

Having guided numerous PMs through this maze-like process as a recruiter in this specialised sector, I can help uncover the keys to success in these interviews and secure a rewarding role in this dynamic industry.

In this comprehensive guide, we will delve into the following crucial topics:

• Understanding the Role and Expectations
• Approaching Technical Questions and Coding Tests
• Demonstrating Your Track Record
• Grappling with Intellectual Property Concerns
• Highlighting Soft Skills
• Assessing Cultural and Trading Style Compatibility
• Justifying Past Job Moves and Tenures
• Questions a PM should ask
• Example questions a PM might face

Understanding the Role and Expectations

The role of a Quantitative Portfolio Manager in the quant trading space is a blend of multiple disciplines — part mathematician, part statistician, part coder, and fully immersed in the world of financial markets. A solid foundation in quantitative techniques, an understanding of financial markets, and proficiency in programming are vital. As a PM, your ability to leverage these skills to develop and implement advanced trading strategies sets the baseline for your potential success in this role.

However, technical knowledge alone isn’t enough. The finance industry, particularly quant trading, is ever-evolving. The advent of new technologies and methodologies means that staying updated isn’t just an option; it’s an absolute necessity. Whether it’s the application of machine learning in trading or developing new algorithmic strategies, the ability to incorporate these advancements in your work can significantly differentiate you from others.

But it’s not just about hard skills and staying abreast of industry trends. As a PM, you’re expected to possess critical soft skills like clear communication, adaptability, leadership, and the ability to handle high-pressure situations. These skills are paramount in steering your team towards success, making quick yet informed decisions, and effectively communicating complex quantitative ideas to various stakeholders.

Depending on the group and role you aim for, these factors will change in weight. A silo PM on a multi-manager platform doesn’t need to worry much about communication skills. While a PM expected to lead a team or be part of the fundraising efforts will be judged on their communication skills.

Navigating Technical Questions and Coding Tests

Within the realm of quantitative trading, the expectation for portfolio managers is to hold a robust foundation in mathematics, statistics, programming, and finance. The industry demands high technical proficiency, with interview questions often delving deep into complex mathematical and statistical concepts and programming languages like Python or C++.

Each firm carries its unique approach to evaluating PMs and researchers. Researchers undergo rigorous testing, with online tests, take-home assignments, on-the-spot coding and more.

PMs face a more straightforward process, with rarely any take-home assignments or online coding challenges, mainly owing to their successful track records. This track record is evidence of their fulfilment of the basic requirements of a Quant PM.

However, PMs are not exempt from having their technical skills quizzed during interviews. This evaluation helps determine their potential success on the client’s platform and the level of support they might need — both vital factors in assessing a PM’s potential as a successful hire.

Practising coding exercises and technical problem-solving can help refine skills and bolster confidence. Being well-prepared for technical questions and coding tests demonstrates proficiency and readiness to meet the industry’s demands.

Anyone who does not have a track record should 100% do practice tests. PMs are the exception to the rule. However, PMs must expect deep queries into their technical abilities.

I advise PMs to review and brush up on the technical side. Someone else may have built an optimiser or back tester years ago. At a minimum, talk confidently about any programming done in the build-out of your system and how you could do it again if needed.

There is typically one of two reactions (guess which is more popular?)

• Either you go the way of the athlete, believing practice makes perfect, investing time in brushing up on technical skills.
• Or, who cares about my coding if I’m generating $30m a year…

Hard to argue with that…

Demonstrating Your Track Record

During the interview process, an inevitable hurdle that PMs encounter is demonstrating their performance record and adeptness at handling various market conditions. Hiring firms typically seek a formidable track record of performance and an understanding of manoeuvring through ever-changing market conditions.

Your track record is one of the most intensely scrutinised aspects by potential employers during the interview process. A robust, verifiable track record is undeniable evidence that cuts through the ambiguity, affirming your skills and expertise. It is a tangible demonstration of your ability to conceive, design, and execute successful trading strategies.

