How To Start A Quant Hedge Fund?

Are you interested in starting a quant hedge fund? If you want to start a quant hedge fund, you should read this post. First you need to become a successful quant trader. Only then starting a quant hedge fund makes sense. Quants are people who have PhDs in maths, physics, stats and finance. These people get high salaries on Wall Street. Their sole job is to make quantitative trading models that can beat the markets consistently. Beating the market is not easy. But some people do it. These people who can consistently beat the market and high returns are known as Market Wizards. If you want to know how, you should read this post on Market Wizards by Jack Schwager.

So you should have a track record of consistently making a return that is higher than the market return before you start your hedge fund.  There are many people who are successfully running their hedge funds. But there is no guarantee that your fund will always beat the market. There are many hedge funds that went bust in their quest to make high returns in a short period of time. So it will heavily depend on your skills when it comes to starting and running a hedge fund. Did you watch the Paul Tudor Jones infamous Trader Documentary?

Difference Between A Traditional Hedge Fund And A Quant Hedge Fund

So let’s start with what’s the difference between a quant hedge fund and a traditional hedge fund. A quant hedge fund solely trades quantitative trading strategies while a traditional fund can use no quantitative strategies.

The Most Successful Quant Hedge Fund

Watch this interview with the CEO of Medallion Fund John Simon. Learn how a mathematician became a billionaire hedge fund manager. Medallion Fund is one of the most successful algorithmic trading quant hedge fund. It is not open to public. Medallion Fund has been making around 80% annualized return before fees for many years now. So it has a consistent track record.

The goal of quant trading is similar: to build models that find signals hidden in the noise of the markets. Often they’re just whispers, yet they’ll help predict how the price of a stock or a bond or a barrel of oil might move. The problem is complex. Price movements depend on fundamentals and flows and the sometimes irrational behavior of people who are doing the buying and selling. You can read the full story of Medallion Fund and how it works by clicking the above link which will take you to a recent Bloomberg article.

Now if you are a successful trader, it doesn’t mean you will be able to run a hedge fund. The trading strategies that work for small capital most of them fail miserably when these strategies are used with large capital. If the market gets the info that Warren Buffet is planning to buy $2 Billion worth of shares of company ABC, the price will appreciate before he is able to buy any stocks of that company. So you have to be always secretive about your trading strategies.

This is what these people do. They buy these stocks in chunks so that no one can figure out what is happening. Developing quantitative trading strategies requires a lot of patience. Once you have a successful quantitative trading strategy, you need to keep it a secret. The moment it gets known to other people it stops working. This is the precise reason that the Medallion Fund has never disclosed its quantitative trading strategies. All those who work for this fund have to sign a non disclosure agreement that practically forces them to keep their mouths shut about its proprietary strategies.

How College Kids Are Now High Frequency Trading From Their Dorms

College kids are doing algorithmic trading from their dorms. This is a very interesting article on how college kids have become master high frequency traders. College students are beating professionals in their game. You must have heard about Quantopian? It is a online algorithmic back testing platform that has become very popular in recent years. It’s membership swelled from 35K to 60K in one year. Another popular online quantitative trading platform is QuantConnect. Algorithmic trading is not rocket science. Most of these college kids will get hired by quant hedge funds and in few years will start their own quant hedge funds. Meet this 17 years old hedge fund manager.

This 17 years old hedge fund manager is being interviewed by Fox Business!

How To Start A Hedge Fund?

Now you have met with a 17 year old hedge fund manager and you will be eager to start your own hedge fund. Let’s start by watching this video by the Hedge Fund Startup Guru.

Now the video below is also about how to start a hedge fund, lessons from a professional. Learn how much capital you will need to start a hedge fund. Don’t think it will be in a few thousand dollars.

Now these were some interesting videos that we could find on the topic of how to start a quant hedge fund. We are not interested in starting a hedge fund. We believe in trading our own money. If we lose we are only losing our own money not someone’s else. Well this is our opinion. Trend following is the trading strategy that has been used to make millions in the market. Read the post on how to do trend following and make millions in both up or down market.