San Francisco-based hedge fund Numerai (CRYPTO: NMR) has secured a commitment of up to $500 million from JPMorgan Asset Management (NYSE:JPM), potentially more than doubling the firm's size.
What Happened: Numerai currently manages about $450 million and expects the new capital to be deployed over the next year.
Founded in 2019, Numerai operates an unconventional model that sources stock-trading strategies from freelance quantitative analysts, according to Bloomberg.
Participants submit ideas using the firm's proprietary platform and stake its native token, Numeraire (NMR), to demonstrate confidence in their forecasts.
Successful contributors are rewarded with additional tokens, while underperforming models lose value.
Numerai then builds long-short equity portfolios based on these aggregated signals.
The commitment from JPMorgan follows a year of strong returns. Numerai posted a 25% gain in 2024 after a 17% loss in 2023, with positive monthly performance recorded for 15 consecutive months.
"People don't really want to invest until there's a track record," Numerai founder Richard Craib said. "And when you're doing something super unusual and different, like we are, they might wait even longer before they get excited."
A spokesperson for JPMorgan declined to comment.
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Why It Matters: Numerai's approach reflects broader Wall Street trends, including artificial intelligence, crowdsourced trading, and crypto-based incentives.
The firm provides anonymized data on roughly 6,000 global stocks, requiring users to rely on machine learning to generate predictions.
Unlike traditional funds, the structure allows virtually anyone to participate, with minimal costs for onboarding new contributors.
Despite its innovative model, crowdsourced hedge funds have faced challenges.
Quantopian, a similar startup backed by Steve Cohen, shut down in 2020 after weak returns.
Numerai itself experienced setbacks but adjusted its strategy by cutting losing positions more quickly and focusing on higher-quality contributors, leading to its rebound.
The Numerai One fund has delivered positive results in most years since launch, including a 20% gain in 2022 during a broader market downturn.
It is estimated to be up around 6% net of fees so far in 2025, compared with a 7% return for Aurum's index of quant equity market-neutral funds.
Craib compared Numerai to multi-strategy hedge funds like Millennium Management but noted its cost advantage.
"It's the question of waste: Did you really need to suck up that much capital and talent to make a hedge fund?" he said.
Numerai recently repurchased $1 million of its NMR tokens to support staking rewards and maintain liquidity for participants.
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