Key Takeaways
- • Tower Research Capital is recruiting top quantitative traders using "Software Vendor Agreements" (SVAs), a proprietary alternative to traditional separately managed accounts (SMAs) offered by competitors like Millennium, Qube, and Schonfeld.
- • SVA structure allows external portfolio managers to retain intellectual property ownership and brand control while accessing Tower's technology infrastructure, capital, and market connections in exchange for profit-sharing arrangements.
- • SMA-style strategies at multistrategy hedge funds have grown 27% year-over-year to $315 billion in assets, more than double 2019 levels, according to Goldman Sachs data—signaling intensifying competition for talent across the industry.
- • Tower Research, founded in 1998 by former Credit Suisse trader Mark Gorton, has been experimenting with SVA structures for years before the recent SMA frenzy accelerated across Wall Street.
- • The SVA model represents Tower's competitive response to hedge fund talent acquisition strategies, offering external traders infrastructure and capital without requiring them to establish independent fund management operations or raise capital separately.
Summary
Tower Research Capital is deploying a distinctive recruiting strategy in the intensifying competition for quantitative trading talent: offering "Software Vendor Agreements" (SVAs) that function as a proprietary alternative to the separately managed account (SMA) structures gaining traction across Wall Street.
Under the SVA framework, Tower provides independent portfolio managers with access to the firm's technology platform, capital base, and market connections while allowing them to maintain complete control of their intellectual property and brand identity. In return, Tower shares in the profits generated by these external teams. The specific terms vary by team, but the fundamental arrangement remains consistent: external traders gain the operational and financial benefits of operating within a major quant trading infrastructure without surrendering autonomy over their strategies or brand.
The timing of Tower's expanded use of SVAs reflects broader industry dynamics. Multistrategy hedge funds including Millennium, Qube, and Schonfeld have increasingly adopted SMA structures as a talent acquisition tool, presenting candidates with an attractive alternative to traditional employment: launching a dedicated investment vehicle under their own banner without the capital-raising burden or infrastructure-building requirements. According to Goldman Sachs data, SMA-style strategies at multistrategy hedge funds grew 27% year-over-year to $315 billion in assets under management—more than double the 2019 level—demonstrating the structural appeal of these arrangements to both firms and portfolio managers.
Tower Research, the New York-based quantitative trading powerhouse founded in 1998 by former Credit Suisse trader Mark Gorton, began experimenting with SVA agreements years before this recent industry frenzy accelerated. The firm has substantially increased recruitment activity using this model in recent years as the broader talent competition intensified. By offering a twist on the SMA model—structured as a software vendor relationship rather than a pure fund management arrangement—Tower positions itself to attract elite quants who might otherwise establish independent trading operations, while retaining the capital and operational benefits that such external teams generate.
Under the SVA framework, Tower provides independent portfolio managers with access to the firm's technology platform, capital base, and market connections while allowing them to maintain complete control of their intellectual property and brand identity. In return, Tower shares in the profits generated by these external teams. The specific terms vary by team, but the fundamental arrangement remains consistent: external traders gain the operational and financial benefits of operating within a major quant trading infrastructure without surrendering autonomy over their strategies or brand.
The timing of Tower's expanded use of SVAs reflects broader industry dynamics. Multistrategy hedge funds including Millennium, Qube, and Schonfeld have increasingly adopted SMA structures as a talent acquisition tool, presenting candidates with an attractive alternative to traditional employment: launching a dedicated investment vehicle under their own banner without the capital-raising burden or infrastructure-building requirements. According to Goldman Sachs data, SMA-style strategies at multistrategy hedge funds grew 27% year-over-year to $315 billion in assets under management—more than double the 2019 level—demonstrating the structural appeal of these arrangements to both firms and portfolio managers.
Tower Research, the New York-based quantitative trading powerhouse founded in 1998 by former Credit Suisse trader Mark Gorton, began experimenting with SVA agreements years before this recent industry frenzy accelerated. The firm has substantially increased recruitment activity using this model in recent years as the broader talent competition intensified. By offering a twist on the SMA model—structured as a software vendor relationship rather than a pure fund management arrangement—Tower positions itself to attract elite quants who might otherwise establish independent trading operations, while retaining the capital and operational benefits that such external teams generate.
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