A small Boston startup with a novel approach to investing got a $250 million vote of confidence Wednesday.
That's how much famed hedge fund manager Steven Cohen gave Quantopian to invest using complicated trading algorithms it crowdsources from experts such as mathematicians and scientists. Cohen is Quantopian's first major client and marks a big leap for the five-year-old company, which until now that been testing its trading strategies using its own money.
"This is a watershed moment for the entire industry. Steve Cohen, one of the most storied and successful investors, will be supporting investment algorithms produced by Quantopian's community," John Fawcett, chief executive of Quantopian, said in a statement.
Fawcett has described Quantopian as community where "nerds and hackers write code that is then used to trade stocks and invest." The company says its 85,000 members include nuclear physicists, data scientists, students, developers, financial professionals and professors.
The authors who develops a successful investment strategy will get royalty payments based on investment gains.
Cohen was one of the country's most profitable money managers and formerly ran SAC Capital Advisors. But the firm ran afoul of regulators in 2013, when it had to pay a record $1.8 billion fine over insider trading charges. The Securities and Exchange Commission alleged Cohen failed to supervise his employees. Some regulators had wanted Cohen barred for life from managing outside money. But in a settlement reached with the SEC earlier this year, Cohen will be able to return to the investment management business in two years.
Cohen founded Point72 Asset Management, to manage primarily his family's wealth and is estimated to have about $11 billion in assets under management.
His firm's venture capital arm, Point72 Ventures, LLC, which gives early stage funding for data mining, artificial intelligence, and machine learning, is also investing $2 million into Quantopian to help it grow. The Wall Street Journal first reported Cohen's investments.
"This deal is exactly what we had in mind when we launched Point72 Ventures," said Pete Casella, the co-leader of the firm.
Under the deal, Quantopian will get an increasing amount of the $250 million pot to invest for Cohen as the company meets certain performance goals.
"The scarce resource in quantitative investing is talent," said Matthew Granade, the leader of Point72 Ventures. "Quantopian has demonstrated an innovative approach to finding that talent."
Deirdre Fernandes can be reached at deirdre.fernandes@globe.com. Follow her on Twitter @fernandesglobe.