A new sort of hedge fund relies on crowd-sourcing
The problem with Quantopian, many current robo-advisors (including some with large valuations) and other market-related fintechs is that by and large they don&#x27;t seem to have anyone who has had real success actually trading automated quantitative strategies at a serious hedge fund or tier-1 proprietary trading group on their founding teams. I&#x27;ve seen successful VCs, well-known academics, market gurus, people with a background in some aspect of running a mutual fund and all manner of other people who seem like they should be good, but nobody with an actual track record. I&#x27;ve seen people who worked on technology at hedge funds but the technology group at a hedge fund builds what amounts to plumbing like clearing, reporting etc, not the actual trading technology, certainly nothing that can actually impact PNL.<p>Jonathan Larkin at Quantopian comes closest to what is needed and since he joined Quantopian has certainly had good success, but even his experience was more along the lines of recruiting and risk-managing portfolio managers, not actually running a large book. He certainly helps Quantopian but Quantopian is coming from a place where when it was founded, I personally had to explain what selection bias meant to John Fawcett and despite Jonathan Larkin being there, they still seem to be making some pretty basic mistakes in how the platform is setup.<p>Spending a few years working on a tier-1 automated trading desk is absolutely essential because, what is deployed at those firms (and what you are competing with) is years if not decades ahead of academia and the rest of the industry and you learn more in a week of working on a successful trading desk (which only happens if you demonstrate a lot of not just academic aptitude), with people sharing knowledge available nowhere else than in a decade in academia or anywhere else, even other groups at the same firm, potentially sitting 10 feet away from the trading group. I&#x27;m not suggesting people steal IP or anything like that but you do have to have sone sense of what the state-of-the-art actually is if you are going to claim to have developed something state of the art.<p>I suspect it&#x27;s going to end up like the search space, where the space will be taken over by the second generation of firms that nobody has heard of who decide to do things differently from how investment management is currently run offline taking advantage of their knowledge of how mutual funds including index funds are picked off by sophisticated traders.<p>Interestingly, Igor Tulchinsky at Worldquant and his team who are a tier-1 trading shop have basically been running a very successful version of what Quantopian hopes to become without a lot of hoopla or publicity for years, decades if you include the time they were doing this as an independent team at Millenium.