10 ms·

Quantopian hedge fund has lost about 3% since beginning of trading in June

85 points by chollida1 9y ago

deleted 9y ago
[deleted]
cardmagic 9y ago
This is a ridiculously tiny amount of time to judge performance.
- bpicolo 9y ago
  The market as a whole is up 7%, so really they're down 10%. They lost money in a bull market
  - zeusk 9y ago
    They're not down 10% and market gains are not risk free. Performance can really only be compared with risk free returns (ie. TIPS). Anything else and you have to look at a bunch of other factors like volatility, VAR etc.
    - 1024core 9y ago
      Index gains are just about as risk-free as you can get.
      - kgwgk 9y ago
        Yeah, indices do never go down...
      - whatok 9y ago
        Wow.
      - syncsynchalt 9y ago
        An actual risk-free* investment would be money market or TIPS. Index funds may be the historically best performing equity investments (when including expense ratio) but no equity investment is risk-free.
      - lorenzhs 9y ago
        That's what a bull market lasting eight and a half years does to public sentiment :) A crash would make for interesting times, that much is certain.
      - vorotato 9y ago
        That's wildly untrue, and to the extent that people think that we are at risk of economic collapse.
  - icedchai 9y ago
    Yes. You'd have to really try pretty hard to lose money in this market.
    - kevstev 9y ago
      not really. Value based strategies tend to get hurt pretty bad during the tail end of bull markets when euphoria starts to set in, and increases tend to be due to P/E expansion and rosy predictions for the future rather than current performance, and tend to do very well after downturns and things get oversold.
      - icedchai 9y ago
        Still, most value funds aren't losing money over the past 5 months.
    - frankc 9y ago
      They are probably market neutral. For as many dollars they are long, they are short an equal amount. Therefore it doesn't matter what the market is doing. It matters that their longs outperform their shorts.
  - frankc 9y ago
    What the market is doing isn't really relevant to a market neutral strategy, and that is almost surely what they are running. The goal is to make money consistently, whether market is up or down.
    - kevstev 9y ago
      I am on the platform, and yeah they post frequently about looking for market neutral strategies.
  - nether 9y ago
    This is a ridiculously tiny amount of time to judge performance.
  - this_user 9y ago
    A bull market with pretty low volatility, though. Especially since the early summer. At this point, a 2% daily move in SPX would be a 4 sigma event. Making money from actively trading the market is much harder when ranges are small, and it's easy to die from a 1000 cuts when you don't adapt.
    - cardmagic 9y ago
      4 sigma event assumes normal distribution and its abundantly clear that stock market distributions are far from normal.
- hendzen 9y ago
  Not for strategies that are trading frequently with 1-3 day holding periods...
chollida1 9y ago
> But in the four months since it began trading on June 1, Quantopian’s traders have lost about 3%, according to people close to the matter. The S&P 500 rose 6.6% in that period. It's still way to early to be worried about the fund but to be fair, its been a good time for most quantitative funds. And the space that I imagine Quantopian is competing in, factor based models for US Equities, is a very crowded space right now. I'm sure having a flagship fund was an important project for the company I'm reminded of the Paul Graham story where he tells Jerry Yang his idea for selling ads and then realized when Jerry told him no that yahoo was already selling ads for more than they were worth. I'm wondering if there is a parallel here with quantopian where they were better off letting people think that they could beat the market with a factor based model, rather than actually starting a fund and showing their users how tough it really is. > Still, Quantopian manages about $50 million in a hedge fund, a tiny amount in that world and well below the $250 million executives anticipated at the end of this year This might work in their favour. The difference in the management fee doesn't translate into alot of money and its much easier to manage a sub $100 million fund than it is to run a $250 million dollar fund. Especially for one that is just starting out and doesn't appear to have found their secret sauce just yet.
- inthewoods 9y ago
  The problem is that there is no other really scalable revenue play for a product like Quantopian other than starting a fund. They could try and charge people for the platform but that is pretty niche. That could be a good business - but I'm not sure it's a VC-funded business. Still, I've been skeptical of Quantopian's business for a while. System writers are likely to opt-out if they have any success, and they need a track record of 5+ years in order to raise any substantial amount of money - particularly true with something so unproven like a crowdsourced algo fund.
  - huac 9y ago
