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Big News for the Quantopian Community: Managing External Capital

Hi everyone,

I have some wonderful news to share. Today, we're announcing an agreement with famed investor Steve Cohen of Point72: Mr. Cohen has agreed to invest up to $250 million in a portfolio of algorithms managed by Quantopian.

With these new funds to manage we will be able to make larger allocations to more algorithms selected from our community. Licensed algorithm authors earn a royalty of 10% of the net profits generated by their algorithm. With larger allocations, profitable algorithms will receive larger royalty payments. Better still, we expect profitable algorithms to attract more capital from investors. I believe this will mark the beginning of a cycle: increasing capital, more algorithms, and more members earning larger royalties.

How could you receive an allocation? We offer all of the education and the complete platform you need to write a fundable algorithm. The getting started tutorial gives you the basics of the Quantopian platform. You can read what our Chief Investment Officer looks for in algorithms. You can also learn important advanced concepts by going through our lectures. To see how your algorithm does out-of-sample compared to the rest of the community, enter it into the contest. Whether your algorithm is eventually selected for an allocation or not, you will learn more about writing quantitative strategies, the market, statistics, and programming.

In addition to the investment capital, Point72 is making an investment in Quantopian the company, through its venture arm, Point72 Ventures. Quantopian is one of Point72 Ventures' first investments, and we are delighted to have their double vote of confidence in our model. Quantopian will use the capital to help fund its operations. Perhaps even more importantly, Point72 Ventures is helping us access top vendors, prime brokers, and industry experts.

This agreement with Mr. Cohen and Point72 won't change who we are, but it will dramatically increase the scale of what we can do. Everything you love about Quantopian remains the same: we respect and protect the intellectual property you create here; the platform is free and constantly improving; and select authors can earn a royalty based on performance.

We continue to improve and expand the tools, data, and education available to algorithm authors. Work continues on adding futures to our platform. We are expanding the breadth and frequency of our in-person workshop series. New data sets are being added regularly to the platform. And there many other author tools in progress, including a dynamic screen for tradable securities, an evaluation library to help you during idea generation, and more.

Some community members will be interested in the investing mechanics: Quantopian will evaluate and select algorithms to manage Mr. Cohen's assets, just as we do today for our proprietary trading. The selected algorithms will connect to a prime broker through an order/execution management system (O/EMS) at Quantopian. From the algorithms' perspective, everything will run exactly as it does today. It will take us a few months to get the infrastructure set up to put this money to work. We hope to have many more algorithms up and ready for deployment at that time. In the meantime, we're continuing to fund new algorithms with our proprietary trading account, which has 10 allocations to community algorithms running today, and several more on the horizon.

It is a big day for the Quantopian Community (including those of us who work for Quantopian), and for the Quantopian model. Steve Cohen has a world-class track record as an investor and as a selector of quant managers. His faith in our approach and in your ability to create valuable algorithms is the ultimate validation of our work together. We hope that you share our excitement about the opportunities that come with this new capital, and that you feel the same pride we do in the validation of our shared efforts.

Thanks, and happy coding,

fawce

Disclaimer

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.

39 responses

Awesome update!

Excellent news! Congratulations.

Great news! Well done Quantopian.

congrats, well done, up and up!

Great

Huge and amazing news. Very motivational...

The money should be good for the company . However I have to remind you that his firm was fined $1.8 billion and he was banned from managing outside money. Not exactly strong ethics.

As somebody who has been here since 2013 it's been fun to watch the community grow.

Congrats Mr. Fawcett and Quantopian team, I look forward to more features being added.

In the words of Donald Trump , " This is HUGE, Ok! " ...congratulation Quantopian, well done . :)

From the news release:

Mr. Cohen’s commitment, 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.

What are these "performance metrics"?

As somebody that has been here since 2013 at least, and who works in the hf industry, I offer my sincerest congratulations on this coup.

Well done to all at Q.

Saw this on the wires, great for you guys. The platform is great, the educational content is great, sure you all worked your __'s off. Very happy for you.

I'm looking forward to have my trained monkeys run with Mr. Cohen's money.

