Hedge funds are always searching for new sources of alpha as their techniques to beat the market are discovered and quickly arbitraged away by competitors. They’re also searching for new sources of talent.
Alternative data firm Thinknum, hedge fund Apex Capital, and others have developed an online competition to find recruits outside the well-trodden channels of elite schools and rival financial firms. “We need new pipelines to reach people with diverse backgrounds,” said Marta Lopata, CEO of Micgoat, the platform hosting the competition.
Anybody — regardless of credentials — is allowed to pitch investment ideas in a short video. The creators of the best submissions go on to the next round: debating fellow candidates in front of a board of hedge fund managers and online viewers. The judges have no information about a person’s background when analyzing their performance. The winners will interview for jobs at Apex.
The Stocks Debate Challenge has completed its inaugural cycle, and the founding firms expect other hedge funds to participate over time. Hundreds of students have registered for the competition and sponsors intend to hold another round in the coming months.
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“We’re changing the dynamic so managers can find people with the best ideas, not necessarily the shiniest backgrounds,” said Justin Zhen, co-founder of Thinknum, an alternative data platform. Zhen said the Stocks Debate Challenge is different from start-ups like Quantopian, which offer free education and tools allowing users to try their hands at developing investment algorithms. “That’s purely quantitative and doesn’t allow employers to see candidates in action, articulating a concept and defending their ideas against criticism,” said Zhen.
“There’s a huge war for talent. If you’re a hedge fund you need any edge you can get to find people,” he added.
Hedge funds recruit heavily from top colleges and universities and regularly poach from competitors. But they’ve begun facing direct competition not only from one another, but also from technology giants like Google, Facebook, and Amazon.
Furthermore, some hedge funds are after portfolio managers, analysts, and technologists from heterogeneous backgrounds to foster diversity of thought. Academic research over the last five years or more has found that people from a wide range of backgrounds can offer fresh ideas and break the cycle of group think.
Hedge funds like WorldQuant have run with the idea of diversity and finding undiscovered talent around the globe. The firm recruits from eastern Europe to rural Vietnam and China. It has also invested heavily in developing WorldQuant University, a well-respected online program that is available for free.
“Everyone educated at Harvard Business School comes with the same view point,” said one hedge fund manager, when asked if his firm would consider candidates found via the competition. “We wouldn’t necessarily go after diversity for altruistic reasons. But we are convinced that someone who grew up in rural southeast Asia and learned computer programming from the Khan Academy can bring something to the table that is totally different from someone who took the usual path to an elite college and elite grad school.”