Eisler Capital and the hedge fund infrastructure question
If you're a portfolio manager considering which hedge fund to work for, you'll probably know already that it's not just about the pay or culture. Infrastructure is a critical differentiator, especially if you work in systematic trading.
Hedge fund infrastructure, however, does not come cheaply. Mega funds like Millennium and Citadel have invested heavily in their tech stacks, which are populated by assorted top developers. For smaller funds, keeping pace can be a big ask.
As we reported last month, some Schonfeld insiders complain that technology is an issue for the struggling fund. "If I'd known how bad the technology was, I might not have joined," says one. Some of those who've exited Eisler Capital recently have similar gripes.
"Infrastructure is a massive problem," says one quantitative portfolio manager who left Eisler this year. "When you start a pod there, it's very difficult to get sufficient software engineering resources." A former strat at the fund claims that Eisler has a long way to go before it can compete with some of the pure quant funds.
It's a charge that Chris Milner, Eisler's COO absolutely refutes. “We are a tech-enabled company and have been discretionary and systematic since inception,” Milner tells us. "We have been building our system for eight years," he adds.
The disagreement highlights hedge funds' differing approaches to technology and the extent to which the cost of tech can eat into portfolio managers' pnl and pay. At Citadel, for example, technology and analytics have a reputation for being comparatively centralized. Millennium has a central technology platform and over 1,200 people in its technology function, many of whom work with its portfolio managers to develop custom solutions.
Milner says Eisler has adopted a centralized approach. “We have a centralized tech stack and when we allocate strat resources to portfolio managers we aim to enhance the tech stack in a way that becomes community property," he says. "We think this makes sense because there’s considerable overlap between what PMs want, with some nuance on the margin.” By comparison, having a devolved tech stack can lead to a lower quality product, says Milner. In the eight years that Eisler's developed its stack, over 400 strat years have gone into the system.
Eisler's strats team is run by Sam Wisnia, the brilliant but sometimes difficult ex-Goldman Sachs partner who inspires ferocious loyalty in some and ferocious complaints in others. Angelo Haritsis, an ex-Goldman Sachs MD who was in charge of Deutsche's fixed income strats function is understood to run Eisler's infastructure team below Wisnia.
Some exiting Eisler PMs say getting infrastructure resources from either Wisnia or Haritsis is hard. "Eisler develops internal tools and infrastructure via the strats team who aren't paid by the PMs directly," says one. "- If you want strat time you have to fill in a form which is prioritized and added to a do list which may never be done because they are already busy working for the bigger teams."
Another former quantitative portfolio manager at Eisler says there's insufficient flexibility in the approach: "The strats only think in a certain way and they're trying to implement things in that, but some people need extra support from the tech team to do the things they want."
The centralized model works, but not for systematic trading, argues another former portfolio manager. "Systematic PMs do not need one-off pieces of code, they need 100% commitment of several software engineers, who will monitor actively and improve the systems every day," he says. "Systematic trading is typically done with a very small human layer, as opposed to discretionary traders, so they need systems they can really trust, because their career depends on it. How can a systematic PM trust a strategist who is not incentivized with the PnL generated by their code?"
Given the centralization of technology at other successful funds, this may be unfair. Eisler Capital has a record of generating strong returns, and Milner suggests the criticisms are sour grapes from portfolio managers who didn't get resources for good reason. “Sometimes we will decide that the return on investment from allocating strat resources isn’t high enough. It’s a commercial decision and it varies by situation,” Milner says.
Other insiders at Eisler say the fund is building out its technology platform. It employs around 70 strats and in July it hired David Ainsworth from G Research as head of data engineering. Alexander Alekseev, a former senior portfolio manager at Millennium is also understood to building a pod focused on systematic equities. Eisler Capital is said to be building a new low latency data centre for his benefit. This has not been confirmed by the fund.
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