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chairman of Alphasimplex Group, a quant research firm.

In other words, the growth in traders using quant strategies also tends to diminish easy profits, says David Mclean, a finance professor at Depaul University. He cites research showing that three years after an academic paper on an automated strategy is published, returns based on that strategy fall by more than half as more traders catch on. Meanwhile, as more quant traders vie for an edge, some envision a world where so many algorithms are unleashed on electronic markets that sudden shocks—such as August’s meltdown in U.S. stocks—become more frequent.

While it’s difficult to know precisely how many quant startups there are, Quantopian, a Boston-based firm that provides coders the tools and software they need to build quantitative trading programs, has seen its user base climb to 66,000 from 1,570 in 2011, the year it started.

Open source coding languages such as R and Python, which are building blocks for critical number crunching, are posted for free on online libraries. Boutique services such as Estimize provide crowdsourced earnings estimates. “There’s so much data, so much open sourced software and computing power available,” says Emanuel Derman, director of Columbia University’s financial engineering program and the former head of quantitative risk strategy at Goldman Sachs.

Back in Manhattan, the elite hedge funds still rule, having built up the status and the reputation that come with years of outsize returns. Point72 Asset Management’s Midtown-based quant business, with its large glass conference rooms and white walls adorned with founder Steven Cohen’s personal art collection, looks and feels nothing like a startup.

And according to Ross Garon, the head of Point72’s quant shop, big firms have little to fear from smaller competitors. They still have the best technology and brightest minds (not to mention the most money). “The democratization of tools doesn’t necessarily mean there’s the democratization of good judgment of what to research,” he says.

Despite those disadvantages, Hunter and his partner, Ernie Chan, who works from Niagara-on-the-lake in southern Ontario, have held their own. QTS returned 12 percent last year, outstripping the U.S. stock market and the average for hedge funds globally. It runs $22 million for individuals and one large family fund.

To keep costs low, QTS uses a service called Algoseek to get access to price data for futures, pulling in an “astronomical” amount of information for $500 a month. Hunter himself wrote the code that QTS’S options trade on. The firm employs part-time contractors and uses tools such as Amazon Web Services to augment its computing capacity when a laptop won’t do the trick.

Billion-dollar-plus firms might not worry about two guys running a few million dollars. But “there’s a threat they’re missing,” says Dan Dunn, who oversees product management and membership at Quantopian. “The reality is there are brilliant people all over the world who they have never seen or heard of until they show up and eat their lunch,” Dunn says.

Then again, all those brilliant minds sometimes trip over one another. Jpmorgan Chase’s Marko Kolanovic pointed to the role of crowded quant trades in the events of August, when U.S. stocks plummeted 11 percent in six days. Many blamed China and the Federal Reserve. Kolanovic told clients automatic selling by “price-insensitive” quants made everything worse.

Where Kolanovic sees danger, Hunter senses opportunity. On any given day, he tests 10 different models while executing eight strategies for clients. He and Chan are considering developing code to profit from distortions that show up in managed futures when too many quants trade the same strategies. “We’ve thought about trying to take advantage of it, certainly if the algorithm is clearly affecting the market,” Hunter says. �Dani Burger

trillion Estimated assets invested in quantitative strategies The bottom line Computer-driven trading strategies are easier than ever to execute, but that may chip away at their profitability.

Chinese Wall Streeters who’ve decided to go back to their home country. They were drawn to the U.S. to study at top business schools or earn salaries they could never get in China. Now, U.S. firms are cutting bonuses and positions. And while financial concerns are mounting in China, many of these ambitious expats say they were hitting a career ceiling in the U.S. Meanwhile, China’s economic growth, while slowing, is shifting into areas that could benefit bankers.

China is developing beyond laborintensive manufacturing, which means “a huge demand for good brains,” says Cao Huining, a professor of finance at the New York campus of Beijing’s Cheung Kong Graduate School of Business. “A lot of people see better career paths in China than in the U.S., where they probably could just make a mediocre living,” he adds.

The Chinese have a name for returnees: hai gui. In Mandarin the phrase means “return across the sea,” and also sounds like the word for sea turtles. The turtles of finance first started swimming back in 2008, when Wall Street erupted in crisis. They were prized in China for their understanding of both Western business practices and the nuances of Chinese culture. Some joined China’s financial regulators.

The latest round of returnees faces a different environment. The government is encouraging entrepreneurship, and the country has created some of the world’s most valuable startups, including smartphone manufacturer Xiaomi and peer-topeer lender Lu.com. Venture capitalists poured a record $37 billion into China last year.

Chinese lenders are scrambling to expand their trading desks as the yuan moves fitfully toward becoming a global currency. The International Monetary Fund recently added the yuan to its basket of reserve currencies, a move Barclays estimates could increase global demand for the yuan by as much as $300 billion by 2020, even though the currency has weakened since August.

“In China, the sky is the limit,” says Su, executive director at First Seafront Fund in Shenzhen. Su got an MBA from the University of Rochester. After four years as a Vanguard Group analyst in Pennsylvania, he sold his two- story house and moved his family to China in October. “In a mature market like the U. S., you have to wait for a long time for opportunities,” he says. “I didn’t know when my turn would come.”

