1/2 Lets think about this from the ground up. You are a modal L/S HF and you want to make sure you will be around in 10 years, so you decide you need to make some serious changes. You probably have never hired anybody technical or you have less than a handful of technical people of questionable quality on staff to do this (maybe a DS/SDA + a SWE). You will have to outlay significant upfront cost to build infra + hire expensive technical talent in a market where you are much more likely to be outbid for high quality talent (and mid to low quality is arguably worse than nobody here). While prop firms have a longer time horizon to do this, you will need to convince LPs and GPs substantially invested in the fund that it is worth the firm's time and energy to undergo this transition and expense + you will have to convince your LPs that you will be able to pull this off without it seeming like a red flag and strategy drift. Say you do all that, you hire 1-2 actual QRs, 1-2 actual SWEs, nice to haves would also be a dedicated risk quant + microstructure quant/qt instead of relying on just the manual execution trader(s) you probably have. Now you have to go about the process of building the commercially useful things without burning too much time + adding value to the desk so your LPs and GPs maintain faith in what you are doing. You will need to build or buy a risk model and a portfolio optimizer but what's this, if you want to do optimization correctly you will need to calibrate a market impact model because you are probably overtrading and have never really thought about TCA, temporary impact, and permanent impact so you will need to procure or generate a dataset of your trades and the market's response to them only to find out that your long horizon alphas would have a better transfer coefficient if you overlaid short term execution alphas. But then you run into a few problems: 1) doing research at the microstructure scale requires much more complex infra, larger and more expensive datasets, 2) Do do this effectively you essentially need a team dedicated to stat arb style signal research but you are just a MT/LT fundamental investor, 3) even if you were able to put a small team on optimal execution signal research + monetization you will come to the realization that you are trading against counterparties at this frequency that can outcompete you on both speed and cost fronts since they are market makers/HFT firms with rebates and colocation you are unable to afford or procure. What this optimal path ends up looking like is exactly a prop firm and why I believe they will outcompete even the Citadels/Millenniums/Balys of the world