North American hedge fund manager Steve Cohen, the venture capital arm of his asset management firm Point72 Asset Management and Quantopian have entered into an agreement for the latter to manage up to $250 million of investment capital provided by Cohen. Quantopian has a significant user base in Asia, with user numbers in Singapore standing out relative to countries like India, Chinese territories and Australia.
In email communications with a Quantopian representative, user numbers in Singapore as at the end of July were reported at 2700 individuals – a large number given the population of the city-state – and stands out relative to countries like India (3200), Hong Kong & China (5000) and Australia (2000).
Commenting on these numbers, John “Fawce” Fawcett, CEO and founder of Quantopian, remarked: “Australia and Asia Pacific generally represent an untapped source of talent for quant firms. We have received very strong interest from the region and are seeing the emergence of high quality algorithmic strategies.
“This investment will allow us to allocate more funds toward member-created strategies in the region and further tap into what is essentially a greenfield talent pool,” he added.
The deal also sees Point72 Ventures acquiring a stake in Quantopian. Point72 Ventures, LLC is an affiliate of Point72 Asset Management, L.P., and provides early stage capital to startups in fields such as data mining, artificial intelligence, and machine learning.
The venture capital unit of Point72 was launched in March 2016 in order to invest in and develop financial technology for asset managers and is co-led by Matthew Granade, the chief market intelligence officer of Point72 and Peter Casella.
In a statement to Bloomberg,Granade shared:“This is not just about writing checks. We want to do this in spaces where their products can help us invest with greater insight.”
Quantopian offers a free platform with an online community of over 85,000 members from 180 countries where they claim institution-quality investment algorithms can be developed. Quantopian has previously received venture investments from leading venture firms that include Bessemer Venture Partners, Khosla Ventures and Spark Capital.
Speaking on the investment, Fawcett commented: “This is a watershed moment for the entire industry. Steve Cohen, one of the most storied and successful investors, will be supporting investment algorithms produced by Quantopian’s community.”
“These funds will permit Quantopian to make larger allocations and therefore pay larger royalties to authors of profitable algorithms. I expect this major incentive to galvanize both existing and new members, and propel everyone to new levels of creativity,” he added.
According to a press release, the crowd-sourced investment algorithms from Quantopian will be used to manage Cohens’ fund, authors of a selected algorithm will receive a royalty based on the performance their strategy.
Noting that talent represented a scarce resource in quantitative investing, Granade observed that Quantopian had “demonstrated an innovative approach to finding that talent” and remarked: “In addition to receiving investment capital, Quantopian is getting strategic advice that it can’t get from any other investor and Point72 will benefit from an ocean of untapped talent.”
The capital commitment by Cohen, a portion of which is contingent on Quantopian meeting certain performance metrics, represents the first major commitment of funds for Quantopian to manage using its members’ algorithms, which current hosts in excess of 400,000 algorithms authored by its community of over 85,000 members.
This community includes professors, finance professionals, research scientists, developers, and students. By offering an institutional quality platform online and for free, with access to extensive data, Quantopian gives anyone the ability to create and test investment algorithms – and be rewarded for their work.
Quantopian evaluates the performance of each algorithm on its platform and makes allocations to selected algorithms based on factors including return, risk, style, capacity, and interaction effects. The authors of the selected algorithms receive a share of the profits generated from their investment strategies.