You all are trailblazers of the open access movement and obviously work extremely hard. I'm happy to have access to this platform, well done and congrats!

Fawce

Can you tell us what performance metrics you have shown Cohen?

  1. What is your target in terms of CAGR over the long term?

  2. What is your target annualised std of monthly returns?

  3. What is your target max DD?

  4. Can you explain more about your methods for making such forecasts?

  5. Can you comment on the recent article in the FT which said you will be using 6x leverage?

Congrats!

Dibs!

Congratulations everyone at Q! Very exciting news.

Congratulations! I gained a lot more valuable knowledge learning how to develop trading algorithms on Quantopian. Highly appreciate it especially for providing free backtesting platform. Hope you can invest using more algos (best 10, best 20, or even best 50?), and probably crowd investing.

Congrats to the Q team!

It'll be interesting to see how your plan to "connect to a prime broker through an order/execution management system (O/EMS) at Quantopian" plays out. Will you update the backtester/simulator model to be in line with the new broker and the O/EMS (e.g. orders, slippage, commissions)? Will the broker support paper trading? Etc.

There's also a question of your plans for the Quantopian retail trading platform. Now that you have seed money committed for the fund (100%x$0.25B/$10B = 2.5%), perhaps you are wondering how the rest of the business fits in (no doubt a point of discussion with Point72). Is Point72 Ventures investing in the fund part of the business, or the whole thing? Or perhaps you don't view them as separate, but as somehow synergistic?

Good news for you. Good news for us. Congrats!

Did a little poking around on the Point 72 website, and found this:

https://www.point72.com/careers/cubist-systematic-strategies/

Cubist Systematic Strategies, our systematic investing business, deploys systematic, computer-driven trading strategies across multiple liquid asset classes, including equities, futures, and foreign exchange. The core of our effort is rigorous research into a wide range of market anomalies, fueled by our unparalleled access to a wide range of publicly available data sources. The organization is structured to strongly support investment professionals in their research efforts.

What we look for:

Creative and innovative investment professionals
Seasoned experts and advanced degree holders (MS or PhD) in finance, computer science, mathematics, physics, operations research, statistics, or other quantitative disciplines
Strong analytical and quantitative skills with the ability to conduct independent research utilizing large data sets
Experienced developers with a history of researching or implementing quantitative models for equities, futures and/or FX, either at a firm or independently
Programming experience in any of the following: C++, Java, C#, MATLAB, R, Q, Python, or Perl

Hmm? Sounds a lot like the profile of a Quantopian user (and many of its employees).

@ Fawce - how will Cubist Systematic Strategies play with Quantopian? Was this part of the discussions/deal? Seems like you could be in direct competition, in both investing and recruiting.

As someone who has worked directly for Steve at SAC as his first Risk Manager and IT/App Dev manager all I can say is congratulations and DON'T Rest on your Laurels. Smart and Brilliant are terms thrown around in the Trading and HF industry and to be honest there are only a few that are and Steve is one of them. He is looking a good ideas to grow and make real money as well as to find better trading strategies....My recommendation to the owners/managers of Quantopian; Don't take you foot off the pedal and enjoy the ride. Take nothing for granted and always, always, always get better...
I have been fortunate enough to work with two great traders, Richard Donchian reprogramming his trading systems and Steve Cohen building his first real-time trading and risk systems. I only wish that there was a product like Quantopian back in the last 80's and 90's because this is a fabulous and important tool for anyone interested in trading.
..Congratulations.

Excellent news. Well done to the Quantopian team.

I will ask what everyone is thinking but no one is asking - is this the same Steve Cohen who "In November 2013, S.A.C. Capital pleaded guilty to insider trading violations, agreed to stop managing funds for outsiders, and paid a $1.8 billion fine.[7][8] In January 2016, Cohen reached a settlement with the SEC on the civil charge, in which he is barred from managing money for outside investors until 2018.[9]"?????

https://en.wikipedia.org/wiki/Steven_A._Cohen

It is, and someone mentioned that five days ago.

