April 11, 2016 Yerba Buena Cen­ter San Fran­cisco CHECK:

M O C . N IG BLOOMBERGB­USINESSWEE­KDES

Bloomberg Businessweek (North America) - - Technology -

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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