However, substantiating your track record is more complex. Non-disclosure agreements (NDA) and proprietary knowledge restrictions mean you may have difficulty articulating a comprehensive account of your past work. This is where your ability in effective communication becomes pivotal. Without disclosing proprietary information, you would need to communicate your work’s nature carefully, your role in the team, the strategies you crafted, and their respective outcomes.

More on this shortly.

First, not to be the bearer of bad news, but no one cares about your backtest.

A live track record is the thing that counts. Football teams don’t hire based on what people do on the training ground; they hire based on the results they produce in games. It’s the same for PMs. No one cares what the backtest performance is if it’s never been tested in the real world. Creating a Sharpe 5 strategy on massively overfitted data requires little skill.

This is why, while informative, backtested results encounter scepticism. Though theoretically sound, they’re often perceived as overly optimistic due to susceptibility to biases such as overfitting and lookahead bias. Even if you ensured these tests’ validity, accounted for biases and transaction costs, it is 10% of the value of a real track.

Backtests combined with live results are okay — 6 months minimum of live trading that matches the backtest performance is powerful. One or two years live and in line with a long, accurate backtest, and you are golden!

Your live trading track record commands more gravitas as it represents actual outcomes amidst the unpredictable market realm. It is the ultimate testament to your skills, strategies, and decision-making under live market conditions. Highlight your live track record, delve into the strategies you employed, the markets you traded, and most importantly, your approach to risk management.

Candidates will be probed on their experiences with losses or periods of lacklustre performance and the subsequent learning from those phases. Honesty and transparency are essential during these conversations, but remember to underscore your resilience and adaptability amidst market volatility. I think a firm understanding of risk management and the ability to explain your investment process and philosophy could be crucial in navigating the interview.

Every successful PM will encounter periods of poor performance in their track record. Potential employers aren’t overly concerned about the presence of a drawdown — they’re interested in how you navigated these challenging periods. Be transparent about the reasons for performance dips. Discuss your steps to mitigate losses, risk management tactics, and the lessons learned.

While talking about periods of underperformance, please make sure you maintain a balanced outlook. Presenting yourself as a victim of the market can deter potential employers. They are interested in someone who has learned from past failures, maintains a positive outlook, and is ready to re-engage with the market.

Navigating Intellectual Property and Legal Challenges

One particularly thorny issue is negotiating intellectual property (IP) matters. Firms in the quant trading industry heavily rely on proprietary strategies and methodologies, creating a tricky dynamic for candidates. They need to communicate their skills and experiences effectively, yet they must do so without violating confidentiality clauses or revealing proprietary details.

Candidates must strike the right balance in sharing information during interviews. They should draw attention to their relevant skills and experiences yet remain mindful of the boundaries of confidentiality. This often means discussing experiences in more general terms and not disclosing specific details that could infringe upon intellectual property agreements.

In scenarios where you own the intellectual property, you have more freedom to discuss your strategies in detail. However, it would be best to remain cautious about revealing too much. Regrettably, some entities may exploit the interview process to ‘fish’ for strategic insights. To navigate this, share enough information to generate interest, but avoid giving away all your trade secrets. Additionally, ask which firms are typically fishers — ask friends, your network and experienced recruiters.

The situation is more complex if you don’t possess the IP or have strict NDA’s. During interviews, you might be asked about your models and strategies. This requires careful navigation. You should illustrate your experience and skills without disclosing specific proprietary information. Instead, focus on discussing your role, the skills you employed, and the outcomes you achieved. If replicating your previous strategies isn’t permissible, shift the focus onto the new ideas you can bring.

Another challenge is the non-compete clauses often embedded in employment contracts within our industry. It’s essential to understand the nuances of these clauses and ensure that your career moves do not violate them. While discussing new roles with potential employers, being transparent about any existing non-compete constraints is crucial.

Understanding legal and ethical constraints can sometimes feel like navigating a minefield, especially if you’re in transition and eager to share your expertise. It’s strongly advisable to seek professional legal counsel. An experienced attorney can guide how to discuss your experience within the bounds of your agreements without selling yourself short.

