Millennium & Point72 adding data centre expertise amidst questions over hedge funds' strategies
If you're a big multistrategy hedge fund using AI to generate alpha, or an electronic trading firm using AI to make markets and hedge trades, do you really need your own data centre? What if you just....rent space in one?
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With data centre capital expenditure expected to hit at least $800bn this year, different strategies are emerging with regards to data centre provisions. Some firms, like Jump Trading, QRT, XTX and Jane Street have data centres for their own use. Jump, for example, says it has three "large purpose built" research data centres. A data centre is being built for Qube in Iceland. XTX is building a data centre in Kajaani, Finland. Jane Street was reported to be in the early stages of building and financing its own data centre in June.
Less clear are the data centre strategies of major hedge funds. Millennium and Citadel declined to comment for this article and Point72 and DE Shaw didn't respond to a request to comment. But data centres are clearly on the agenda.
Earlier this year, for example, Millennium added Joseph Lenox from Citadel as its global head of data centres and Christian Blanc from Goldman Sachs as his apparent deputy. In London, it's just hired David Rosa Casado from Deutsche Bank as a network automation lead, focused on AI engineering. Similarly, Point72 hired Peter Deignan from Morgan Stanley as a data centre programme manager in January. Balyasny has had a global head of data centre management since last August, in the form of Kevin Monahan, who arrived from CBRE.
Where are these data centres? In current job ads, Millennium says it has two data centres in New Jersey. The location of other funds' data centres is less clear. There are suggestions that because major firms have investments in data centre providers like CoreWeave (Citadel, Jane Street), Nscale (Citadel, Jane Street, Point72) and because Point72's Turion fund is focused on data centres and AI investments, they may be able to secure preferential access to facilities and don't need their own sites. This has not been confirmed.
There are suggestions, too, that because firms like Citadel and Citadel Securities are partnered with Google Cloud, they don't need data centres of their own. Neither firm is believed currently to have its own data centre for this reason.
Running your own data centre requires talent. Jump Trading, for example, has hired three data centre engineers in the past month (Adam Motto from StoneX in New York, James Diley from Oracle in Texas, and Lalit Gangurde from Amazon in Mumbai). Jump is also advertising multiple data centre roles, including a data infrastructure planning lead.
Data centre jobs are fundamentally about real estate, which is presumably why Hadrien Karabachian, a vice president in BlackRock's real estate division recently became chief of staff at data centre provider Data4 in Paris.
Karabachian didn't respond to a request to comment for this article, but one industry insider suggested the physical nature of data centres is problematic for multistrategy hedge funds which are usually run on comparatively short time horizons.
Constructing a data centre requires a long-term commitment. Bloomberg reported in August, for example, that Jane Street had entered a 15-year lease on a data centre in Oklahoma.
Speaking off the record, one senior technologist with a history of working across the quant hedge fund industry, suggested these time horizons can be difficult for some multistrategy firms to handle.
"A pod shop pays its portfolio managers based on their own P&L after expenses and recovers its costs through the pass-through structure," he said. "But what happens when you realise you can't get the compute you want from AWS and so you have to build a data centre of your own. - How do you charge that forward cost to a pod when those PMs might not even be there to benefit?"
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