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Crowd-Sourced Quant Network Allocates Most Ever to Single Algo

Crowd-Sourced Quant Network Allocates Most Ever to Single Algo

  • Quantopian devotes $50 million to anonymous community member
  • Firm’s user base grows to more than 210,000 algorithm authors

Photographer: Brent Lewin/Bloomberg

Photographer: Brent Lewin/Bloomberg

Quantopian Inc., the investment platform whose flagship hedge fund struggled early on, has made its largest allocation -- $50 million -- to one of its quants.

The allocation, which includes leverage, went to an anonymous algorithm author, according to Jess Stauth, managing director of portfolio management and research. Crowd-sourced Quantopian, founded in 2011, has deployed $70 million since starting a hedge fund last year and increased the trading amount with leverage to about $134 million.

The Boston-based firm launched its flagship, multi-algorithm fund in June 2017, but the vehicle lost 2 percent in about four months of trading. That September, the firm’s chief investment officer left after 15 months.

“The investment we made building an institutional-quality trading and execution desk, that took longer than I would’ve thought,” Stauth said in an interview. “That vision that we started with has been definitely a challenge.”

Stauth declined to comment on the flagship fund’s first-year returns.

Growing Base

Still, Quantopian’s roster of algorithm authors has grown to more than 210,000 from 148,000 users a year ago, according to Stauth. The firm has licensed 25 authors to use their algorithms to trade its investor capital, including eight within the past year.

Quantopian provides users with free tutorials and historical data they use to build and test trading systems. Its international community has run more than 9 million algorithm backtests.

The network’s licensed authors are allocated capital and leverage for their algorithms. When the algorithms generate returns, the authors receive about 10 percent of the profit. Most, like the recipient of the $50 million allocation, choose to remain anonymous.

Quantopian has raised almost $50 million in venture funding from equity investors including Andreessen Horowitz, Bessemer Venture Partners and hedge fund billionaire Steven Cohen’s Point72 Ventures. Cohen committed as much as $250 million in 2016 to be managed by Quantopian through a separate account.

Read more: Q&A with Quantopian CEO on starting a “multi-algo” hedge fund