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As far as Hayden Burgoyne is concerned, picking stock market winners is hardly rocket science.
And he should know. Burgoyne is a NASA engineer who spends his days plotting a mission to explore the moons of Jupiter. But at night, the 32-year-old is an amateur quant and part of an online community earning cryptocurrency for their stock-picking prowess.
Burgoyne and thousands of his peers crunch reams of market data for Numerai, a crowdsourcing firm with big early backers in hedge-fund billionaire Paul Tudor Jones and former Renaissance Technologies executive Howard Morgan.
It’s quant investing for the era of democratized trading.
“I have no finance background so it puts people like me on an equal footing with somebody with an economics PhD,” Burgoyne said from Los Angeles County, where he helps develop the spacecraft for an interplanetary project known as the Europa Clipper.
Without revealing their models, the contributors pick stocks they think will outperform in the coming month and make bets in online trading tournaments using a digital currency issued by Numerai. The San Francisco-based firm, established in 2015, then invests in the corresponding stocks.
Those picks from the likes of Burgoyne, a world away from Wall Street, have powered the market-neutral fund to a 9% gain this year through August. In 2020 it was up 8% when many storied quants faltered.
“By setting up the problem and being in charge of data people look at, we can get exactly the type of signal we want,” said Numerai founder Richard Craib. “Although they might not work individually, when you combine them altogether the increase in accuracy and performance is huge.”
With $45 million in assets currently, one pension fund could be set to allocate as much as another $130 million if the firm hits certain milestones, according to Craib. He declined to disclose further details because the information is private.
The wisdom of crowds. Digital assets. Quant models. It all risks sounding like the latest gimmick in an industry dealing with the exorbitant costs of in-house talent.
Meanwhile, there are well-known problems with trading market patterns purely based on statistical models, and it’s too early to tell if Numerai will sidestep them. There have been other crowdsourcing platforms — most notably Quantopian — who started with big ambitions but shuttered after failing to harvest consistently winning stock ideas from the masses.
But so far something is working for Numerai, perhaps thanks to a unique business model that is also riding the cryptocurrency boom.
Users like Burgoyne parse a whole assortment of data on 5,000 stocks from price history to valuation ratios, without knowing what the underlying metric actually is. Participants then score each security on how likely it is to outperform in the coming month, and bet on their own predictions with Numeraire, the digital token issued by the firm.
Those who do well get more…