American hedge fund manager Steven A, Cohen is investing $250 million in a hedge fund launched by Quantopian that is banking on a new project to do-it-yourself traders that will look to engineer market-beating mathematical models that hope to optimize investment strategies, according to a Wall Street Journal report.
The investment in Quantopian will aim to disrupt the existing hedge fund playing field with quantitative investment techniques. Cohen’s $250 million will go towards funding the research and design by mechanical engineers of a market-beating model – such a prospect could provide a windfall for hedge funds, money managers, and others.
The approach is noteworthy as the goal will be for do-it-yourself traders to create computerized investing methods, giving a share of any profits to the creators. In addition to the investment, Mr. Cohen, who is the acting CEO of Point72 Asset Management LP, is also slated to make an undisclosed investment in Quantopian itself.
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Mr. Cohen is not the first billionaire to set his sights to fostering better money-management techniques. However, the new approach does culture an embrace for quantitative investing, which relies mainly on math-based models to bet on statistical relationships or patterns in equities, bonds options, futures, or currencies. The initiative has run in tandem with other research into investment strategies presently, such as machine learning and big data analysis, a favorite amongst many fintech groups.
Thanks in part to Mr. Cohen’s sizable commitment to the fund, Quantopian will be able to broaden its investing, which will see more emphasis and allocation to trading algorithms. According to Quantopian CEO John Fawcett, the full $250 million from Point72 won’t initially be deployed, but as Quantopian meets certain performance metrics, new funds will be made available to the fund.
Quantopian currently boasts a user pool of approximately 85,000 from a panel of 180 countries. To date, the group, through its users, has created upwards of 400,000 algorithms on the company’s free web-based platform. Despite this swell, the group has selected only ten of these to trade a few hundred thousand dollars on behalf of Quantopian, which deals with stocks.
The system is the perfect incubator for innovation and the development of algorithms, as would-be creators can begin playing with data and code to create an algorithm, which can promptly be tested against old data or against live data flowing into the system.