April 11, 2016 Yerba Buena Center San Francisco CHECK:
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Clay pottery decorates the halls of a thatched, single-story adobe home in the desert town of Las Cruces, N.M. Out back, where scrub brush stretches into the arid plain between the mountains and the Rio Grande, is a 50-foottall wireless Internet tower.
Roger Hunter is in the kitchen, grinding hand-roasted coffee beans. The 66-year-old former math professor turned investor apologizes if he appears a bit out of sorts. As chief technology officer of a two-man startup called QTS Capital Management— his partner lives in Canada—hunter pulled an all-nighter fixing a systems glitch.
It’s a long way from Wall Street, but for Hunter and investors like him, being apart from the frantic activity of New York is an advantage. “This is particularly true when developing code and exploring new strategies,” he says. His strategies are all automated and might include trades on anything from currencies to hog futures to options on market volatility.
With little more than open source software and an Internet connection, Hunter is one of a new breed of traders breaking into quantitative investing. Quants, as they’re known, crunch a dizzying amount of data from across global markets and write programs to trade on the patterns they spot in asset prices. Powerhouse firms such as AQR Capital Management and Citadel have used fast computers and closely guarded algorithms to try to beat the market, and analysts estimate the 40-year-old industry runs more than $1 trillion in assets. Now low-cost, highpowered technology is razing virtually every barrier to entry.
The rise of DIY quants comes as the proliferation of machine-based strategies has made it harder for traditional players to succeed. In January, Martin Taylor of Nevsky Capital closed his 15-year-old hedge fund, lamenting the distorting influence of computer traders. But established quants, too, are feeling the heat. “Technological edge is harder to come by because the more egalitarian these tools have become, the more difficult it is to come up with something truly new,” says Andrew Lo, a finance professor at MIT and
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