Finance

Systematic trading firm Vatic is launching a new quant strategy, and it’s hired a former finance professor who worked at Citadel and D.E. Shaw to lead the charge

  • Vatic Investments has hired former Citadel and D.E. Shaw quant Allen Poteshman as CIO.
  • Poteshman, a former finance professor, will launch a new statistical arbitrage strategy.
  • Its the latest in a string of hires for the high-speed systematic trading firm.
  • See more stories on Insider’s business page.

High-speed quant trading firm Vatic Investments is launching a statistical arbitrage effort, and it has hired a former finance professor who worked at Citadel and D.E. Shaw to lead the charge as its chief investment officer.

Allen Poteshman joined Vatic Investments, previously known as Vatic Labs, last week to oversee its overarching investments but also to build out a new “stat arb” strategy, according to a statement released on Wednesday.

Poteshman, most recently a managing director in Citadel’s Global Quantitative Securities group in 2019, will report to Vatic founder and CEO James Chiu.

“Adding a professional of Allen’s caliber deepens an already extraordinary team and will allow us to combine our existing strengths in trade execution with an enhanced focus on research and financial analysis, creating a single system that embraces both short- to medium-term trading,” Chiu said in the statement.

Stat arb is a classic quant strategy that employs mathematical models, troves of data, and algorithms to take advantage of short-term market mispricing or trading errors, often betting that correlated groups of stocks will revert to historic norms.

Poteshman comes from academia, researching equity and options markets and teaching at the University of Illinois at Urbana-Champaign from 1999 to 2007. He holds Ph.D.s in finance and philosophy as well as a Master’s in physics.

In 2007, he left to join D.E. Shaw’s equity stat arb group, where he spent 11 years until joining Citadel in 2018.

Scott Grummon, who worked as in-house counsel at billionaire Steve Cohen’s SAC Capital and Point72 from 2001 to 2016, also joined Vatic as general counsel and head of compliance, according to the statement.

Vatic looks to expand

Vatic Labs was among a slew of systematic, high-speed proprietary trading firms to emerge as the dust of the financial crisis settled.

Chiu, who worked at prop-trading standout Jump Trading from 2008 to 2013, founded Vatic in San Francisco in 2014. Like other high-frequency shops that rely on cutting-edge technology and sophisticated algorithms to score trading profits, Vatic gained a reputation for secrecy, according to industry insiders.

But the firm, now based in New York, has been expanding its operation in recent years, taking outside capital and pursuing strategies that scale better than high-frequency trading. Vatic had raised $44 million across 19 investors as of May 2020, according to a Form D filing with the Securities and Exchange Commission.

It isn’t clear how much total outside money the company manages.

In early 2020 Vatic hired Todd Hohman, a long-time Goldman Sachs partner who held titles at the bank including cohead of global systematic market making and head of global quant vol. He was promoted to president and head of risk management earlier this year, around the same time the firm appointed Dave Handley as chief technology officer.

Before Vatic, Handley worked as head of research development at Citadel and as co-CTO at PDT Partners.

Chris Grabowski, a former research engineer also with Citadel and PDT, and Alexy Makarov, former head of quantitative research in options market making at Two Sigma Securities, also joined the firm, Vatic announced in February.

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