Recently came across ALGODEAL, which aims to provide us, quant traders, a platform to backtest and implement live automated trading strategies, as well as access to institutional money. This appears to be a promising development in the world of retail quant traders.
Quant Fund Management meets Crowd-Sourcing
In an adaptation of the web 2.0 model, the company aims to leverage the content (quant strategies) provided by their users. In order to attract these quant users, AlgoDeal do provide you the following:
- Free backtesting software: their proprietary java-based MarketRunner
- Free infrastructure: computer grid to run backtests and optimizations and low-latency data/exchange connectivity
- Free clean historical market data: covering 80 futures markets
- Access to institutional funds
And in good ol’ 2.0 fashion, this is still a beta platform…
The Business Model
The access to the software, infrastructure and market data is completely free; but the guys at AlgoDeal are not running a charity for hedge-fund-less quant traders…
For each backtest you receive a scorecard with each metrics evaluated (CAGR, Sharpe ratio, MaxDD, etc.) and a final score. AlgoDeal selects the best scoring systems and allocates its clients’ funds to the selected strategies.
This is done via a legal agreement that ties you for a fixed-term, but the ownership of the strategy remains yours.
And you get paid: 10% of the strategy profits (which would amount to 50% of the variable part in a typical 2/20 fee arrangement).
So you’ll need java if you want to use AlgoDeal’s platform. There are 2 options, you can either edit the strategies directly on the website or download MarketRunner and run it in your favourite IDE (the only real viable option..) such as Eclipse, etc.
The whole grid aspect is hidden from you: it should just mean that the backtests and optimizations that you submit online should be parallelized and run faster.
Regarding the execution side of things for live trading, AlgoDeal have entered into an agreement with QuantHouse to provide fast access to markets (proximity hosting, exchange connectivity with proprietary fiber optic network, etc.).
Finally, the historical data is all continuous contracts, rolled automatically (no mention of what rolling algorithm is used). They currently only provide daily data going back from 1999 but expect to go down to 1-min frequency in the coming months.
This is still a beta version and as a result things are still moving. AlgoDeal have a published Roadmap on the site which lists coming improvements over the next 3 months, such as risk management, improved money management, multi-strategy systems, etc.
The beta tag also means that this is not yet a final, stable release. One example of this last night: I could not get to run one of their canned quick start examples, simply getting the message:
Something went wrong! some backtests failed
However, the developers do seem to be responsive on the forum they maintain (they also communicate through their blog). There is also a fair deal of doc available.
This beta release is by invite only and new registrations seem to be closed for now. However I contacted AlgoDeal directly to request a special “blogger” invite, which they kindly obliged. They also mentioned that they would allocate 100 invites for you, my readers:
We can allocate an initial set of 100 logins to referrals from your blog, once they have left their email on our website ask them to send an email to firstname.lastname@example.org with in the subject line “On behalf of Jez’s blog”
Note: for the record, I am not associated with AlgoDeal in any way and I am not getting anything out of these invites. I just thought that sharing these might be of interest to you.
It is obviously not as sophisticated (yet?) as a “proper” backtesting platform such as Trading Blox, and I only played with AlgoDeal and their simple canned examples on the online editor. I assume there will be lots of progress and improvements in the coming months, before their proper launch (Q2 2010?).
I think the real selling point for serious quant traders is the “easy” access to institutional money, provided that the platform is flexible enough to implement “sophisticated” strategies. I am not sure whether long-term Trend Following strategies are the best way to get selected on this platform (backtest market data only goes back to relatively recent 1999, typical higher return volatility might be an issue, etc.)
In any case, this is a “free” way to get access to a large quant fund infrastructure and capital raising without the hassles and headaches that come with setting up your own fund or working for one (and looking a much better option than covestor, KaChing or collective2). I do not know how much external capital AlgoDeal have secured for fund allocation, but each strategy could be allocated between $100k to $10M, and the 10% share of profits makes it potentially an attractive proposition.
A platform and space to watch…