In the latest sign of the growing popularity of quantitative
investment strategies, proprietary trading and technology firm
Kershner Trading Group’s CloudQuant technology platform is
launching and licensing its first crowdsourced trading
strategy.
CloudQuant, a trading strategy incubator that can be used by
data scientists and traders around the world to create and then
test their trading strategies, is licensing an algorithm
developed by a U.K. based professor and crowd researcher using
its platform. CloudQuant is allocating $15 million to the
strategy and will pay the algorithm’s creator 10 percent
of monthly net trading profits generated from the strategy.
Morgan Slade, CEO of CloudQuant, says the platform allows
anybody to access the firm’s institutional-quality data
and tools to develop unique trading algorithms on its web
site.
“You have large corporations finding solutions to
technology problems using crowd researchers. You have open
source software that leveraged the wisdom of the crowds for
years. Why not the hedge fund industry?” says Slade.
Once CloudQuant successfully vets crowd researchers’
algorithms through back testing and other methods, it then
manages all the trading and execution and provides other
support. CloudQuant licenses crowd researchers’ algorithms
and pays fees based on the performance of the strategy.
“Talented researchers no longer have to work their way
up on Wall Street. They can jump to the top by using our
platform and get an allocation just like a portfolio manager at
a hedge fund,” he adds.
CloudQuant is one of a new generation of quantitative
ventures that is looking beyond established hedge fund
professionals for new ideas, including Quantopian, backed by
SAC Capital Advisors and Point72 Asset Management founder Steve
Cohen, and Numerei, a hedge fund backed by Silicon Valley and
run by a 30-year-old South African mathematician. Unlike
competitors, Slade emphasizes that CloudQuant lets developers
run their algorithms as a separate trading strategy. Numerei,
for example, incorporates successfully crowdsourced algos into
its own primary investment process.
[II Deep Dive: Steven Cohen’s Crowdsourced
Quant Experiment Gets Real]
Slade, who was the global head of equity trading at Allston
Trading, a high-frequency firm, and a portfolio manager in HFT
at Citadel, says people from 125 countries have been using its
tools. Slade emphasizes that the firm’s own data
scientists and quant traders work closely with people using its
tools, offering feedback and advice.
“We’re viewing this as an extension of our
research department,” says Slade. “People in the
hedge fund industry go from firm to firm and take their ideas
with them. So there’s a lot of group think. We’re
looking for an influx of new ideas.”
CloudQuant started soliciting users for the platform in the
first quarter of 2017. The developer of the algorithm that
CloudQuant funded started working with the firm three months
ago. After two months, he requested funding, and CloudQuant
helped him refine the strategy, Slade says.