ReleaseWire Connect

While the boundaries between hedge funds and private equity used to be very distinct, we are starting to see the space between them in investment portfolios becoming an increasingly grey area. One of the reasons for the mixing of private equity and hedge funds has been the advantages that this has for those who are operating in a more illiquid private markets space. And given that hedge funds and private equity firms aren't in competition when it comes to the best ideas there is a lot more room for this grey 'in between' space to develop.

The idea of using neural networks in quants is not something that has always been met with particular enthusiasm. In particular the use of neural networks in derivatives pricing met with a lot of scepticism when the idea first surfaced, not least those who argued that neural networks could take far too long to train and were not exactly reliable.

HFT Trading hit the headlines once again this year as it emerged that the Treasury had decided to commission an investigation into the impact that HFT Trading is having on the markets. No scope has yet been published for the investigation but it follows similar moves in the US where issues arising as a result of growth in HFT Trading (which now makes up 60% of trading on US equity markets and 30% in the UK) are also being looked into.

A new report by HFM and the Alternative Investment Managers Association indicates that there is an increasing enthusiasm for hedge fund investment. In fact, around a third of investors are going to increase the investments they make in hedge funds during the second half of 2021.

Digital banking has made huge progress over the past year with widespread adoption driven partly by the need to adapt to pandemic conditions and partly by momentum already in play. It's become obvious to consumers and organisations alike that the advantages of digital banking are real and tangible.

Finance is a crucial export industry in the UK and fintech has become an area where British innovation and expertise has achieved an impressive level of dominance. However, earlier this year Ron Kalifa, the Chairman of Worldpay, expressed how he felt that the UK would need to accelerate investment in fintech to continue to hold a prominent position in the industry. There are many financial technology opportunities in the UK but Kalifa made some comparisons between the UK and the US that are uncomfortable reading.

All the attention of sports fans is currently on Europe as Euro 2020 kicks off this month, just 12 months behind schedule. However, while we seem to have plenty of time for the games being played on European soil right now the story is not the same where investment is concerned. In fact, investors still seem to be giving Europe the cold shoulder with European equities experiencing net outflows in every month of the year so far. That's despite the fact that European equities have been posting strong returns that have at least been the equal of UK and US counterparts.

Monzo is one of the most recognisable names in fintech but it has not been an easy couple of years for the challenger bank. In June 2019 Monzo was the second most valuable fintech in the UK, with its valuation of £2 billion meaning that only OakNorth sat above it. However, things did not continue in that vein and by May 2020, Monzo had been making redundancies, closed its Las Vegas office and put hundreds of UK staff on furlough while its valuation was slashed by 40%.

Risk is an area where cutting edge technology can have a big impact in terms of producing more effective solutions to existing obstacles. Artificial Intelligence (AI) and machine learning have a lot to offer and are already being employed by forward thinking firms in order to close loopholes and create opportunities for greater efficiency. One recent example of this comes from BNP Paribas Asset Management, which is using machine learning in order to estimate carbon emissions for those organisations that don't report their carbon footprint. The modeling of carbon emissions to be provided by the machine learning technology will provide estimates for around 10,000 companies, supplying data that simply wouldn't otherwise be available.

The past year has seen a great deal of progress in innovative areas of financial services such as quantitative analytics. Two key trends look set to dominate in 2021: Portfolio Construction/Optimisation and FICC Execution. As a quant recruiter we've seen demand for those with skills in both these areas start to spike. Portfolio Construction/Optimisation has been a growth area for several years now and many hedge funds have already invested in team building to support it. However, this is now a dominant trend in the StatArb industry and, as a result, there is an increasing need for candidates with the right skills.