Okay, so hedge funds are known for hiring rocket scientists, nuclear engineers and other big-brain types for hedge fund jobs. The latest news only serves to confirm the trend as Thomas J. Sargent of New York University, this year’s co-recipient of the Nobel in economic science, has recently signed on as a consultant for Hutchin Hill, a multi-strategy hedge fund with $1.5 billion in assets under management.
“We believe working with Professor Sargent will be of significant value in developing a deeper understanding of the macroeconomic background that has had such a large impact on risk sentiment and asset prices, especially during the past three years,” says a company letter to investors, quoted in New York Times’ Dealbook.
Sargent is one of many notable economists who have made the leap to the hedge fund industry. He joints other notables as former presidential chief economic adviser, Lawrence H. Summers, who consulted for D.E. Shaw; another Nobel winner, Myron Scholes, an economist who was present during the blow-up at Long-Term Capital Management; and Alan Greenspan, former chairman of the Federal Reserve, who is a board member at Paulson & Company.
Sargent’s contribution to the field of macroeconomics focuses on the relationship between economic policy and macroeconomic variables, such as gross domestic product or employment. He looked specifically at how people and institutions change their expectations in response to these policy changes, and developed quantitative methods to evaluate the effect of these policy prescriptions on households and firms.
A hedge fund firm like Hutchin Hill hires this knowledge in an effort to gain an edge understanding the impact of fiscal and monetary policy alternatives on global growth, risk and asset prices.
Hutchin Hill was founded by Neil A. Chriss, a well-known “quant” or mathematician capable of writing complex computer algorithms that execute trades electronically. He worked at Morgan Stanley in its institutional equities division before joining Goldman Sachs in its quantitative strategies group, a quant fund that helped launch the careers other famous hedge fund managers including Clifford S. Asness of AQR Capital Management.
What’s your take? Do you think top-rank academics play an important and positive role in the hedge fund industry? Add your comments below.