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Renaissance Technologies

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Re: Renaissance Technologies

#61

Post by billsnow »

thewarrior wrote: post #47
jjoonathan wrote: post #32

Earlier quoted context omitted.

> here's no outside investors in the Medallion fund anymore, so if it is a scam, they would only be scamming their own employees The "it's a scam" theory that I heard had nothing to do with it being a Ponzi scheme, instead it was about laundering high-tax income into low-tax capital gains while maintaining a plausibly deniable investment cover story. It didn't have to beat the market, it just had to beat regulators.…

But how exactly would this laundering work ?

I think he means that they funnel the income from fees into this "black box" fund and that's what creates the huge returns. My instinct would be that there's no way this would get past auditors, but then again, Madoff got away with cooked books, so it's plausible.

Re: Renaissance Technologies

#62

Post by gibybo »

jessriedel wrote: post #54
gibybo wrote: post #39

Note that RenTec also runs two other funds that are larger than the Medallion Fund, but both under perform the index. On a completely unrelated note, if I were interested in creating a fund that appeared to have market beating returns for decades and I wasn't concerned about the legal consequences, here's one way I might do it: I would create fund A and B and seed them with some initial capital. For fund A, I would c…

Just to make sure I understand you: the idea is that the excess returns of fund A above the index would be no larger than the under returns of fund B below the index?

Yes, but on a $ basis rather than a % basis.

Re: Renaissance Technologies

#63

Post by BoiledCabbage »

unlinked_dll wrote: post #52
gibybo wrote: post #39

Note that RenTec also runs two other funds that are larger than the Medallion Fund, but both under perform the index. On a completely unrelated note, if I were interested in creating a fund that appeared to have market beating returns for decades and I wasn't concerned about the legal consequences, here's one way I might do it: I would create fund A and B and seed them with some initial capital. For fund A, I would c…

I mean if you want to not go to jail all you really need to do is beat the market by N% and take that as your fee. If N is sufficiently low you can probably do it by aggressively balancing the portfolio every 2-3 years, such that it functions like an index fund but with adjustment to cut out losers. There are plenty of folks out there that will do this for you. Just don't get greedy.

Uh, if all it took to beat the market was consistently rebalancing your portfolio everyone would be doing it. It takes more than that to consistently beat the market.

Re: Renaissance Technologies

#64

Post by rbavocadotree »

gibybo wrote: post #39

Note that RenTec also runs two other funds that are larger than the Medallion Fund, but both under perform the index. On a completely unrelated note, if I were interested in creating a fund that appeared to have market beating returns for decades and I wasn't concerned about the legal consequences, here's one way I might do it: I would create fund A and B and seed them with some initial capital. For fund A, I would c…

It's an interesting idea, but in this case Fund B only came into existence after 15+ years of market beating performance by fund A.

A funny thing from the recent book: One of Rentech's earlier employees spent his first few months there trying to figure out what the scam was.

Re: Renaissance Technologies

#65

Post by deepnotderp »

Someone's going to say this eventually, so it may as well be me.

Rentech is not the only hyper successful fund. There are others, like TGS management (https://www.google.com/amp/s/www.cnbc.com/amp/2014/05/09/mys...) that are just as successful and who you've never heard of.

What rentech has done is to have built an excellent data processing engine that automatically extracts signal from noise. Other, much more secretive, funds have done this too.

Re: Renaissance Technologies

#66

Post by sbu_throwaway »

Here's some inside baseball:

I recently graduated from Stony Brook University where Jim Simons chaired the math department in the 1960s. He left to start Renaissance Technologies which is located 1 mile down the street from campus. Their influence is everywhere. We have a Simons Center for Geometry and Physics ($150m building). I take classes in Frey Hall (Robert Frey used be managing director at Rentec). Our med school is literally the "Renaissance School of Medicine." Our athletic facility is the Walter J. Hawrys Campus Recreation & Wellness Center (named after Jim's father in law). etc. etc.

Children of Renaissance employees come to campus on weekends to train for USAMO and play chess. I met Jim a couple of times at alumni events and what stood out is how humble and normal and down to earth he seemed. He is also a chain smoker and was lighting up indoors(!) but of course no one can say a word to him lol. He's been making >$1 billion a year for like the past 20 years. To put it in perspective: an average code monkey like me making $250k at a FAANG would have to work for FOUR THOUSAND YEARS to make how much he makes in a year. It's unreal.

Re: Renaissance Technologies

#67

Post by auntienomen »

gibybo wrote: post #39

Note that RenTec also runs two other funds that are larger than the Medallion Fund, but both under perform the index. On a completely unrelated note, if I were interested in creating a fund that appeared to have market beating returns for decades and I wasn't concerned about the legal consequences, here's one way I might do it: I would create fund A and B and seed them with some initial capital. For fund A, I would c…

In the scenario you're outlining, the Medallion Fund's yearly returns would be capped by the underperformance of the other RenTec funds. There are two problems with this scenario: 1) The Medallion fund has been outperforming since the 90s, while the other funds opened in 2005. 2) The Medallion fund has extracted vastly more than would be available from RIEF/RIFF underperformance.

Re: Renaissance Technologies

#68

Post by gibybo »

rbavocadotree wrote: post #64
gibybo wrote: post #39

Note that RenTec also runs two other funds that are larger than the Medallion Fund, but both under perform the index. On a completely unrelated note, if I were interested in creating a fund that appeared to have market beating returns for decades and I wasn't concerned about the legal consequences, here's one way I might do it: I would create fund A and B and seed them with some initial capital. For fund A, I would c…

It's an interesting idea, but in this case Fund B only came into existence after 15+ years of market beating performance by fund A. A funny thing from the recent book: One of Rentech's earlier employees spent his first few months there trying to figure out what the scam was.

Thanks, I didn't know that. Do you know if there were any other funds by him at the time? I could also create a dozen funds that do randomly different things and just close the ones that didn't do well to get me started.

Re: Renaissance Technologies

#69

Post by unlinked_dll »

BoiledCabbage wrote: post #63
unlinked_dll wrote: post #52

Earlier quoted context omitted.

I mean if you want to not go to jail all you really need to do is beat the market by N% and take that as your fee. If N is sufficiently low you can probably do it by aggressively balancing the portfolio every 2-3 years, such that it functions like an index fund but with adjustment to cut out losers. There are plenty of folks out there that will do this for you. Just don't get greedy.

Uh, if all it took to beat the market was consistently rebalancing your portfolio everyone would be doing it. It takes more than that to consistently beat the market.

A lot of money managers are doing that. It's a tiny percentage, something like 2%. The reason that it isn't as common is because the time table is like 15-20 years, not 3-5.

Re: Renaissance Technologies

#70

Post by pmoriarty »

smabie wrote: post #18

A great book about RenTec and Jim Simons came out recently: The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution. Everyone in the industry worships Simons and RenTec as practically god-like. What they've managed to do shouldn't really be possible and is out of this world. According to Wikipedia over a 20 year period between 1994 and 2014, RenTec realized an 71.9% annualized return in their inte…

My own suspicion is that they have access to some raw information that others don't have.

An example of such information would be information gathered from insiders at other corporations or industrial espionage.

It's more likely, in my view, that they've created a world-class industrial espionage outfit than that they've "solved the market" for decades where virtually everyone else has failed.

On the other hand, if they really are cheating, I'm not sure why the US government (who doubtless has penetrated them with their own spies) has let them continue operating for all these years.

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