Quants worth following: Petra Bakosova

"Quants worth following" is our latest interview series highlighting thought leaders in the quantitative trading industry actively sharing their knowledge and resources with the community.

In our first edition, we were fortunate to converse with Petra Bakosova, the CEO of Hull Tactical Asset Allocation. Petra joined Hull Investments in 2014, working for its proprietary trading firm, Ketchum Trading, before transitioning into its quantitative asset management unit, Hull Tactical Funds.

In this interview, Petra addresses common stereotypes about quants and what her daily responsibilities often look like, career advice for those entering the industry, and trend predictions for the quant trading industry.

"The first stereotype that comes to mind about quants is people assume we spend a lot of time working on models when everybody who's ever tried to be a quant knows that really we spend most of our time cleaning and validating data."

Petra shared an example of a recent regression she plotted with 3.3 million data points, in which she removed 33 outliers. When you're working with data that large, it's no surprise that most of your time will be spent ensuring data quality.

She highlights the popular topic of AI, addressing the question many people across various industries ask themselves: Will AI steal my job? Petra responds:

"I don't know if people realize how much of our work is not figuring out what to do; it's figuring out what not to do. It's not that we can't type code fast enough. There's always a million things we want to try and the hardest part about being a good quant is figuring out what is the right thing to work on. So [I have] no concerns about AI!"

Before becoming the CEO of Hull Tactical, Petra was a portfolio manager for Hull Tactical Funds, the quantitative asset management unit. Petra notes:

"Back then, I would have told you I spend about 50% of my time writing code, and the other 50% I do some trading for the fund, I do some operations, I talk to some of our clients or counterparts, and now the split is very different."

As the company has grown, Petra's responsibilities have changed. "Sadly, I spend a lot less time actually writing code and a lot more time thinking about how to get people to talk to each other without keeping everybody in meetings all the time. So I try to optimize the flow of the information within the company, and make sure we work on the right projects, and people stay on top of what everybody else is working on."

Petra shares how the company has changed from dealing with small amounts to large amounts of data and the different challenges with both situations.

"Back in the day, we were working on just forecasting the returns of the S&P 500 market, just an aggregate. Now, we've sort of evolved, and we have a big proprietary trading unit that specializes in all US-listed equity options. So we went from having a small data problem to having a big data problem, and I remember thinking back in the day, 'I wish I had more data. I could build fancier models and I wouldn't have to worry about overfitting all the time.' Now we have a big data problem, and the grass really isn't greener on the other side. It's very different but in an exciting way. There's a lot we can do and a lot of opportunities we can take, so that is very exciting."

The quant finance industry can be challenging to break into. Here is advice that Petra recommends:

"One thing that I always found worked well for me was when coming to new environments and new firms—don't look for the flashiest project that every senior person is already working on. See what are some of the new initiatives, some of the initiatives that people are maybe overlooking, and try to figure out which lots of them could be big."

Although many people desire to work on the biggest, highest-value projects, sometimes you can stand out more by finding small, impactful projects. Staying open-minded can lead to unexpected outcomes that could positively impact your career.

"That was sort of my backstory at Ketchum Trading. It was a prop trading firm, and there was this little ETF project that nobody really cared about. When I showed up, I was like, 'Oh, this is really interesting. Let me have a look; let me see what I can do.' Then Hull Tactical evolved around this ETF project, and the ETF has been in the market for nine years now and going very strong, so it really evolved as my career evolved with it."

We asked Petra about her favorite resources that got her to where she is today. Here are her suggestions for podcasts and books:

Petra suggests Bet the Process, hosted by Jeff Ma and Rufus Peabody, for those interested in audio resources. Although it tends to be unrelated to finance, Petra does draw parallels between sports betting and the financial markets.

"Not necessarily the most useful, but something that I think is just kind of fun to check out. For the podcast, I've been listening to Bet the Process, which is not a finance-related podcast. It's about advantage players and sports betting. I think there's a lot of parallels between what the people do in sports betting and what we do in the financial markets. It's a little bit of a plug because both our founder, Blair Hull, once was a guest on the podcast, and even I have an episode, so if you search hard enough, you'll find it, where we talk about the parallels between finance and sports betting."

Petra suggests the book More Money Than God by Sebastian Mallaby for those interested in the hedge fund and asset management industries.

"As far as books go, I think if somebody wants to go into a sort of hedge fund and asset management industry, a very interesting book is Sebastian Mallaby's More Money Than God. It kind of talks about the history of all the hedge funds, and it makes you think about [how] now the idea sounds simple, but somebody had to be the first one to figure out: oh, value investing is a thing. Somebody had to be the first one to figure out: oh, trend following is a thing. It's very fascinating to go through the history and realize how not really long of a history it is."

For those interested in economics, Petra suggests Nudge by Richard Thaler and Freakonomics by Steven Levitt and Stephen Dubner.

"Two econ books: Richard Thaler, Nudge. I think that's great for just working with people and managing people. Maybe one of the books that got me interested in economics in the first place was Steven Levitt and Stephen Dubner's Freakonomics."

Petra predicts that the democratization of access to market data will influence the quant trading industry to move toward having more small trading firms and away from the consolidation of only having a few large trading firms.

"Maybe I'm going to sound too much of an optimist, but my prediction will be, and maybe this is wishful thinking, is maybe we're going to see a reversal in this consolidation trend we've been seeing. I feel we've been seeing a lot of small firms disappearing and everything. The industry seems to be consolidating into just a few big trading firms and a few big asset management firms.

And I'm sort of hoping some of the work that [Databento does] with democratizing access to data and making data easily available, and maybe some of the work we do at Hull Tactical deploying quantitative strategies that traditionally would be a 2 and 20 strategy into an ETF and publishing a lot of our trade secrets into published papers—I do hope that we're going to see more of this democratization of access to the market and access to the data and access to research. I'm hoping we'll see more market participants and more exciting new firms in the industry."

Check out the full interview video on our YouTube here.