Super trader Steven Cohen has a lesson for the robots and, in a simple terms, has a ‘robot college’ to teach them how to think like successful money managers. (note: if those traders are so smart why are they helping replace themselves?) Automating the decision process of highly successful discretionary traders would seem like training a cat to sit up and roll over. Oh well, good luck to Steven and if the “automated traders” have bad days can he just yell at them? Interesting endeavor.
(Bill Taylor) CEO
“Steven A. Cohen got rich by going with his gut on big trades. Now the billionaire trader is experimenting with another path: automating the decisions of his best money managers.
Cohen’s Point72 Asset Management, which oversees his $11 billion fortune, is parsing troves of data from its portfolio managers and testing models that mimic their trades, according to people familiar with the matter.
The wave of automation that’s sweeping finance, initially relegated to taking over mundane tasks, is starting to encroach the ranks of prized money managers who are among the industry’s highest paid. Cohen is pursuing this effort after producing his second-worst year as a trader and as he prepares to return to the hedge fund industry at a time of intense investor pressure on fees.
Unabashed in his view that the industry is short of talent, Cohen has ramped up the project over the past year or so, said the people, who asked not to be named discussing internal matters.
Using analyst recommendations as an input, the effort involves examining the DNA of trades: the size of positions; the level of risk and leverage; and whether an investment was hedged, said one of the people. It also entails looking at the timing of trades, assessing pricing and liquidity in the market, and the duration over which managers build positions.
The model will identify patterns and relationships based on those analytics and seek to replicate bets, the people said. Point72 is also experimenting with automating the work of its execution traders, who place buy and sell orders with brokers on behalf of money managers.
Read Full Post at Bloomberg