What is a strat job in a bank? At Goldman Sachs and beyond...

'The Strat' as a role in finance may have lost a little of its luster, due in no small part to the rise in prominence of quant researchers and quant developers. Nonetheless, it's still a highly coveted role... but what exactly is it?

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Where did the term ‘Strat’ come from?

J. Aron, the commodities trading firm which once housed former Goldman Sachs' CEO Lloyd Blankfein, was ground zero. Its "strategies" team was the progeny of Bell Laboratories alum Armen Avanessians, who recognized the need for a collaboration between quants and technologists in 1985 (or so the story goes), and the strats team was born. Avanessians stayed at Goldman Sachs until he retired in 2022, working in the bank's Quantitative Investment Strategies (QIS) group, which made up 27% of Goldman employees as of 2018.

It's not just Goldman Sachs, nowadays, though. Over the past decade, strats have caught on elsewhere too. Deutsche Bank now has them. So does Morgan Stanley. So does J.P. Morgan. Even some hedge funds have them. And wherever there are strats, there is strat hiring. Morgan Stanley, for example, currently has around 29 strat vacancies.

What do strats do?

Natalie Basiratpour, a managing director at quant recruitment firm Octavius Finance, says strats were traditionally derivative pricing quants, but that the term has come to encompass the hottest area of finance: quant trading specialists, or developers who can actually implement algorithmic trading ideas. Another strat headhunter says "strat" has evolved to mean a highly commercial form of quant developer: "Strats implement the quant models into the system. They need to be able to talk to the developers and to have the commerciality to talk to the traders."

A strat at one bank is not the same as a strat in another. At Goldman, "strat" applies to anyone using technology to apply mathematical and statistical techniques to problems across the business, but strats within the bank define themselves as "assistants" or "helpers" to their desk. One London-based strat said a strat's role is "prototyping;" writing software that is "perhaps not as robust or time-consuming to build as the IT department would normally do, but good quality enough for its specific purpose."  You'll find them working anywhere from GS Federation (back office) to Goldman's algorithmic trading systems

At Morgan Stanley, meanwhile, one strat in its trading business says his coworkers are far from uniform: 

"Some strats here prefer to do quant research, whereas others support particular trading desks and become more concerned with trading execution. There are others who work on analytics and portfolio optimization."

A senior strat at another bank described an example of how they had been utilized in the business: 

“A structurer had been trying for years to make a new business, a new type of trade for the bank, but due to its novelty, this ‘tradable’ would not be represented into the system as a normal tradable. He asked IT to create a system that would fix it, but they said that it would take six months. Until then, the structurer would have to spend half his day doing manual work in place of that system. Within a few days, I automated that work (temporarily) without really using the systems of the bank. That solution would only exist for six months to a year while the proper systems are being built.”

What skills do you need for a strat job?

Like most quant jobs, you’ll be expected to have excellent STEM fundamentals, but business knowledge is also critical. A former divisional head of strats at one bank said the three most important skills for strats are “software development, business and math;” development-oriented strats will focus on the first two skills and analysis-oriented strats will focus more on the latter two. In each case, business knowledge is a vital component.

In a trading context, that “does not necessarily mean having trading intuition, rather knowing the market and environment in which you operate in order to maximise your ability to help.” Some of the most elite modellers in finance might “have absolutely no idea about products or how to manage risk”, and you will have to ensure their work is compliant with the bank’s processes.

Perhaps because of this necessity for business knowledge, junior strats are hard to come by. The Morgan Stanley strat said students often don't understand the term. "We're finding it difficult to explain what a strat is when we hire graduates," he said, adding that it's also difficult to find someone with the right "hybrid" background.

To get that business knowledge from your university education, consider an MFE program, which will teach you those STEM skills in a financial services context.

What are the culture and pay like for strat jobs?

If you’re looking for the $800k TC packages available to quants in finance, temper your expectations. Strats at Goldman have said “the pay here under MD status is quite low compared to even software engineers now.” Headhunters say VP-level strats in London earn between £150k and £250k ($201k-$335k) in total compensation. "You're not going to get much more than £280k as a strat," says one. "- Unless you're a head of desk." 

While this might sound like plenty to anyone outside finance, Strats often work alongside material risk-takers who “have historically been overpaid for what they've done," says one Deutsche Bank strat. If strats are to earn more, pay will need to be diverted from trading desks.

Then, there’s the usual benefits and pitfalls of a tech-focused job in a bank. One Goldman strat said tech at the bank is “an order of magnitude worse and slower moving” than hedge funds and buy-side institutions. The people are “extremely good,” and it can be an “amazing tool to create your network,” but you must be “passionate about politics and climbing the corporate ladder. 
 

For Goldman Sachs in particular, many have expressed dismay at having to use its proprietary language, Slang, a language co-created by Avanessians. They've said it has hampered their ability to find a (better paying) job elsewhere, but the shift to automation focused work has also harmed their hopes of making it to the buy side. One hedge fund employee via r/Quant said they “have yet to come across a GS candidate doing alpha related analysis”.

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