Wall Street’s Math Whizzes Are Racing to Wire Up the Bond Market
For years, David Horowitz at Agilon Capital was a rare breed in the bond market: a quant in a notoriously old-school business where prices were a call rather than a click away.
Sixteen months of the pandemic is changing all that.
The work-from-home era is fueling a surge in electronic bond trading that gives the likes of Horowitz conviction a long-augured quant revolution is finally ready to sweep the debt world.
Long credit positions held by quants have doubled since 2018 according to Man Group data, outpacing the 20% growth for other asset managers as systematic players seize on the rapid market modernization -- like they did in stocks years ago.
“Credit is going through a similar evolution,” said Horowitz, who led the pioneering systematic credit team at BlackRock Inc. before starting his own $290 million fund. “As we become more electronified we should expect the same sorts of forces to come into play.”
Quants have been saying that for years of course, only to have their math-based models frustrated by the cumbersome and complex debt world. The difference now is that they may have a market liquid and transparent enough to accommodate their constant churn.
Electronic venues like MarketAxess and Tradeweb accounted for 37% of investment-grade and 26% of high-yield trading in May, 8 percentage points higher than the year before, Coalition Greenwich data show.