Behavioral Trader as someone who has worked next to Steve for a few years as his risk manager I can tell you he is a great man, very generous and very honest. If he was so dishonest then why are they allowing him to open up again in 2018?

Look at his management team, most of who are former regulators. I trusted him for years with my money as I was invested in his fund.

Again, all the to Quantopian and Point72.

Thanks to Mr.Cohen's investment this site made the news yesterday thus signed up and find it very interesting and immediately started learning new things I didn't know.

It would be very naive not to notice quant is in need of a significant innovative shift in "Quant" landscape. Like Steve said the other day it's hard to find good talent these days. Hopefully, this site will help to promote knowledge sharing and eventually bring more decent talent to the markets.

Wannabe hedgies are already kissing some Stevie Cohen _ss in this public forum to get an allocation or a job...but, there is nothing new on Wall Street.

On a more serious note, this is good and bad news for Quantopian. The good part is that they got a much wanted injection of money, but the bad is: 1. The association with Cohen, who is a persona non grata in the industry, and 2. The loss of trust from the algo writers due to #1, and the safety of their IP (algo code).

The bottom line is that given the Quantopian limitations (order types to start with, and many more), the only reason Cohen gave the charity 250M (he does give as much to real charities) is that someone deep in the Quantopian community, perhaps someone who is not even a part of a contest, has algos that make a lot of money on a consistent basis. At 80K users, and at 5 algos each, that is a total of 400K algos, and so it is reasonable to expect that 100 of them will perform like Holy Grail. Fact is, though, that no matter how well they perform at this time while Quantopian is/was courting investors, there is NO guarantee that the algos will keep performing at the same rate when real money is used. The HFTs will pick them clean, and what is left will be handled by Mr. Market.

Glancing over https://www.point72.com/careers/ and the job postings there, one gets the impression that the Quantopian play book may have been influenced for awhile by Point 72. It is almost as if Quantopian has been grooming itself for some form of acquisition. My impression is that Point72 is effectively buying the competition. Fawce says that the "agreement with Mr. Cohen and Point72 won't change who we are" but I have to think that it will. The question is how long will the last bit of start-up mojo last? Once the original investors get their return, will Quantopian be taken over by the Man? Fawce, what are your thoughts on Phase 2 of your relationship with Point72? Where do you see things heading?

I suppose Grant the question you need to ask yourself is a different one: "what do I care about any of this anyway"?

Maybe you, Grant, need to think what YOU want and how best to achieve this with or without Q and Stevie Wonder?

Just thinking out loud!

Hopefully the environment stays open. Startups typically follow one of three trajectories, failure, going public, or acquisition. Each affects the volunteer algorithm developers differently but it appears that open frameworks for algorithms may be here to stay and very likely to constantly improve. Nothing to worry about.

@ Anthony -

Mostly, I resonate with Fawce's statement above:

Whether your algorithm is eventually selected for an allocation or not, you will learn more about writing quantitative strategies, the market, statistics, and programming.

Also, I've been involved with Quantopian since its earlier days and have followed their evolution, so I'm interested in how things are playing out. Fawce doesn't actually say why Point72 has taken an interest in Quantopian (and it would be interesting to hear from Point72, too). I have to figure that some measure of due diligence and intuition went into the decision ($250M is a big chunk of change along with the direct investment), but I don't see much discussion. I figure it can't hurt to ask--they can either explain or not.

Congratulations to Quantopian. I just hope that open and free nature of the platform will remain.

Would this in any way imply that Q is worth $250 million? Or is it worth some multiple of that amount?

Not at all. One could make an estimate using the discounted cash flow model of their expected asset (2%?) and performance fees (1/2 of 20% of ???) based on $250M under management, and perhaps some estimate of AUM growth. But one can't say that Quantopian is worth $250M now no.

Just joined here today, looking forward to writing some code and seeing where this goes. Fun project by any means :).

Congrats!

Is the fund allocation is that Quantopian evaluate is for the winner of the contest only?
I am curious if anyone can send the algo for Quantopian team to evaluate if it is selected by Quantopian hedge fund?