Longtime Quant Specialist Offering AI Play
The founder of alternative data-technology company CloudQuant is starting a hedge fund that would employ machine-learning tactics.
Working via his newly formed Sentinel Point Capital, John “Morgan” Slade is aiming to launch the vehicle in May or June with at least $100 million. His staff consists of 7-8 professionals who have been running two separate accounts within CloudQuant since January 2019, and will continue to use that firm’s tools for the new vehicle.
Slade, known for running high-frequency trading programs at managers including Wolverine Trading, Citadel and Millburn Ridgefield, holds the title of chief investment officer at Sentinel Point. He still serves as chief executive of CloudQuant.
Sentinel Point’s two separate accounts invest in U.S. equities and exchange-traded funds. The plan is to broaden into non-U.S. stocks and futures over the next two years.
Using leverage equal to four times equity, the existing portfolios generated a return of 21.25% after expenses but before fees as of Jan. 31. Chicago-based Sentinel Point is telling prospective investors in its commingled vehicle that 82% of the profits reflected alpha generation, with only 18% coming from market beta. The accounts have produced a Sharpe ratio of 1.6, with volatility of 11.8%.
Sentinel Point runs one of those books for Kershner Trading chief executive Andy Kershner, who is an investor in CloudQuant. It manages the other for a family office in New York.
CloudQuant’s services include tools that allow investment firms to more easily incorporate alternative trading data from outside sources into their own processes. Sentinel Point, in turn, has standardized artificial-intelligence techniques to allow its staff to quickly turn unusual datasets into profitable trading strategies.
For example, the firm has developed an automatic mechanism to avoid “overfitting,” an occurrence in which investors’ algorithms learn to wrongly interpret random fluctuations in their sample data as having relevance to new data. The operation also expects to take advantage of researchers worldwide who have been developing trading algorithms for CloudQuant.
While Sentinel Point’s fees aren’t settled, early limited partners are likely to pay an amount equal to 20% of gains without a management fee.
Slade formed CloudQuant in 2016. He was at Wolverine from 2012 to 2015, and during that time developed the proprietary trading firm’s high-frequency equity market-making business.
Before that, Slade headed trading of equities and equity-index products at Allston Trading for two years. He also founded and led an ETF market-making business at Citadel, led institutional trading at Penson Worldwide, worked as a portfolio manager at Carlson Capital, led a group within Merrill Lynch’s proprietary trading unit and served as a director at Millburn Ridgefield.