And then there’s all that ice hockey talk. “It is just very hard to crack that because you don’t grow up in that kind of culture,” says Zhou, 40, who worked as an equities analyst at Manning & Napier in New York and Green Street Advisors in California. “How many Chinese play such sports?” He has joined Ctrip, China’s biggest online travel company.

Guo, 29, worked as an analyst for two years at CBRE Group, the world’s largest property services company. Like many Chinese, he’s an only child and wants to be near his parents as they age. Now he’s with a state-owned insurance firm in Shanghai.

None of the men complained of discrimination, although they felt it was easier for Americans to advance in the U.S. Statistics suggest there are barriers to top jobs for people of Asian descent. Asian Americans, some 6 percent of the U.S. population, make up only 2.6 percent of the corporate leadership of Fortune 500 companies, according to a study by Diversityinc.

Meanwhile, the offers in newly wealthy China are increasingly attractive. You can get housing subsidies and even a driver “if you are a top talent in the market,” according to Zhu Yiyong, director of human resources at Ping An Securities. The company will add as many as 30 jobs from overseas recruitment this year, Zhu said at a job fair in New York in November.

The picture isn’t entirely rosy, not only because some returnees must take care of aging parents. A stock market rout last summer wiped out more than $5 trillion. The government targeted the finance industry with arrests and investigations. Some experience a minor culture shock. “I’m used to the American style of planning ahead,” Su says. Meetings in China are often impromptu, “and people tend to be late,” he says. He also notes that house prices in Shenzhen rose 50 percent in the past year.

Tony Wan, a Chengdu native who worked as a quantitative analyst in New York until recently, says he doesn’t worry about the change. “The chaos is a good thing, because it means more opportunities,” Wan says, declining to name his new employer.

Still, not all sea turtles have swum back for good. About 5 percent of them will go abroad again because they’ll find it harder to fit into their home country than they realize, according to recruitment consulting firm Michael Page. Some will spend their time between their two countries. These people have their own name—seagulls, meaning those who remain uncertain which country is their home. �Bonnie Cao

The bottom line China’s economy is slowing, but its financial sector has boomed. Chinese with Wall Street experience are in high demand.

the past decade. Rybolovlev has alleged, in a complaint to authorities in Monaco, that Bouvier not only collected a fee for his art sales but also misrepresented the price at which sellers were willing to give up their works—pocketing, in some cases, what amounted to an undisclosed markup of tens of millions of dollars.

Now, U.S. federal prosecutors, following the lead of European authorities, have opened an inquiry into Bouvier, according to people familiar with the matter. Bouvier, who operates out of the Geneva Freeport, a vast, tax-free complex of warehouses for art and valuables in the Swiss city, has said that he’s done nothing wrong and that he charges what the market will bear.

One work in question is Modigliani’s Reclining Nude With Blue Cushion, which Rybolovlev bought for $118 million from hedge fund manager Steven Cohen. Rybolovlev later discovered, during a lunch in St. Barts with one of Cohen’s dealers, that Cohen sold the work for $93.5 million.

The probe by the U.S. Department of Justice marks the first time federal authorities have gotten involved in a scandal that’s shaken Europe’s notoriously private ecosystem of art dealers, middlemen, and collectors. U.S. prosecutors are examining various art deals Bouvier struck, focusing on the extent to which he may have misrepresented how much he’d marked up artworks, people familiar with the matter say.

“We have not been contacted by the U.S. authorities and are unaware whether—or how—any such inquiry has been initiated,” says Daniel Levy, an attorney for Bouvier. “During the course of this commercial dispute over paintings, the other party has repeatedly attempted to use law enforcement to further his own private objectives.”

Levy pointed to Rybolovlev’s attempt in Singapore, where Bouvier is a resident, to freeze the dealer’s assets. An appeals court there denied Rybolovlev’s request, calling such an injunction “an abuse of the court’s process.” The court wrote that there may be a “good arguable case” that Bouvier acted dishonestly, but also that Rybolovlev and his representatives “received what they bargained for and at the price they were willing to pay.” It wasn’t clear, the court wrote, whether Bouvier had characterized himself to Rybolovlev as a broker, bound to look out for his client. A spokesman for Rybolovlev declined to comment, as did a U.S. Justice Department spokesman.

After Rybolovlev filed his complaint, Monaco police arrested Bouvier in February 2015 as he entered the lobby of Rybolovlev’s residence. He was released on bail. Bouvier denied the allegations that he’d misled Rybolovlev about the prices of works he was buying. In November a Monaco appeals court rejected Bouvier’s request to have criminal charges against him dropped.

According to the Monaco complaint, a Rybolovlev trust paid about $50 million more for the Leonardo than he alleges the seller received. However the dispute ends, Dianne Modestini, the restorer who helped bring the work to light, laments that it’s disappeared from public view, a common complaint when a work is acquired by a private collector. “When you own a painting such as this, you have a responsibility to hold it as part of the public trust,” she says. �Keri Geiger and Hugo Miller

The bottom line Federal prosecutors are taking an interest in a dispute over whether an art dealer profited by marking up prices.