    They could (you know, theoretically) copy Robinhood's business model and its evolution - allow users to trade algorithmically with their own accounts, offer them up as sacrificial lambs to HFT, and then offer credit, and so on.
inthewoods 9y ago
Very difficult to judge this performance given the time frame and the strategy - not sure that comparing it to the general market makes any sense.
ainiriand 9y ago
Cant read wsj, is there any other source? Thank you.
- thisisit 9y ago
  https://archive.fo/CrtmX https://archive.fo/CrtmX
- mitchellshow 9y ago
  Protip, add this JS snippet to your browser's bookmark bar, then click when you're on WSJ's article. Works like a dream. javascript:location.href='http://facebook.com/l.php?u='+encodeURIComponent(location.href) http://facebook.com/l.php?u='+encodeURIComponent(location.hr...
d--b 9y ago
It's early to say but the top strategies on Quantopian were showing off sharpe ratios higher than 2.5, which should bring great profitability with very small downward moves. The fact that they have such a poor performance so far (while still having little AUM) is definitely a proof that something is wrong with the way they test their strategies...
- huac 9y ago
  accounting for liquidity is hard
tabeth 9y ago
I don't get the point of these. Index funds win most of the time, and when they don't index funds still win once you count the amount of time and effort needed to marginally beat them. Set it and forget it.
- rtx 9y ago
  Nobody wins if everyone is winning.
  - tome 9y ago
    Sure they do. If everyone increases their wealth then everyone wins. It's not a zero sum game.
    - headmelted 9y ago
      Surely if everyone increases their wealth then the value of the trading currency must be proportionally lower? Wealth is a marker of ones assets relative to others -- if everyone has the same wealth then no-one is wealthy. What have I missed here?
      - syncsynchalt 9y ago
        The two of you have defined wealth differently. You have defined wealth as "having more than someone else". They have defined wealth as "easily able to meet needs and wants". In that light, both of you are making correct arguments to your own definitions.
      - finnh 9y ago
        Not quite - liquidity helps prevents recessions. When recessions happen, people (in the aggregate) work less than they otherwise would. Our true source of wealth is our output, which is the product of (work * productivity). See Krugman’s story about the capitol hill baby-sitting coop: http://www.slate.com/articles/business/the_dismal_science/1998/08/babysitting_the_economy.html http://www.slate.com/articles/business/the_dismal_science/19...
jmh530 9y ago
It's called overfitting.
c128 9y ago
People who make money with algos would never share them with quantopian but people who couldn't, would. It's the nature of the beast in wallstreet, I've worked in wallstreet for over 29 years. The resources for discovering algos that are profitable are very expensive.
- kolbe 9y ago
  So, you think wall street would be first to identify some brilliant coder who liked video games too much to have the grades to get into MIT? I doubt it. Quantopian sounds like the right platform to access that type of talent.
  - exelius 9y ago
    Hedge funds operate across a whole bunch of arbitrage options -- not all of which are available to Quantopian. At most hedge funds, "alpha" boils down to information asymmetry (aka "how well-connected is my fund manager?") Pure quant platforms almost never outperform because they're so easy to replicate. Quantopian doesn't have enough "levers" to be able to build a comprehensive arbitrage plan. They might be able to provide low-cost hedging on the greeks, but that's just 1980s finance with computers. Furthermore, it's not the brilliant coder who just joined who makes you all the money. It's the brilliant coder with 15 years experience under his belt who makes way too much to bother with Quantopian who is writing the winners. It's not unheard of for top quant programmers to pull down 8-figures annually. Those guys are just not gonna mess with Quantopian -- they're going to eat it (and any platform like it) for lunch. In quant finance, if you're not the smartest guy in the space you're playing in, you're just another sucker.
    - gonzoflip 9y ago
      Wait, you are saying there are quants that make >1,000,000,000 annually?
      - exelius 9y ago
        Haha, you're right. There are fund managers who make that much though :) I meant 8 figures for quants; need more coffee...
rothbardrand 9y ago
Every investment I've ever bought has gone down within 6 months of the time I bought it. Unless you perfectly time a bottom that's what's gonna happen. The question is where it is in 6 years, not 6 months. Plus, for a hedge fund there are a lot of initial costs and entering a position is where expenses happen generally.
- daveguy 9y ago
  Problem here is they are not purchasing and holding for 6 years or even 6 months. These are typically short term timescale strategies. They are turning capital over quickly so the gains or, in this case, losses are locked in quickly.
beefman 9y ago
archived version http://archive.is/CrtmX http://archive.is/CrtmX

