Tower Research Capital, one of the biggest names in quantitative trading, has quietly become a player in one of Wall Street’s hottest talent races — backing external traders.
In the battle to attract top investment talent, hedge funds such as Millennium, Qube, and Schonfeld have increasingly pitched a tantalizing setup to prized candidates: Rather than joining another in-house investing or trading team, they can set up a separate vehicle to run the firm’s capital under their own banner.
These arrangements, often structured as “separately managed accounts,” or SMAs, have become a shortcut for launching a fund — without the burden of raising money or building infrastructure from scratch. Assets in SMA-style strategies at multistrategy hedge funds rose 27% last year to $315 billion, according to Goldman Sachs, more than double the 2019 level.
But hedge funds aren’t the only ones cutting deals with independent portfolio managers.
New York-based Tower, founded in 1998 by former Credit Suisse trader Mark Gorton, began experimenting with a twist on the SMA years before the recent frenzy, and the practice has gained traction at the firm in recent years, Business Insider has learned.
Instead of an SMA, Tower offers select recruiting targets what it calls a “Software Vendor Agreement,” or SVA, to quants that might otherwise set up their own trading firms. The deals vary by team, but the basic contours are the same, people familiar with the contracts said: External teams keep control of their intellectual property and brand while using Tower’s technology, connections, and capital — and sharing any profits they generate.
Tower’s embrace of external trading teams underscores how the line between hedge funds — which invest on behalf of clients — and prop-trading firms — which trade their own money — is increasingly blurring.
Tower isn’t the only prop trading firm to have backed external quant PMs, according to several prop-trading insiders, but it is among the largest and most prolific. The firm signed its first external manager in 2017, according to people familiar with the matter, and Tower now works with more than 10 external trading teams under SVAs, one of the people said.
One recent example is Pierre Laffitte, a former Jump Trading quant who launched his London-based firm LQT Technologies last year under a Tower SVA, according to people familiar with the deal. (Laffitte did not respond to requests for comment.)
A Tower spokesperson declined to comment.
Hedge funds and prop trading firms converge
Top prop firms like Jane Street, Citadel Securities, and Hudson River Trading rose to prominence in the 2010s for their high-frequency trading and affinity for secrecy. But many firms reaped a windfall from pandemic-era volatility and have been in expansion mode since, edging into medium-frequency quant strategies long considered the dominion of hedge funds.
Those efforts have paid off: prop firms have notched record profits in 2025 amid renewed market turbulence.
At Tower, which has over 1,100 employees and 12 offices around the world, mid-frequency trading now accounts for 25% to 30% of the business and is growing, one person with knowledge of the matter said.
Tower has also gone further than its peers in crossing into hedge fund territory. The firm is preparing to launch Tower Research Asset Management, its first vehicle for outside investor capital, the Financial Times reported. The launch could come in 2026.
Internally, Tower already operates more like a multistrategy hedge fund than most of its peers, with distinct trading teams — including Latour Trading or Limestone — responsible for their own PNL.
Plug-and-play for quants
The upshot of a plug-and-play deal with Tower for a quant trader or researcher is straightforward. With Tower’s capital and resources, including access to exchanges across the world, they can accelerate their timeline to turning a profit and potentially amplify their earnings.
One industry expert familiar with the arrangements, who asked to remain anonymous to protect business relationships, said even fairly simplistic quant strategies can cost tens of millions to get up and running, not to mention all the other aspects of building a company unrelated to developing profitable trading strategies.
An external agreement like an SVA allows the PM to maintain some operational independence and IP ownership but also to “de-risk by having all of the structural elements of the company set up for you day one so you can put your head down and focus on alpha generation.”
The setup mirrors many of the benefits of an SMA, but the structures differ in key ways.
Prop firms face different regulatory oversight since they do not manage funds on behalf of clients. In an SMA, a PM is typically managing assets as an investment adviser and has a fiduciary responsibility to the client.
An SVA, by contrast, is a commercial technology or services deal. The external quant team licenses trading algorithms or strategies to Tower, people familiar with the structures said, which implements them with its own capital and shares a cut of the profits. Regulatory requirements can vary based on market jurisdiction and the assets being traded.
A quant team on an SVA doesn’t necessarily trade Tower’s money exclusively, but some do, a person familiar said.
For Tower, the SVA has become a helpful tool to lure more established quants who may already have IP or even profitable trading strategies, people close to the firm said.
In addition to LQT Technologies — which had 10 employees and planned to start trading in September, according to a LinkedIn post by Laffitte — other Tower-linked teams include:
- Ansatz Capital, founded by Albert Shieh, Charles Chen, Hyun Soo Kim, and Shiyang Cao.
- Differential Research, run by John Williams and Martin Thanh Pham Vu.
- EquiLibre Technologies, based in Prague and led by Martin Schmid, Matej Moravcik, and Rudolf Kadlec.
“It’s a mechanism to bring in people they otherwise wouldn’t have access to hire,” one person close to the firm said.