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Renaissance Technologies is a hedge fund management company. Started in 1982 by James Simons, Renaissance currently has approximately $20 billion in assets under management. [1] Since 1989, the company's $5 billion Medallion Fund has averaged 35% annual returns[2][3], after fees and its flagship Medallion Fund is viewed as one of the most successful hedge funds.[2] Because it is so successful, it charges a 5% management fee and a 36% incentive fee.[4] A measurement of the risk (like beta, volatility, or leverage figures) which accompanied its high annual returns is apparently not publicly available. The company operates in East Setauket, Long Island, New York, near Stony Brook University. Administrative functions are handled out of offices in Manhattan.
For the 11 years ending in December 1999, Medallion’s cumulative returns were 2,478.6 percent. Among all offshore funds over that same period, according to the database run by veteran hedge fund observer Antoine Bernheim, the next-best performer was George Soros’ Quantum Fund, with a 1,710.1 percent return.[5]
Investment strategy
For over two decades, Simons' Renaissance Technologies hedge fund, which trades in markets around the world, has employed complex mathematical models to analyze and execute trades--many of them automated. Renaissance uses computer-based models to predict price changes in easily-traded financial instruments. These models are based on analyzing as much data as can be gathered, then looking for non-random movements to make predictions.[4]
Renaissance employs many specialists with non-financial backgrounds, including mathematicians, physicists, astrophysicists and statisticians. About a third of the more than 200 employees at the East Setauket office have Ph.D's.[4]
Like many other quantitative funds, their RIE Fund had difficulty with the higher volatility environment that persisted throughout the end of summer 2007. According to an August 10th article in Bloomberg by Katherine Burton, "James Simons's $29 billion Renaissance Institutional Equities Fund has fallen 8.7 percent so far in August when his computer models used to buy and sell stocks were overwhelmed by securities' price swings. The two-year-old quantitative, or 'quant,' hedge fund now has declined 7.4 percent for the year. Simons said other hedge funds have been forced to sell positions, short-circuiting statistical models based on the relationships among securities."[6]
On September 25, 2008, Renaissance wrote a comment letter to the Securities and Exchange Commission, discouraging them from implementing a rule change which would have permitted the public to access information regarding institutional investors' short positions, as they can currently do with long positions. The company cited a number of reasons for this, including the fact that "institutional investors may alter their trading activity to avoid public disclosure". [7]
Noted instruments
The Medallion Fund historically has traded non-stock instruments and is international in scope. American-traded instruments include commodities futures (energies, corn, wheat, soybeans, etc.) and US Treasury bonds. Foreign-traded instruments include currency swaps, commodities futures, and foreign bonds. The Medallion Fund has its own internal trading desk, staffed by approximately 20 traders, and trades from Monday opening bell in Australia through Friday closing bell in the US. Its origins date to the late 1980s, and it is believed to have essentially subsumed the trading positions and intellectual property of James Ax's[8] Axcom Trading Advisors after that company's dissolution in 1992.
The Nova Fund historically has traded NASDAQ stocks only, executing purely electronically, with a desk staffed by 1-2 traders overseeing operations. In the mid-1990s, Nova was one of Instinet's largest volume customers. On one day in 1997 Nova executions accounted for 14% of the share volume of the NASDAQ.[citation needed]
The Renaissance Institutional Equities Fund, started in mid-2005 is being offered as a "mega-fund" for institutional investors; reportedly it has a capacity of up to $100bn.
Renaissance runs a number of other funds in various markets, including mortgage-backed securities and funds of external managed funds like the Renaissance Return Fund.
Key Personnel
- Jim Simons, Founder, President & CEO
- Stephen Daffron, Chief Operating Officer, Managing Director
- Gudjon Hermansson, Production Manager, Medallion Fund. Stony Brook University, PhD, Computer Science, 1993
- Henry Laufer, Vice President of Research
- Robert Lourie, Head, Futures Research
- Nathaniel Simons, Principal
Renaissance Alumni
- Alexander Astashkevich - Research, Medallion Fund, committed suicide in February, 2006 [9]
- James Ax Founder of Axcom Trading Advisors, predecessor to the Medallion Fund
- Elwyn Berlekamp - president of Axcom Trading Advisors, predecessor to the Medallion Fund
- Leonard_E._Baum the coauthor for the Baum-Welch_algorithm, built early trading models for Axcom Trading Advisors[4]
- Robert J. Frey, 1992-2004 - Managing Director Emeritus
- Nick Patterson, Research, Medallion Fund; noted chess player, formerly with the UK's GCHQ; now at MIT's Broad Institute
- Kresimir Penavic, Research, Medallion Fund (retired)
- Alkes Price, Research, Medallion Fund; now at Harvard
- Peter J. Weinberger (the "w" in AWK), Medallion Fund, left Renaissance for Google in 2003
Footnotes
External links
