Attracting Quants to Hedge Funds With $100,000 in Prize Money

As financial firms compete with Silicon Valley for a limited supply of data scientists, the $38 billion hedge fund Two Sigma came up with a novel way to attract such talent: offering $100,000 in prize money along with a chance to demonstrate their skills.

Two Sigma created its new partner Kaggle—an SF-based community of data scientists who both collaborate and compete to write machine-learning algorithms.

Bloomberg described Two Sigma’s three-month contest in which 730,000 data scientists work to create a predictive trading model using four gigabytes of financial data. The seven best performers will get cash prizes.

Kaggle’s work with Two Sigma is the first time it has asked users to develop algorithms that closely simulate financial markets. The quants hunt for predictive trading signals without knowing what asset class or securities they are evaluating.

About 40% of these data scientists are in the US, followed by the EU, India, and China. Eastern European data scientists are among the top-ranked, and Moscow has the largest Kaggle meetup group in the world.

Engineer Ben Hamner and econometrician Anthony Goldbloom started Kaggle six years ago to attract data science talent to analytics and predictive modeling competitions. Projects that quants have completed for them include:

  • Monitoring species of plankton from images
  • Measuring cardiac functions
  • Optimizing flight routes based on traffic and weather
  • Modeling the likelihood of patients to be hospitalized within the next year

Other financial firms are also hosting competitions to find the next generation of quants. WorldQuant manages $4.5 billion and collaborates with MIT in contests to build algorithms.

Another company is Quantopian, Inc.—an online platform that has about 90,000 coders creating and running trading algorithms. Point72 Asset Management invested in Quantopian.

As Two Sigma’s Kartik Raghavan told Bloomberg, there is a shortage of people looking at economic data. Money and prestige is certainly one way to attract them. Raghavan said that he has even seen Kaggle rankings on resumes, indicating that its approach is highly successful in drawing top talent.

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