
Quantopian hedge fund has lost about 3% since beginning of trading in June - chollida1
https://www.wsj.com/articles/steven-a-cohen-andreessen-backed-diy-quant-fund-struggles-1510095947
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chollida1
> But in the four months since it began trading on June 1, Quantopian’s
> traders have lost about 3%, according to people close to the matter. The S&P
> 500 rose 6.6% in that period.

It's still way to early to be worried about the fund but to be fair, its been
a good time for most quantitative funds. And the space that I imagine
Quantopian is competing in, factor based models for US Equities, is a very
crowded space right now.

I'm sure having a flagship fund was an important project for the company I'm
reminded of the Paul Graham story where he tells Jerry Yang his idea for
selling ads and then realized when Jerry told him no that yahoo was already
selling ads for more than they were worth.

I'm wondering if there is a parallel here with quantopian where they were
better off letting people think that they could beat the market with a factor
based model, rather than actually starting a fund and showing their users how
tough it really is.

> Still, Quantopian manages about $50 million in a hedge fund, a tiny amount
> in that world and well below the $250 million executives anticipated at the
> end of this year

This might work in their favour.

The difference in the management fee doesn't translate into alot of money and
its much easier to manage a sub $100 million fund than it is to run a $250
million dollar fund. Especially for one that is just starting out and doesn't
appear to have found their secret sauce just yet.

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inthewoods
The problem is that there is no other really scalable revenue play for a
product like Quantopian other than starting a fund. They could try and charge
people for the platform but that is pretty niche. That could be a good
business - but I'm not sure it's a VC-funded business.

Still, I've been skeptical of Quantopian's business for a while. System
writers are likely to opt-out if they have any success, and they need a track
record of 5+ years in order to raise any substantial amount of money -
particularly true with something so unproven like a crowdsourced algo fund.

~~~
huac
They could (you know, theoretically) copy Robinhood's business model and its
evolution - allow users to trade algorithmically with their own accounts,
offer them up as sacrificial lambs to HFT, and then offer credit, and so on.

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javiramos
"offer them up as sacrificial lambs to HFT" what do you mean?!

~~~
samsonradu
All the orders placed are sent to HFT traders before confirmation so they can
take advantage of the information.

There is even a commercial on Bloomberg for a broker that explicitly says they
don’t sell out your orders like others do.

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c128
People who make money with algos would never share them with quantopian but
people who couldn't, would. It's the nature of the beast in wallstreet, I've
worked in wallstreet for over 29 years. The resources for discovering algos
that are profitable are very expensive.

~~~
kevstev
They make a lot of those resources available for free. I worked in algo/hft
for about 11 years, then left and started building my own tools for building
factor based algos using my interactive brokers' apis and my own toolkit. I
was doing it on the side for about 3 months before I came across quantopian-
and immediately felt like an idiot because they had done so much of the work
for me- and it was available for free. It would have taken me probably 2 years
to get anywhere close to their offering, and that's just for the pure
trading/event processing side of it, let alone their backtesting, and risk
measurement framework.

I have been using it for a factor and value based microcap strategy for the
last 4 years and have been beating the market's total return by about 5% on
average each year. I trade a relatively small universe, its not really
scalable to a large fund.

I stopped applying for "quant" jobs in 2007- everyone wanted a PHD even though
I was doing a lot of the same work- I got lucky and landed a job in Options
AMM and for awhile was doing both dev work and what I later found out was
considered quant work in most other places.

My point being though is they provide a lot of infrastructure that would
normally only be available to a very small number of people in banks and the
like and those tools are gate-kept to PHDs and those deemed worthy of even
getting a look. I don't put my algos in the competition and actually trade
them manually so they are likely completely under the radar from quantopian,
and aside- they look for very specific characteristics in their algos that
mine don't fit. There is opportunity out there though, especially if you are
trading in small size (lets say under 5-10M),

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yosyp
Could you elaborate on quant jobs requiring PhDs? Do they look for a very
specific PhD (i.e. statistics), or is it just a blanket requirement to get
past the hiring screens?

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kevstev
This was all about 10 years ago, the market has moved since then, and now it
seems you can slip under the PHD radar and do similar work if you classify
yourself as a "data scientist." Some of the mythos around quants and
technology has been uncovered, 10 years ago quantitative and electronic
trading was still a newish thing and at a backseat to traditional traders and
PMs. Many firms these days are technology first, though there are often still
walls between those who write "models" and those who write "infrastructure."

Anyway, its still largely true that for "quant" roles you need a PHD. It
doesn't need to be in anything particular, but Physics/Math/Statistics are
strongly preferred. This is just a hiring screen thing. Its not impossible,
but quant types tend to have a big head and be elitist, and I personally found
them to just be real jerks in the hiring process, and there were plenty of
opportunities opening up in the then lucrative algorithmic/HFT space so I went
down that road. By jerks, there were just several opportunities where you
could just tell they didn't like my lack of credentials and that I went to a
state school (on a scholarship, but still they can't have non ivy leaguers
stinking the place up), and it was also fairly easy for them to just throw
advanced math problems at me and knock me out of the running- regardless if
this was something that was ever used in their actual work.

I don't really regret it, but it would have been nice to be more heavily
involved in pure finance stuff- I find the markets fascinating, I was very
happy when I wrote some of the first TWAP and VWAP strategies out there, and
then later (surprise!) started getting edged out of that space by "quants"
with PHDs.