The Importance of Soft Skills for Portfolio Managers

In the quant trading space, technical prowess is undeniably crucial. But it’s only one part of the equation. Soft skills — the interpersonal attributes that enable you to interact effectively and harmoniously with others — are significant.

As a Portfolio Manager, your role extends beyond developing trading strategies and managing portfolios. You often lead teams, communicate complex ideas, make crucial decisions under pressure, and constantly adapt to market changes.

Communication is a crucial soft skill for a PM. You need to articulate complex quantitative concepts and strategies to stakeholders who may not have a quantitative background. During your interviews, demonstrate your ability to explain complex ideas clearly and concisely.

Leadership is critical, especially for PMs managing a team of quants. Talk about your leadership style, how you motivate and guide your team, handle conflicts, and foster a collaborative environment. If you have examples of when your leadership contributed to the successful execution of a strategy or project, be sure to share those.

Adaptability and adjusting to new situations and changes are crucial in a rapidly evolving industry like quant trading. Demonstrate your adaptability by discussing instances where you had to adapt your strategies to market changes, new technologies, or regulatory shifts.

Handling pressure is an inherent part of a PM’s role. The financial implications of your decisions and the volatile nature of markets can create high-stress situations. Discuss how you manage stress, make sound decisions under pressure, and maintain a level-headed approach even in challenging circumstances.

Evaluating Cultural Fit

Every quant trading firm boasts a unique culture and trading style. Your success and job satisfaction as a Portfolio Manager hinges on aligning these factors with your values and trading philosophy.

A firm’s culture combines values, working environment, and business practices. During interviews, assess this by asking about the work atmosphere, work-life balance, and the firm’s handling of successes and failures. Talking with current or past employees can also provide valuable insights.

Cultural fit also delves into behavioural aspects. Prospective employers focus on traits like resilience, openness to feedback, and flexibility, which are vital in a fast-paced environment like quant trading. Firms also value candidates sharing their approach to risk, problem-solving, and ethics, which are crucial to shaping the firm’s trading strategies.

Interviewers may pose behavioural questions or hypothetical situations to understand your handling of challenges and decision-making. They might explore your past experiences, looking for insights into collaboration, leadership, and problem-solving. This, combined with your company research, can help show your alignment.

Trading Style Compatibility

Trading style alignment with your expertise and the broader business context is also vital. Companies vary significantly in their trading approaches, from high-frequency firms to long-term trend-following funds. Understand the firm’s trading style and ensure it aligns with your skills. Interviews also offer the chance to ask thoughtful questions about their trading approach.

Remember, a clash of trading styles can lead to conflicts, misalignment, and failure. For example, leading the systematic trading business in a traditionally discretionary firm can bring resistance from stakeholders. Likewise, attempting high-frequency trading in a firm lacking the necessary technology can cause friction.

When exploring new opportunities, scrutinise all aspects that could affect your success and discuss potential obstacles openly.

Navigating and Addressing Career Transitions

A vital aspect of any Portfolio Manager’s interview process is the ability to communicate and justify past career moves effectively. Each transition forms a distinct chapter in your professional narrative, and how you present these shifts can significantly influence potential employers’ perceptions of you.

In your interview, please be ready to discuss your job history and career trajectory, including the reasons behind leaving previous positions or short tenures at certain firms. It’s essential to convey these transitions candidly and positively, emphasising what each role taught you and how it contributed to your professional development.

Frequent job changes can often label candidates as ‘job hoppers’, potentially raising questions about their commitment and loyalty. PMs with several short-term positions must be ready to provide compelling justifications for these brief stints. Often, it’s not the short tenure but the lack of a clear and sensible explanation that concerns potential employers.

Negative experiences can happen. Whether these experiences stem from clashes with management, poor cultural fit, or underperformance, it’s vital to navigate these discussions tactfully. Strike a balance between honesty and presenting yourself positively, avoiding blame-shifting or negativity.

