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Renaissance Technologies

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Re: Renaissance Technologies

#151

Post by erikig »

cjken wrote: post #74

While I understand there are moral and ethical complications with the vast sums of wealth and influence attached to RenTec, the tone in these comments is disappointing... There is no fraud at RenTec, and there is nothing magical about what they do. It's simply an amazing technical and scientific organization, operating with almost unthinkable efficiency and scale. I haven't read the book, but I'm pretty sure this isn…

Thanks for sharing this, I'm diving into the 3 videos that you highlighted:

Part 1: Mathematics - https://www.youtube.com/watch?v=HVqxs0YBp4g

Part 2: Finance - https://www.youtube.com/watch?v=srbQzrtfEvY

Part 3: Philanthropy - https://www.youtube.com/watch?v=w8o-qC8E5ic

Re: Renaissance Technologies

#152

Post by maest »

soVeryTired wrote: post #138
cepth wrote: post #131

Earlier quoted context omitted.

In the book (“The Man Who Solved the Markets”), the author actually provides the Sharpe ratios for their flagship fund (“Medallion”). Medallion’s Sharpe Ratio has almost never been below 2.0, and has been as high as 7.0 (!!!) in some years. I’ll link to the Wikipedia page below for the math, but these figures would highly suggest that their returns are much less likely the result of luck, and more likely the result o…

Well I'm saying it's both skill and luck, combined with hindsight bias. They're famous because Medallion is the best performing quant fund . Even if quant funds were just chumps tossing coins, if you pick the best of a number of them, you'll get something that looks good. Now that maths still doesn't stack up that they were just lucky - they probably had skill too. But I think it's more likely that they had a modest…

Thing is, with the amount of leverage they are running, it's more luck than skill.

Luck means making big returns, skill means doing it with low volatility and high Sharpe.

Re: Renaissance Technologies

#153

Post by tomp »

maest wrote: post #152
soVeryTired wrote: post #138

Earlier quoted context omitted.

Well I'm saying it's both skill and luck, combined with hindsight bias. They're famous because Medallion is the best performing quant fund . Even if quant funds were just chumps tossing coins, if you pick the best of a number of them, you'll get something that looks good. Now that maths still doesn't stack up that they were just lucky - they probably had skill too. But I think it's more likely that they had a modest…

Thing is, with the amount of leverage they are running, it's more luck than skill. Luck means making big returns, skill means doing it with low volatility and high Sharpe.

The point of Sharpe is that it’s invariant with respect to leverage. Anything with sharpe 3+ is extremely impressive - that’s 3 sigma, assuming normal returns that’s like 2% tail event.

Re: Renaissance Technologies

#154

Post by maest »

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…

Front running external money with the internal fund is a big no-no and a well known possible conflict of interests.

I don't see a way this would go on for such a long time.

Re: Renaissance Technologies

#155

Post by [deleted] »

crazypyro wrote: post #139
analogkid wrote: post #98

The tone of many comments here is disappointing. I'm really surprised at the number of people suggesting illegal activity. Why is it so hard to accept that someone did the math?

It's simply surprising that they continuously find an edge in an ever increasingly competitive market. It's not a fair comparison to say they just "did the math" when there are thousands of other, highly qualified, highly intelligent people trying to "do the math" at the same time, all the time, yet RenTech has managed to always come out ahead and not just barely, but massively ahead. I don't believe RenTech is doing…

[deleted]

Re: Renaissance Technologies

#156

Post by javiermares »

javiermares wrote: post #123
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…

Hold on, it's not comparable to the ~10$ CAGR of the SP500 is it? RenTec's fund is capped so it's an average return of 71.9% but not an annualized return, since the returns are not compounded. Correct?

* ~10%

Re: Renaissance Technologies

#157

Post by leto_ii »

kasey_junk wrote: post #107
leto_ii wrote: post #101

I have to say, the first time I read about Renaissance I felt sadness at the thought that this much ability and such resources were put into essentially making money out of thin air, with very limited (if any) social benefits. I can't escape the feeling that the world would be a better place if maths and physics phd's would get to live a good life doing maths and physics, rather than being lured into quant finance.

How do you feel about them working on nuclear bombs & working for the NSA? Cause for many years that was the standard way to live tr good life.

About as bad. Although, as has been pointed out, military research can have benign applications as well.

Re: Renaissance Technologies

#158

Post by tomp »

hogFeast wrote: post #95
rb808 wrote: post #14

Do they still outperform? I can imagine 10 years ago they were ahead of everyone but now quant investing is everywhere I would be surprised if they have a big edge.

I would read the recent book. Competition really started in the mid-1990s (and quant funds existed way before that point), and Renaissance actually picked up steam far later than everyone else (and had trouble raising capital because everyone thought the space was already tapped out). Btw, the point to investing isn't an absolute level of knowledge but relative knowledge. If you keep moving ahead because you are smar…

Companies like AHL and Winton have completely different goals and ways of making money... they got into the “quant” (a.k.a. trend following) industry very early and still reap the benefits, they have big AUMs, scalable strategies, etc, but (AFAIK) their actual performance isn’t that amazing (compared to RenTech, Two Sigma, Citadel, ...).

I only interviewed at AHL so I cannot speak of the quality/intelligence of people working there, but judging by the difficulty of the interview, compared to some other companies, my conclusion is that their hiring bar isn’t that high. I also wonder how limited these companies are in their investment strategies - either they cannot invest into more sophisticated strategies (limited by investor agreements), or they don’t want to, because poor known returns are easier to justify (“trend following just had a bad year, nothing we can do about it”) than poor unknown returns (“we tried thes completely new thing that we have no experience in, and it didn’t work and we lost a lot of your money”).

Re: Renaissance Technologies

#159

Post by tomp »

nabla9 wrote: post #33
bhouston wrote: post #11

Earlier quoted context omitted.

It seemed that all hedge funds in Billions were trading in insider information. It does seem prevalent, but I am not personally in the industry at all: https://medium.com/@malwarwick_98471/insider-trading-in-the-... https://en.wikipedia.org/wiki/Steven_A._Cohen

You can also see them trading on non-public information they get trough other channels. I think that's more normal. In real life you can't run a fund by finding insiders willing to commit crimes routinely. But you often can get the same information by other means by collecting intelligence. Observing traffic, the flow of materials, following people and finding who meets who.

> Observing traffic, the flow of materials, following people and finding who meets who.

IANAL, but I’d imagine that then it’s no longer non-public information (at least in the US).

Re: Renaissance Technologies

#160

Post by rlucas »

tomp wrote: post #153
maest wrote: post #152

Earlier quoted context omitted.

Thing is, with the amount of leverage they are running, it's more luck than skill. Luck means making big returns, skill means doing it with low volatility and high Sharpe.

The point of Sharpe is that it’s invariant with respect to leverage. Anything with sharpe 3+ is extremely impressive - that’s 3 sigma, assuming normal returns that’s like 2% tail event.

Yes, but Sharpe calculated ex post is also subject to survivorship bias.

For example, you might make a (successful) bet that works only in a low-volatility environment; if it works, your ex post Sharpe ratio will look ingenious.

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