~~~
c128
In the early 90s, I was lucky. I pitched on the phone, they called me in, and
the following day I had a corner office overlooking the beautiful statue of
liberty. We laughed, dined, and drank often after work, it was fun and not a
snob in sight.

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tabeth
I don't get the point of these. Index funds win most of the time, and when
they don't index funds still win once you count the amount of time and effort
needed to marginally beat them.

Set it and forget it.

~~~
rtx
Nobody wins if everyone is winning.

~~~
tome
Sure they do. If everyone increases their wealth then everyone wins. It's not
a zero sum game.

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headmelted
Surely if everyone increases their wealth then the value of the trading
currency must be proportionally lower?

Wealth is a marker of ones assets relative to others -- if everyone has the
same wealth then no-one is wealthy.

What have I missed here?

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finnh
Not quite - liquidity helps prevents recessions. When recessions happen,
people (in the aggregate) work less than they otherwise would.

Our true source of wealth is our output, which is the product of (work *
productivity).

See Krugman’s story about the capitol hill baby-sitting coop:

[http://www.slate.com/articles/business/the_dismal_science/19...](http://www.slate.com/articles/business/the_dismal_science/1998/08/babysitting_the_economy.html)

~~~
dnautics
Krugman misidentifies the problem with the co-op. Basically the whole thing is
a failure in the exercise of price controls.

An arbitrary authority decides on a unit of a resource that shouldn't have
fixed value should have fixed value, and his solution is to introduce
inflation... I suppose when you have a hammer everything looks like a nail.

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d--b
It's early to say but the top strategies on Quantopian were showing off sharpe
ratios higher than 2.5, which should bring great profitability with very small
downward moves. The fact that they have such a poor performance so far (while
still having little AUM) is definitely a proof that something is wrong with
the way they test their strategies...

~~~
huac
accounting for liquidity is hard

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cardmagic
This is a ridiculously tiny amount of time to judge performance.

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bpicolo
The market as a whole is up 7%, so really they're down 10%. They lost money in
a bull market

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icedchai
Yes. You'd have to really try pretty hard to lose money in this market.

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kevstev
not really. Value based strategies tend to get hurt pretty bad during the tail
end of bull markets when euphoria starts to set in, and increases tend to be
due to P/E expansion and rosy predictions for the future rather than current
performance, and tend to do very well after downturns and things get oversold.

~~~
icedchai
Still, most value funds aren't losing money over the past 5 months.

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inthewoods
Very difficult to judge this performance given the time frame and the strategy
- not sure that comparing it to the general market makes any sense.

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jmh530
It's called overfitting.

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ainiriand
Cant read wsj, is there any other source? Thank you.

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mitchellshow
Protip, add this JS snippet to your browser's bookmark bar, then click when
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rothbardrand
Every investment I've ever bought has gone down within 6 months of the time I
bought it. Unless you perfectly time a bottom that's what's gonna happen. The
question is where it is in 6 years, not 6 months.

Plus, for a hedge fund there are a lot of initial costs and entering a
position is where expenses happen generally.

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daveguy
Problem here is they are not purchasing and holding for 6 years or even 6
months. These are typically short term timescale strategies. They are turning
capital over quickly so the gains or, in this case, losses are locked in
quickly.

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beefman
archived version [http://archive.is/CrtmX](http://archive.is/CrtmX)