Candidates should also discuss any steps they have taken to address or learn from these experiences. This showcases your resilience and adaptability and conveys your willingness to grow from past experiences.

The Two-Way Interview: Evaluating Your Potential Employer

While preparing for a Portfolio Manager interview, it’s easy to forget that the process isn’t one-sided. As much as the firm is evaluating your candidacy, you, too, should assess the potential employer to ensure it’s the right fit for your career goals, working style, and trading philosophy. The significance of this mutual assessment can’t be overstated in the quant trading world — understanding whether you can succeed and thrive in a prospective role is of utmost importance.

So, how do you flip the script and interview your potential employer effectively? Here are some strategies and example questions you might consider:

Understanding the Firm’s Culture and Values: Your alignment with the company’s culture is essential for your job satisfaction and long-term success. Ask about the company’s values, their approach to work-life balance, how they handle successes and failures, and what they do to foster a positive work environment.

• “Can you describe the company culture here, and what specific attributes make it unique?”
• “How does the firm handle successes and failures? Can you provide an example of each?”

Assessing the Trading Style and Approach: As discussed earlier, the firm’s trading style should resonate with your skills, experiences, and preferences. Ask about the company’s trading philosophy, technology utilisation, and risk management practices.

• “Could you describe the firm’s trading style and philosophy? How does it differentiate from your competitors?”
• “What kind of technology stack does the firm use, and how open is it to innovation in this area?”
• “Can you describe the firm’s approach to risk management?”

Understanding Your Role and Responsibilities: A clear picture of your expectations can help determine if the role aligns with your skills and interests. Ask about the day-to-day responsibilities, expected performance, and the resources provided to achieve these goals.

• “What will be the size of the book I’ll be managing? How and when does scaling occur?”
• “Can you clarify the performance expectations for this role? What key performance indicators (KPIs) would be used to assess my performance?”

Inquiring About Risk Limits and Constraints: Understanding the firm’s risk tolerance is crucial, as it will dictate your trading strategy and your freedom in managing your book.

• “Can you elaborate on the firm’s risk limits and how they are set?”
• “What risk limits do you have in place? Are they contractually agreed or applied on a discretionary basis?”
• “How frequently are these risk limits reviewed and potentially adjusted?”

Investigating the Resources and Support Provided: The resources and support available can significantly impact your ability to perform your role effectively.

• “What resources and support are provided by the firm? What’s the firm’s technological infrastructure like? Will there be support for research and strategy development?”
• “Are there resources I would need to bring or arrange myself?”

Clarifying Compensation Structure: While compensation can be a sensitive topic, it’s an essential factor to consider.

• “Could you provide some insight into the compensation structure for this role? How is it aligned with my performance and the performance of my book?”
• “How are costs calculated and from where are they taken — Gross, net, top, bottom?”

Gauging Leadership and Decision-Making Processes: The leadership style of the firm and how decisions are made can greatly impact your job performance and satisfaction. Inquire about the decision-making process, how innovation is encouraged, and how conflicts are resolved.

• “Can you describe the leadership style within the firm?”
• “How does the firm encourage innovation? Can you provide an example of a recent innovation implemented?”

Remember, these conversations provide vital information and signal your preparedness and seriousness about the role to the potential employer. Each question offers a unique lens to view and assess the firm and the position you are considering.

It will likely be hard to ask all these questions in all interviews. The first couple rounds of interviews will focus predominantly on the PM. In later stages, the process becomes more two-way communication as both parties assess the potential for a successful partnership. Tagging a couple of these questions at the end of each round is a good tip. Also, don’t be afraid to ask for more conversations with senior management, CIO, CTO or CRO to improve your understanding. Any group should accommodate this in the pre-offer/offer stages — if not, it’s a potential red flag…

By asking insightful questions and critically evaluating the responses, you’ll be in a stronger position to make an informed decision about your potential fit with the company. Remember, an interview is an opportunity to find a role where you can succeed and grow.

As an alpha generator, the role is less of an employee and more of a partnership. It is an excellent sign if you feel like this at the end of the interview process.

