Make way for the ‘Financial Engineers’

Wall Street is looking beyond business schools for its new masters of the universe. In the high-speed, high-stakes world of algorithmic trading, math geeks rule, and universities are churning out scores of graduates from newly designed financial engineering programs to meet banks’ and hedge funds’ demand for quantitative experts. The most cutting-edge work in the field is still being done by physicists and mathematicians with Ph.D.s, but financial engineering programs are providing Wall Street with a growing number of traders and analysts who can crunch numbers and generate complicated market strategies.

Financial engineering programs didn’t exist in the mid-1990s, but now they graduate an estimated 500 students in the United States every year, and one expert sees the number of programs growing by some 30% to 50% over the next five years.

There are still plenty of jobs for MBAs on Wall Street. But financial engineering graduates from top schools, including New York University, Columbia, the University of Chicago and Stanford, can earn more than $100,000 a year in their first year of work, on a par with MBAs from those and other top schools. The programs are meeting demand from banks and hedge funds that need thousands of quantitative experts for their trading desks as financial markets have grown more complex and trading strategies more abstruse. Graduates of financial engineering programs can find jobs at banks’ trading desks, helping with areas like valuing securities, generating new trading strategies, or tweaking existing automated trading systems.

A decade ago, many trading-desk jobs would have gone to holders of doctorates in physics and computer science, but times have changed. People started to ask themselves, “Is it smart to have people take seven years to complete a physics Ph.D., and then think about a finance career?”

Doctoral students in areas like computer science, physics, or mathematics may often need to learn more about financial markets, but they still are often strong candidates for Wall Street jobs. What can these guys do that Ph.D.s can’t?

The ideal set of skills includes the ability to write commercial-calibre software programs, a passion and talent for solving complex mathematical problems, and a deep understanding of financial markets, said Drew Myers, a Seattle-based recruiter.

“The original motivation for their getting a degree was a fascination with problems, and they have a gift for solving them,” Myers said.

 

(source: SmallCapMarketWatch.com)