FINANCE Bloomberg Businessweek December 21, 202019ILLUSTRATION BY PETE SHARP. DATA: HEDGE FUND RESEARCH
it’s a lesson in humility for novices hoping to go
toe-to-toe with professional traders.
Another is that running a successful hedge fund
requires much more than amassing trading ideas.
Quants perform sophisticated analysis on huge
amounts of data to find potentially lasting patterns,
and then have to turn those insights into workable
trading strategies. Quantopian gave users the tools
to hunt for patterns—say, the relationship between
a stock’s social media mentions and its perfor-
mance. The next step was putting them together
in a profitable way, and that proved difficult.
The platform allowed users to try almost any
strategy. This led to more than 12 million so-called
backtests, in which hypothetical strategies were
run against historical data to see if they’d work. But
the fund was limited to using a subset of strategiesthat fit with its particular investing style, known
as equity market neutral. Also, many of the users’
strategies weren’t scalable, meaning not much
money could be invested in them, according to a
person familiar with the matter.
Karl Rogers, the founder of hedge fund consult-
ing firm ACE Capital Investments, learned quant
trading himself on Quantopian. But he says there
just wasn’t enough skill out there for the fund
to take advantage of. They were “getting people
who just want to learn trading signals or people
who don’t do this on a full-time basis, and they’re
competing with people who do this on a full-time
basis,” he says.
“To find positive returns that beat the market
and to have to find it in a very specific way makes
the problem even harder,” says Jared Broad, Index change
S&P 500
Global hedge funds
Equity market
neutral funds80%400-20
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