We are proud and happy to announce that for the first time, we are live with four of your algorithms now managing external capital! Congratulations to DrKodiak and Jenia who got the first allocations. We keep getting great interest from investors from all around the world, and more investments will follow in the next months.
Thanks to all your hard work and your great algorithms, our community is now officially the first crowdsourced hedge fund in the world. After only 18 months of trading the competitions’ winning algorithms with our own money, you have delivered the proof of concept. Your results were so good that we had to open up the platform to institutional investors.
From now on not only the competitions matter. A consistent performance of your algorithm on live data will attract investments independent of your success in our competitions.
To improve your chances for an investment please keep in mind the five things investors are looking for. They want:
Highly scalable strategies that can handle hundreds of millions of investments. Keep building your algorithms for as many different markets as possible. A strategy that works for 50 futures can manage a lot more capital than a strategy for 1 future. The amount of money you can potentially make with your program is directly proportional to its investment capacity.
A long live history. Building up trust takes time. You should assume that it takes at least 6 months or more of forward testing your algorithm on live data before investors will start to put some trust in the results.
High risk-reward ratios. The Sharpe Ratio is our central risk reward ratio, and it is the performance number that matters most for investors. A high Sharpe Ratio on live data is your best guarantee for an investment.
Diversification and low correlation. Investors are looking for trading programs that are not correlated with their other investments. Algorithms with a low correlation to the stock or bond market have a higher chance of getting an investment, even at a lower Sharpe Ratio.
No overfitting. It can be very tempting to squeeze out the last little bit of performance on historical data at the cost of more complexity. However, all too complex models often fail on live data. Sharpe Ratios in the range of 1-2 at a lower complexity often prove to be much more robust out of sample. Investors care about consistent results.
Congratulations again to all of you. This is a big step for us and the hedge fund industry as a whole.
Keep up your great work, and good luck in the Q7
Martin and the Quantiacs Team