Jonathan Larkin has the fate of 80,000 wannabe quants in his hands. OK, this may be something of an exaggeration, but as the newly-installed chief investment officer of ‘crowd-sourced’ hedge fund Quantopian, he’s responsible for uncovering talent within its large ‘community’ of programmers, quants and data scientists.
Quantopian started life as a community of quants, providing a browser-based trading platform for its members to develop and experiment with investment ideas. It offered prizes and the coveted role of ‘quant in residence’ – an online mentoring role for top-performing members – to encourage participation.
If this all sounds like good fun, it’s now starting to get serious – Quantopian is preparing to open its doors to external investors before launching its own hedge fund by the end of this year, and will be relying on its members to come up with investment strategies. Larkin will be at the helm.
“We have 80,000 members, so to sift through these investment strategies to find the best, we rely a lot of an automated filtering process,” he says. “Once we identify the right strategy and the right candidate, we start the due diligence process and then commit to formally share a percentage of the PnL.”
In other words, you could essentially become a hedge fund trader based purely on the algorithms you create, rather than your experience or educational background. The reward for this is roughly 10% of the PnL.
Moving into managing money
This is an evolution for Quantopian. Previously, it offered top-performing quants $100k to manage for six months – they could keep any profits.
One winner, Simon Thornington, said it opened doors to an industry closed to those without experience. He’s since gone on to take a quant developer role at newly-launched hedge fund Mana Partners. A former ‘quant in residence’, Simon Meggs, is now a partner and head of trading at hedge fund Fulcrum Asset Management.
For Larkin, the CIO role at Quantopian represents a departure away from more traditional finance roles. He spent nearly nine years trading equity derivatives at J.P. Morgan before switching to the buy-side to lead Millennium Partners’ equities team.
Unusually, he then moved back to banking, as a managing director in Nomura’s prop trading division, Principal Strategies Group, in 2012. He stayed for just one year, however, before taking a role heading up equities at Bluecrest Capital Management in New York. He left in 2015 for a portfolio manager position at Hudson Bay Capital before signing up to Quantopian in June this year.
So, why move to Quantopian? “I’ve spent my career building the multi-manager business of hedge funds. We’re dramatically magnifying this – using the internet to scale a multi-manager hedge fund to a degree never seen before in the industry,” he says.
It’s also the chance to get into a business at the outset, he says. “I’ve always been interested in moving into a business where there’s a blank sheet of paper,” he says. “At Nomura, I grew the team from zero to 30 people, I joined J.P. Morgan’s equity derivatives team at an early stage and Millennium’s equities was at an inflection point when I arrived. Bringing my investment experience to Quantopian at this stage of the company’s growth is reflective of this.”
The data scientists, computer programmers and quants working on Quantopian can do so either full-time or as an aside to their regular job.
Hedge funds are currently struggling to find enough talent for these roles and many are having to come up with increasingly innovative ways to uncover new talent. Hedge fund Man Group AHL launched a coding competition last year, offering a $5k prize and a nine-week internship to the winner. Meanwhile, World Quant University – the educational arm of a hedge fund with the same name – offers an online Masters degree to aspiring quants.