Renaissance Technologies

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Renaissance Technologies LLC
Type Private
Founded 1982, New York
Headquarters East Setauket, New York
Key people James H. Simons, Director, President and CEO
Industry Investment Management
Revenue US $?(2006)
Net income US $? (2006)
Employees 250-300 (2006)
Website www.rentec.com

Renaissance Technologies is a hedge fund management company. Renaissance was started by James Simons in 1982. As of March 31, 2007, it was holding some $27 billion in public equity positions. Since 1989, the company's $5 billion Medallion Fund has averaged 35% annual returns[1][2], after fees and is viewed as one of the most successful hedge funds[citation needed], and according to the U.S. Offshore Funds Directory, beats acclaimed investors such as Bruce Kovner, George Soros, and Paul Tudor Jones.[1] Because it is so successful, it charges a 5% management fee and a 44% incentive fee. A measurement of the risk (like beta, volatility, or leverage figures) which accompanied its high annual returns is apparently not publicly available. Extremely secretive (though unlike certain other investment management companies, not so secretive as not to have a public website), the company operates in East Setauket, Long Island, New York, near Stony Brook University. Administrative functions are handled out of offices in Manhattan.

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[edit] Scientifically based investment strategy

For over two decades, Renaissance has been at the forefront of research in mathematics and economic analysis. Renaissance employs more than 150 scientific specialists, including mathematicians, physicists, astrophysicists and statisticians, half of whom have a PhD, who review market data to find statistical relationships that predict the price movements of commodities, currencies and stocks. These employees come from countries as diverse as Japan and Cuba [3].

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. Renaissance represents a validation of the quantitative trading model and trades with such high frequency that it (the Nova fund, specifically) accounts for over 10% of all the trades occurring on NASDAQ some days.

It is worth noting that Nova trades execute purely electronically on direction from a computer model. Medallion fund trades are (in large part) executed through a trading desk, whose goal is to increase the value of the positions the model directs the desk to take by timing market trends and executing in novel fashions (including intra-desk trading).

Renaissance trades at margin levels uncharacteristically low among hedge funds. This allows them to significantly reduce exposure risk, while the efficiency of their computational model allows for consistently high returns.

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."

[edit] 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[4] 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.

[edit] Key Personnel

  • Jim Simons, Founder, Director, 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

[edit] Renaissance Alumni

[edit] Footnotes

  1. ^ a b Sarnet.Org WSJ Front Page: Titan's Millions Stir Up Research Into Autism
  2. ^ Shalev, Ofra (2007-10-19). The MBA is Dropping to a Lower League (ה - MBA יורד ליגה) (Hebrew). Ha'aretz. Retrieved on [[2007-12-25]].
  3. ^ Renaissance Technologies Website (2001-02-02). Retrieved on 2007-11-26.
  4. ^ http://en.wikipedia.org/wiki/James_Ax

[edit] External links