Renaissance Technologies


Renaissance Technologies
Renaissance Technologies LLC
Type Private
Industry Investment Management
Founded 1982, New York
Headquarters East Setauket, New York, United States
Key people James H. Simons, Director, President and CEO
Revenue US $?(2010)
Net income US $? (2010)
Employees 275[1] (2009)
Website www.rentec.com

Renaissance Technologies is a hedge fund management company of about 275 employees and more than $15 billion in assets under management in three funds.[2] It operates in East Setauket, Long Island, New York, near Stony Brook University with administrative functions handled in Manhattan.

Contents

History

Started in 1982 by James Simons, Renaissance currently has more than $15 billion in assets under management.[3] Since 1989, the company's $5 billion Medallion Fund has averaged 35% annual returns after fees [4][5]. The Medallion Fund is one of the most successful hedge funds.[4] In 2011, out of 144 tech pro, Renaissance Technology was ranked as no. 4 of the best IT department in financial services.

Renaissance's charges a management fee of 5% and a profit participation of 36%, both of which are higher than the industry standard of 2% and 20%, respectively.[6]

Funds

The Medallion Fund 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[7] Axcom Trading Advisors after that company's dissolution in 1992.[citation needed]

The Nova Fund 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 and is offered as a fund for institutional investors. Renaissance manages a number of other funds in various markets, including mortgage-backed securities and funds of external managed funds like the Renaissance Return Fund.[citation needed]

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.[6]

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.Ds.[6]

Like many other quantitative funds, their RIE Fund had difficulty with the higher volatility environment that persisted throughout the end of the summer of 2007. According to an August 10 article in Bloomberg by Katherine Burton, "James Simons's $29 billion Renaissance Institutional Equities Fund fell 8.7% in August 2007 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."[8]

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".[9]

Investment returns

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 hedge fund observer Antoine Bernheim, the next-best performer was George Soros’ Quantum Fund, with a 1,710.1 percent return.[10] A measurement of the risk (e.g., beta, volatility, or leverage figures) which accompanied its high annual returns is not publicly available. In 2009 the Medallion fund topped the list of the most profitable hedge funds with profits of over $1 billion.[11]

Personnel

  • Jim Simons, Founder, President & CEO
  • 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, Vice Chairman, and Director[12]
  • George Zweig

Renaissance Alumni

  • Alexander Astashkevich - Research, Medallion Fund, committed murder and suicide in February, 2006 [13]
  • James Ax, founder of Axcom Trading Advisors, predecessor to the Medallion Fund, and a noted mathematician
  • Elwyn Berlekamp, president of Axcom Trading Advisors, predecessor to the Medallion Fund, and a noted mathematician
  • Leonard E. Baum, the coauthor for the Baum-Welch algorithm, built early trading models for Axcom Trading Advisors[6]
  • 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

  1. ^ https://www.renfund.com/vm/index.vm
  2. ^ http://www.hoovers.com/company/Renaissance_Technologies_LLC/rrtrfyi-1.html
  3. ^ Rentec.com
  4. ^ a b Sarnet.Org WSJ Front Page: Titan's Millions Stir Up Research Into Autism
  5. ^ Shalev, Ofra (2007-10-19). "The MBA is Dropping to a Lower League (ה - MBA יורד ליגה)" (in Hebrew). Ha'aretz. http://new.haaretz.co.il/hasite/pages/ShArtPE.jhtml?itemNo=914730&contrassID=2&subContrassID=6&sbSubContrassID=0. Retrieved 2007-12-25. 
  6. ^ a b c d Teitelbaum, Richard (2008-10-27). "Simons at Renaissance Cracks Code, Doubling Assets". Bloomberg. http://www.bloomberg.com/apps/news?pid=20601213&sid=aq33M3X795vQ&refer=home. Retrieved 2009-06-02. 
  7. ^ http://en.wikipedia.org/wiki/James_Ax
  8. ^ Burton, Katherine (2007-08-10). "Renaissance's Stock Hedge Fund Falls 8.7% in August". Bloomberg. http://www.bloomberg.com/apps/news?pid=20601087&sid=atlWKnI7gccw&refer=home. Retrieved 2009-06-02. 
  9. ^ "Comment Letter from Renaissance". S.E.C.. http://www.sec.gov/comments/s7-24-08/s72408-3.pdf. Retrieved 2009-06-02. 
  10. ^ Zuckerman, Gregory (2005-07-01). "Renaissance's Man: James Simons Does The Math on Fund". The Wall Street Journal. 
  11. ^ Opalesque (8 January 2010). "Renassaince Technologies’ Medallion fund tops list of most profitable hedge funds in 2009". http://www.opalesque.com/IndustryUpdates/550/With_returns_in_2009_Appaloosa_tops_Bloomberg451.html. 
  12. ^ "Nathaniel Simons: Executive Profile & Biography - BusinessWeek". http://investing.businessweek.com/research/stocks/private/person.asp?personId=27011074&privcapId=3071217&previousCapId=3071217&previousTitle=Renaissance%20Technologies%20Corp.. Retrieved 2011-10-14. 
  13. ^ Metro Briefing | New York: Port Jefferson: Couple Identified In Murder-Suicide

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