Before I started working at a hedge fund as a software engineer, I wish someone had written a blog post like this for me. It is for that reason that I decided to write this post.
Not only do I want to answer some of your questions about what it’s like to be a software engineer for a hedge fund, but I also want to document my experience working for one. Read on below for my personal experience as a hedge fund software engineer.
Systematic Hedge Fund Software
The hedge fund that I worked for in Baltimore was a systematic hedge fund as opposed to a discretionary hedge fund. Rather than a person making trading decisions, software algorithms decided what to buy and sell.
Sound complicated? Well, it kind of is. But at a high level, here’s how it works.
Basically, a team of really smart economics and finance PhDs come up with various theories about how to make money from different markets. In this case, markets are stocks, bonds, foreign exchange, and commodities. These theories are researched and backtested using historical market data.
Once a viable theory is approved, the researchers then work together with a team of software engineers to write the code for the theory. This code is called a model. After the model is written, it is then integrated into the trading system for testing. If everything looks good, real money from investors is allocated into the model as it gets released into the production environment.
From that point on, the model gets executed on a daily basis as it constantly ingest the latest market data. The output of a model is essentially a list of how much to buy and sell of each asset.
As we zoom out, the hedge fund itself has multiple portfolios based on different investment strategies. Each portfolio consists of one or more software models.
Working at a Hedge Fund as a Software Engineer
Here’s the part of this blog post that gets a bit technical. This is where I’ll talk a bit about software development.
I spent most of my time working with a programming language called MATLAB. Any software engineer will probably cringe when they hear the word MATLAB.
In my opinion, MATLAB is a great language to conduct mathematical research with; however, it’s a terrible language to build a hedge fund’s trading infrastructure with. Unfortunately, the hedge fund that I worked for got grandfathered in to using MATLAB—a language that they started using decades earlier.
The problem was that this language was limited and proprietary, and so the code base grew to become hacked together and clunky.
What needed to happen was a modernization of the entire research and trading systems. And that’s exactly what we were working on as I left the company. We were looking at switching over to Python along with some open source big data tools such as Hadoop.
So my time was split between creating and maintaining existing models and investigating how the hell we were going to essentially build a new hedge fund from scratch.
It was a tough problem indeed, but I loved the challenge.
Software Engineer Hedge Fund Salary
I earned a good salary working as a software engineer for a hedge fund. At my peak with 6 years of experience under my belt, I was making $94,000 per year base salary as a software engineering at a hedge fund in Baltimore.
For comparison, here is a table of my annual compensation as a software engineer since graduating college.
|2012||$67,200||Defense||Baltimore, MD||0 years|
|2013||$68,500||Defense||Baltimore, MD||1 years|
|2014||$72,000||Defense||Baltimore, MD||2 years|
|2015||$74,100||Defense||Baltimore, MD||3 years|
|2016||$91,000||Hedge fund||Baltimore, MD||4 years|
|2017||$92,500||Hedge fund||Baltimore, MD||5 years|
|2018||$94,000||Hedge fund||Baltimore, MD||6 years|
|2020||$115,000||Defense||Tucson, AZ||7 years|
|2021||$117,312||Defense||Tucson, AZ||8 years|
Hedge Fund Employee Perks
I really enjoyed working at a hedge fund as a software engineer. The pay was great, benefits were on point, and the work environment was relaxed.
I especially appreciated all of the extra things that the company did for its employees. In addition to having an onsite gym, we had weekly fitness classes. We even got points for using the gym and for walking around the lake. These points could be redeemed for cash, swag, or extra vacation days.
Frequent happy hours in the cafeteria and the big annual themed party were events that I looked forward to. The annual crab festival was also a memorable highlight.
In addition, an unlimited supply of seltzer water, sodas, and popcorn were always available. Fresh fruit or healthy snacks awaited us every Monday.
A 401k match of 9% and annual profit share of 7.25% were also quite nice. HSA contributions of $100 per month were more than enough to cover your health insurance premiums.
I’m leaving out a lot here, but one last perk that I want to mention was the generous 15 days of paid vacation per year in addition to 3 personal days, 5 sick days, and 1 volunteer day.
At this point, you might be asking: Tony, why the hell did you quit your job?
Why I Quit My Job
I make it quite obvious on my website why I quit my job, but here is the short version.
First of all, I’ve always had a dream of creating something great and being my own boss. Even after many failed software side hustles, I never lost this aspiration.
However, the traditional path of going to college and getting a job didn’t allow any room for entrepreneurship.
I probably would still be working as a software engineer if it weren’t for my back injury. Looking back now, I needed a disrupter—something to knock me off the traditional path.
In any case, I’m glad this happened to me at a young age. I quit my job when I was 28.
To this day, I enjoy programming. But to write software in front of a computer screen for 40+ hours a week until retirement is a scary thought. Although I spend a good amount of time on a computer blogging nowadays, it is at my own leisure.
You should have been making a lot more than that at a hedge fund.
How much do you think?
I match your lifestyle, YoE and age and been working remotely/traveling before pandemic, also residing in rural midwest for a fintech with team in NYC. total comp is $135k ish, 25days vacation total.
Looking to jump ship for something like 170-200k. A hedge fund recently reached out, I ain’t going to a hedge fund unless i’m gonna be making 200k+ due to the volatility of such roles.
Anon; Great choice of word there volatility 🙂
Well done Tony and best wishes there is no growth to be realised in life when playing it from a comfort zone and then again entrepreneurship is no walk in the park and many just dont have the mental grit for it; but should one stay the course “i.e. burn the boats, no plan B” the rewards are many beyond money. I enjoy pushing myself in everything I do it builds mental muscle to push harder never quitting (David Goggins -ex Navy Seal) has some pearls on hacking the brain). You’ll do great!