Steve Cohen Is Betting Big On This New Algorithmic Trading Strategy

Point72 Asset Management's Steven A. Cohen, the billionaire investor operating under a two-year ban from managing others' money, is putting $250 million of his own funds under management with Boston-based startup Quantopian, and has bought a $2 million piece of ownership in the algorithmic trading platform.

It's a major profile booster for Quantopian, which last reported managing just $5 million in investments through its trading platform.

Quantopian is unusual among algorithmic hedge funds in that it does not rest its trading strategy upon proprietary algorithms developed in-house. Instead, the firm's crowdsourcing model allows it to vacuum up trading algorithms from a global community of over 85,000 contributors. The algorithms they submit are able to plug into Quantopian's massive data sets, and the company vets strategies in a test environment.

Those that perform well get access to capital allocations and the algorithm authors reap a share of any returns. 

The $250 million investment is Cohen's biggest public vote of confidence yet in algorithm-driven trading, variations of which are also known as quantitative strategies or systematic CTAs. Cohen is set to emerge from a two-year ban on managing others' money in early 2018, the result of insider trading charges against SAC Capital Advisors, Point72's predecessor firm. (Cohen himself was not criminally charged.) 

The ownership interest in Quantopian is the first publicly announced investment by Point72 Ventures, Cohen's venture capital firm that launched in March. The deal, along with recent news of a massive office lease he's signed in Manhattan's Hudson Yards development, signals Cohen's major ramp-up for a return to managing other's money.

"It definitely seems like he's coming back with a quant twist," said Bartt Kellermann, the CEO of the quantitative investing conference series Battle of the Quants. "It's an investment that could make a massive impact on the quant world by nurturing those different strategies."

In 2014, Cohen spun out his own quantitative strategy portfolio, Cubist Systematic Strategies. The portfolio does not report assets separately, but Cohen's net worth is estimated at over $11 billion.

Cohen's top five publicly traded holdings through his own funds at the end of March were Facebook (FB) , Alphabet (GOOGL) , Netflix (NFLX) , Zoetis (ZTS) , and  ConocoPhillips (COP) , according to filings.

Facebook and Alphabet a holding in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells GOOGL and FB? Learn more now.

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