I recently came across the name Sam Barnett. He is a 24-year-old founder of a quantitative hedge fund (SBB Research Group) with more than $100M under management. He started the fund after his Sophomore year at college, and the fund started trading on Feb 15, 2011.
His story is pretty amazing. He developed a quantitative trading model while studying applied math at CalTech, model performed very well, his college professor introduced some investors to him, and he started his fund before his junior year with $2M assets under management. Oh he is also an internationally-ranked tennis player, has a black belt in Karate, and is pursuing his PhD at Northwestern at the same time.
One very interesting thing is that apart from using backtesting to develop new strategies, his hedge fund develops strategies from a theoretical perspective. These strategies are theoretically able to perform in all kinds of markets, even in conditions that have not happened before. That’s pretty interesting.
On his trading strategy, he revealed the following
- His systems collect a variety of data: pricing, economic indicators, news events, etc.
- His self-learning model makes predictions of stock prices over a business quarter (90 to 110 days), and rates stocks from zero to 100.
- For highly rated stocks, the system will either buy call options or sell put options. The lower the rating, the more a combination of puts and calls are used.
- Typical holding period is 90 to 110 days, but many positions are traded more frequently.
- Portfolio comprises of thousands of options contracts that are highly diversified.
- 2011: 4.6% vs -5.5% for S&P
- 2012: 15.4% vs 13.4% for S&P