Conclusion

Stepping into the world of quant trading as a Portfolio Manager is a thrilling journey laden with unique challenges, learning opportunities, and potential growth. Your unique blend of skills, experiences, and insights will be key in navigating this dynamic field.

As a seasoned recruiter in the quant trading sector, I’ve observed the transformative impact of the right alignment between a PM and a firm. It extends beyond merely filling a role — it’s about cultivating synergies that fuel innovation, growth, and success.

However, the journey towards this alignment, through the job market and interview process, can be complex. With careful preparation, self-awareness, and the right guidance, you can successfully showcase your potential and seize the perfect opportunity.

Furthermore, we’ve highlighted the importance of assessing your potential employer. The article provides a set of questions that can help gauge your chances of success and understand your role better. Remember, preparedness is key, and it works both ways — knowing what questions to ask and anticipating what might be asked of you.

By diligently addressing these challenges and continuously honing your skills, you can highlight your ability to thrive in the quant trading industry.

It’s a commitment to growth, hard work, and ongoing learning that paves the way to success.

— — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —

Questions a PM might face:

• Background and Timeline
• Provide the timeline of strategy development — where/how was it developed, who all were involved?
• Is the strategy fully systematic or are there discretionary elements?
• Would the strategy still run at your previous firm or any other place? If yes, then what is the impact of this?

Strategy description

• Provide a brief summary of each underlying trading model, and it’s source of alpha? (why do you think the model works, and it’s edge vs other similar strategies)
• How are the different models combined into a portfolio?
• Are there any aspects of your models or portfolio construction that differentiate your approach vs. other similar strategies?
• What instruments does the strategy trade? Please provide a detailed list
• During which hours does the strategy trade?
• What is the average and range of holding periods for each trade?
• How is the strategy currently implemented? (coding environment, trading systems etc.)
• What kind of market conditions does the strategy do well in? When does it perform poorly?
• How does the model do when there is a volatility spike (VIX sharply higher)? How does it do during period of equity market drawdowns?

Execution

• What is the trading setup — venues that you trade on, and execution algorithms used?
• How sensitive is the strategy to execution and latency?
• Is the execution passive or aggressive?
• What is the trading volume per day relative to the risk allocation?
• Do you need an EMS or OMS? If yes, then please outline the key requirements of the system. If you’ve used a 3rd party system in the past, which one was it?
• Do you have ideas on how to improve upon your existing execution setup?

Performance track record

• Provide a live trading performance, daily resolution if available — $ and % PNLs
• How can the track record be verified?
• Provide backtest/simulation performance for the longest period available, daily resolution. Detail all assumption included in the simulations — spreads, fees, clearing and financing costs etc.
• Any reasons and issues that have caused differences between live and simulation performance?

Provide the following statistics for Live and Simulated performance separately:

• Sharpe ratio
• Sortino ratio
• Best/worst 1-day, 5-day, 20-day period
• Average up day return, Average down day return
• Ratio of up-days to down-days
• Max drawdown peak to trough
• Longest drawdown (peak to trough to full recovery)

Data and Technology

• What are the underlying data sets that the model relies on?
• How have you accessed this data in the past?
• What technology needs are there for the strategy to go live? Do you need developer help to connect to databases, execution systems etc.?

Risk Allocation and Management

• What are the internal exposure/risk limits and controls? How large can single exposures become? Are there concentration limits?
• How do you monitor the risk of the strategy? Any metrics used? How often are these reviewed?
• Explain any risk management features of the positions, models or strategy not covered above
• What size has the strategy been traded on previously?
• What is maximum projected capacity for the strategy? How is this estimated?
• How do you monitor production PNL vs. simulation results?
• What are the key factors and metrics to consider if thinking about increasing or decreasing allocation to the strategy?
• Do you use any stress scenarios to test the risk management and performance?
• How does the strategy/risk framework handle major known and unknown events?
• Does the strategy have a max drawdown limit and at what point would you believe the strategy is no longer working?