85 points by chollida1 9y ago

deleted 9y ago

[deleted]

cardmagic 9y ago

This is a ridiculously tiny amount of time to judge performance.

bpicolo 9y ago
The market as a whole is up 7%, so really they're down 10%. They lost money in a bull market
- zeusk 9y ago
  They're not down 10% and market gains are not risk free. Performance can really only be compared with risk free returns (ie. TIPS). Anything else and you have to look at a bunch of other factors like volatility, VAR etc.
  - 1024core 9y ago
    Index gains are just about as risk-free as you can get.
    - kgwgk 9y ago
      Yeah, indices do never go down...
    - whatok 9y ago
      Wow.
    - syncsynchalt 9y ago
      An actual risk-free* investment would be money market or TIPS. Index funds may be the historically best performing equity investments (when including expense ratio) but no equity investment is risk-free.
    - lorenzhs 9y ago
      That's what a bull market lasting eight and a half years does to public sentiment :) A crash would make for interesting times, that much is certain.
    - vorotato 9y ago
      That's wildly untrue, and to the extent that people think that we are at risk of economic collapse.
- icedchai 9y ago
  Yes. You'd have to really try pretty hard to lose money in this market.
  - kevstev 9y ago
    not really. Value based strategies tend to get hurt pretty bad during the tail end of bull markets when euphoria starts to set in, and increases tend to be due to P/E expansion and rosy predictions for the future rather than current performance, and tend to do very well after downturns and things get oversold.
    - icedchai 9y ago
      Still, most value funds aren't losing money over the past 5 months.
  - frankc 9y ago
    They are probably market neutral. For as many dollars they are long, they are short an equal amount. Therefore it doesn't matter what the market is doing. It matters that their longs outperform their shorts.
- frankc 9y ago
  What the market is doing isn't really relevant to a market neutral strategy, and that is almost surely what they are running. The goal is to make money consistently, whether market is up or down.
  - kevstev 9y ago
    I am on the platform, and yeah they post frequently about looking for market neutral strategies.
- nether 9y ago
  This is a ridiculously tiny amount of time to judge performance.
- this_user 9y ago
  A bull market with pretty low volatility, though. Especially since the early summer. At this point, a 2% daily move in SPX would be a 4 sigma event. Making money from actively trading the market is much harder when ranges are small, and it's easy to die from a 1000 cuts when you don't adapt.
  - cardmagic 9y ago
    4 sigma event assumes normal distribution and its abundantly clear that stock market distributions are far from normal.
hendzen 9y ago
Not for strategies that are trading frequently with 1-3 day holding periods...

chollida1 9y ago

> But in the four months since it began trading on June 1, Quantopian’s traders have lost about 3%, according to people close to the matter. The S&P 500 rose 6.6% in that period. It's still way to early to be worried about the fund but to be fair, its been a good time for most quantitative funds. And the space that I imagine Quantopian is competing in, factor based models for US Equities, is a very crowded space right now. I'm sure having a flagship fund was an important project for the company I'm reminded of the Paul Graham story where he tells Jerry Yang his idea for selling ads and then realized when Jerry told him no that yahoo was already selling ads for more than they were worth. I'm wondering if there is a parallel here with quantopian where they were better off letting people think that they could beat the market with a factor based model, rather than actually starting a fund and showing their users how tough it really is. > Still, Quantopian manages about $50 million in a hedge fund, a tiny amount in that world and well below the $250 million executives anticipated at the end of this year This might work in their favour. The difference in the management fee doesn't translate into alot of money and its much easier to manage a sub $100 million fund than it is to run a $250 million dollar fund. Especially for one that is just starting out and doesn't appear to have found their secret sauce just yet.

inthewoods 9y ago
The problem is that there is no other really scalable revenue play for a product like Quantopian other than starting a fund. They could try and charge people for the platform but that is pretty niche. That could be a good business - but I'm not sure it's a VC-funded business. Still, I've been skeptical of Quantopian's business for a while. System writers are likely to opt-out if they have any success, and they need a track record of 5+ years in order to raise any substantial amount of money - particularly true with something so unproven like a crowdsourced algo fund.
- huac 9y ago
  They could (you know, theoretically) copy Robinhood's business model and its evolution - allow users to trade algorithmically with their own accounts, offer them up as sacrificial lambs to HFT, and then offer credit, and so on.

