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This latest QC blog post seems like a major reversal of business strategy in opening up the the alpha streams market to individual retail investors.
I'm a bit puzzled by this as previously the QC strategy was to target the institutional investment space and not the retail space, in order to build a trusted high quality institutional grade platform with institutional grade algos, and to also not compete with the retail "bot" sites.
May I ask why the change of tack?
Won't this change how institutional investment firms perceive QC and the alpha market ?
Or has it been determined that the retail space and demand for algos has grown so significantly in the last year, that it cannot be ignored?
Best,
ES.
Jared Broad
Hi Ernest,
Our vision was always to bring it to as many people as possible, but the investment and energy required to start up a two-sided marketplace like this were intense - so we eliminated one side and built a community of quants 2014-2018. 2018 we then tried to bootstrap the other side by focusing on the $1B+ funds. There were many signed agreements but there was simply not enough simultaneous competition for the same alphas to create the goal of a market for alpha.
We lowered this barrier to $10M+ AUM in late 2020 to attract a wider audience of funds and it worked fantastically; with liquidity increasing and the smaller funds loving the model. On checking with legal there is nothing stopping us from making it accessible to everyone, and many of the investors in the community have been trying to access the strategies for years, so we're optimistic sophisticated individuals will be net positives to the community.
We now realize pioneering an alpha market is like building a crypto exchange in early 2014. The best way to get widespread adoption is to open it to as many people as possible and let the early adopters push the market liquidity to critical mass, and then let the old school funds join the party when they're ready.
We expect the majority of the investors to be sophisticated investors or funds with $100k - 100M AUM, due to the processes we're setting up to license the alpha. The process won't be simple and we won't lower the barriers to submitting an alpha, so it should attract the right people on both sides.
The second issue we had with the previous model was a fixed subscription system, although simple, could not efficiently price the alpha as quants had no idea what price to set. Funds could license an alpha for $250 forever that was worth 10x that price. The new system is an auction for shares, very similar to a Google advertisement auction for views. Investors/Funds will bid and the winner of the bid will win their allocation.
I'm very excited by the new alpha market access and pricing. Its been a lot of fun designing this new evolution of the platform. I think it'll be great for those submitting strategies and should build more liquidity into the market, and most importantly give investors access to the strategies.,
Jared
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Grant Forman
thumbs up
The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.
Ernest Shaggleford
Hey Jared,
many thanks for clarifying the reasons for the shift.
I totally agree that opening this up should ramp up the market place liqudity and attract a lot of interest.
I'm also hoping that this will increase interest for options algos which I hope will help drive the maturity of these features in Lean.
Best,
ES.
The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.
Mykola Dobrochynskyy
Hey Jared,
Congratulations to the new Alpha Market model! It’s really great and exciting!
Best,
Mykola
The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.
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