Quantopian dives into algorithms

Quantopian, a “crowd-sourced” hedge fund, has begun allocating some of the money invested by industry tycoon Steven Cohen to trading algorithms coded by freelance computer scientists, as it steps up its efforts to disrupt the hedge fund industry.

The Boston-based company backed by venture capital firm Andreessen Horowitz provides data scientists, mathematicians and programmers the tools to design automated trading algorithms. It licenses the best ones for its own hedge fund.

Last year Mr Cohen, the head of Point72 and one of the hedge fund world’s biggest names, invested $2m in Quantopian, and promised up to $250m of his own money to the platform’s algorithmic traders.

“This is the step that we’ve been waiting for,” said John Fawcett, the chief executive of Quantopian. “We want to be extremely deliberate, but the trading capacity of these algos is much higher. We just want to move cautiously before scaling up.”

Until this week, Quantopian had merely allocated modest amounts of its own money to a handful of trading algorithms to test their resilience and performance. But in the second quarter of this year, Quantopian expects to begin allocating more capital to strategies on its platform via a pooled investment vehicle.

Quantopian is now allocating money to members from countries such as Australia, China, India, Spain and the US, who have backgrounds ranging from data science to engineering and academia.

The hedge fund says it now has 120,000 members from 180 countries, and more than 6m trading simulations have been run on its platform.

Many hedge fund managers scoff at the idea that part-time algo traders can compete with the heft and brain wattage of the quantitative finance industry’s big names.

“We’ve made a lot of progress, and so have our competitors, which helps bring the crowd-sourced approach more credibility,” Mr Fawcett said. “This isn’t the end though, it’s the end of the beginning.”

Source Financial Times

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