Hedge Fund Virtualization: "The Network is the ATM"
The first part of the talk introduces the concept of "Hedge Fund Virtualization" and how this innovative financial technology will dramatically reshape the landscape of investment and money management that comes under quantitative finance driven by automated trading. Unlike traditional "Fund of Hedge Funds" (FoHF) or "Multi-Strategy Funds", a "Virtual Fund of Hedge Funds" (VFoHF) is a novel investment vehicle that explores a completely different part of the hedge fund design space. In particular, VFoHF breaks new ground in each of the following six dimensions: (i) algorithmic secrecy vs. overall fund transparency, (ii) portfolio configurability based on risk/return profiles, (iii) dynamic position sizing to actively tune performance in real time, (iv) customized fund liquidity (e.g., quarterly, monthly, weekly or daily), (v) reduced fund administration costs due to virtualization, and (vi) graceful M&A among member funds to improve overall survival rates as market changes with minimal disruptions to operations. The concept of virtualization will change how you view, operate, or invest in hedge funds, and challenges Wall Street incumbents with non-standard, flexible and disruptive "terms and conditions" under which investment services are packaged and delivered.
The second part of the talk peeks "under the hood" to examine the "nuts and bolts" of how everything fits together in realizing "Hedge Fund Virtualization." We will explore the concept of "Strategy Blades" (all with good Sharpe edges!), how they fit within the architecture of "The Matrix" (aka the "Money Grid"), and how they work together to differentiate along each of the six dimensions described earlier. This part of the talk will be conducted at a conceptual and architectural level, with ample illustrations and examples but without the use of formula, to encourage participation and discourse among a wide audience. Components of the underlying financial technologies are currently being developed and under testing at Space Machine, a Silicon Valley proprietary trading firm founded by a former U.C. Berkeley computer scientist with a passion for quantitative finance and an interest in fostering a community of quants in the Silicon Valley. For more information, please visit: www.spacemachine.net.
John F.C. Cheong is the CEO and founder of Space Machine, Inc., a proprietary trading firm with headquarters in the Silicon Valley and offices in Tokyo. John created the architecture and oversaw the construction of a complete investment management infrastructure that includes model design, strategy development, trade execution, and risk management. John is an active blogger on diverse topics related to: computational finance, machine learning, money, bitcoin, macroeconomics, mathematics, automation, automated trading, collaborative networks and architecture; and authored the blog series: "Trading Wall Street from Silicon Valley."
Prior to founding Space Machine, John was a Computer Scientist at the University of California at Berkeley from 1995 to 1998. John was an angel investor in a number of Silicon Valley start-ups: Interwoven, AdKnowledge, MySpace, ZipRealty, PurePayment, Digital Fountain, Bluelark Systems, Dante Software, Guitar Hero, A Bit Lucky, and DeCarta. He is the author of: “Internet Agents: Spiders, Wanderers, Brokers, and Bots” (1995). John received the Ph.D. and M.S. degrees in Computer Science from the University of Michigan in 1992 and 1988, and the B.S. degree in Electrical Engineering from the University of Texas at Austin in 1986.