Hedge fund industry continues to grow and adapt with the rapid progress of FinTech

Hedge fund industry continues to grow and adapt

with the rapid progress of FinTech

FinTech has been accelerating over the last 2 years. This acceleration is the result of increased demand for consumer grade usability within institutional environments as well as the ability to leverage technology advances such as blockchain or infrastructure as a service (such as AWS or Google Cloud) to provide adaptable, high growth, low cost capabilities to a variety of financial institutions. What happens when this growth begins to provide the ability for independent algorithm creation?

As discussed in “Trading places: the rise of the DIY hedge fund” by Greg Williams one result is the rise of the individual quant hedge fund using platforms and tools “that would enable quants to conduct activities without the need for institutions.” This has resulted in the growth of firms such as Quantopian, QuantConnect, and Battlefin as well as others which provide a robust suite of tools to construct and backtest quantitative trading algorithms. These algorithms combine the creator’s programming and analysis skills with diverse alternative data sets such as social media analysis, stock market data and news sentiment data to generate alpha in custom portfolios.

According to Fawcett, Quantopian has 100,000 users in 180 countries and claims Quantopian is “institutional quality”. – Greg Williams

In addition to the technology benefits from fintech companies addressing the needs of quants and quantitative hedge funds to drive alpha are increased opportunities for investment in these startup funds. This past week FinAlternatives reported that “Quantopian Makes First Allocations To Crowd-Sourced Algo Strategies“. These initial allocations were the first phase of allocations from a $250 million capital investment received from Steven Cohen’s Point72 Asset Management in 2016.

Investments range from $100,000 to $3 million, the firm said in a statement, and went to the 15 top crowd-sourced strategies that survived a rigorous evaluation process of more than 100,000 submissions. – FinAlternatives

We are excited to see the continued focus on creating robust, adaptable and powerful platforms for generating alpha in the capital markets. These platforms provide essential resources to unify intellectual capital, investment capital, trading capability and unique alternate data sets to create real opportunity across the investment spectrum.