inthewoods 9y ago

Very difficult to judge this performance given the time frame and the strategy - not sure that comparing it to the general market makes any sense.

ainiriand 9y ago

Cant read wsj, is there any other source? Thank you.

thisisit 9y ago
https://archive.fo/CrtmX https://archive.fo/CrtmX
mitchellshow 9y ago
Protip, add this JS snippet to your browser's bookmark bar, then click when you're on WSJ's article. Works like a dream. javascript:location.href='http://facebook.com/l.php?u='+encodeURIComponent(location.href) http://facebook.com/l.php?u='+encodeURIComponent(location.hr...

d--b 9y ago

It's early to say but the top strategies on Quantopian were showing off sharpe ratios higher than 2.5, which should bring great profitability with very small downward moves. The fact that they have such a poor performance so far (while still having little AUM) is definitely a proof that something is wrong with the way they test their strategies...

huac 9y ago
accounting for liquidity is hard

tabeth 9y ago

I don't get the point of these. Index funds win most of the time, and when they don't index funds still win once you count the amount of time and effort needed to marginally beat them. Set it and forget it.

rtx 9y ago
Nobody wins if everyone is winning.
- tome 9y ago
  Sure they do. If everyone increases their wealth then everyone wins. It's not a zero sum game.
  - headmelted 9y ago
    Surely if everyone increases their wealth then the value of the trading currency must be proportionally lower? Wealth is a marker of ones assets relative to others -- if everyone has the same wealth then no-one is wealthy. What have I missed here?
    - syncsynchalt 9y ago
      The two of you have defined wealth differently. You have defined wealth as "having more than someone else". They have defined wealth as "easily able to meet needs and wants". In that light, both of you are making correct arguments to your own definitions.
    - finnh 9y ago
      Not quite - liquidity helps prevents recessions. When recessions happen, people (in the aggregate) work less than they otherwise would. Our true source of wealth is our output, which is the product of (work * productivity). See Krugman’s story about the capitol hill baby-sitting coop: http://www.slate.com/articles/business/the_dismal_science/1998/08/babysitting_the_economy.html http://www.slate.com/articles/business/the_dismal_science/19...

jmh530 9y ago

It's called overfitting.

c128 9y ago

People who make money with algos would never share them with quantopian but people who couldn't, would. It's the nature of the beast in wallstreet, I've worked in wallstreet for over 29 years. The resources for discovering algos that are profitable are very expensive.

kolbe 9y ago
So, you think wall street would be first to identify some brilliant coder who liked video games too much to have the grades to get into MIT? I doubt it. Quantopian sounds like the right platform to access that type of talent.
- exelius 9y ago
  Hedge funds operate across a whole bunch of arbitrage options -- not all of which are available to Quantopian. At most hedge funds, "alpha" boils down to information asymmetry (aka "how well-connected is my fund manager?") Pure quant platforms almost never outperform because they're so easy to replicate. Quantopian doesn't have enough "levers" to be able to build a comprehensive arbitrage plan. They might be able to provide low-cost hedging on the greeks, but that's just 1980s finance with computers. Furthermore, it's not the brilliant coder who just joined who makes you all the money. It's the brilliant coder with 15 years experience under his belt who makes way too much to bother with Quantopian who is writing the winners. It's not unheard of for top quant programmers to pull down 8-figures annually. Those guys are just not gonna mess with Quantopian -- they're going to eat it (and any platform like it) for lunch. In quant finance, if you're not the smartest guy in the space you're playing in, you're just another sucker.
  - gonzoflip 9y ago
    Wait, you are saying there are quants that make >1,000,000,000 annually?
    - exelius 9y ago
      Haha, you're right. There are fund managers who make that much though :) I meant 8 figures for quants; need more coffee...

rothbardrand 9y ago

Every investment I've ever bought has gone down within 6 months of the time I bought it. Unless you perfectly time a bottom that's what's gonna happen. The question is where it is in 6 years, not 6 months. Plus, for a hedge fund there are a lot of initial costs and entering a position is where expenses happen generally.

daveguy 9y ago
Problem here is they are not purchasing and holding for 6 years or even 6 months. These are typically short term timescale strategies. They are turning capital over quickly so the gains or, in this case, losses are locked in quickly.

beefman 9y ago

archived version http://archive.is/CrtmX http://archive.is/CrtmX