
Renaissance Technologies - pvsukale3
https://en.wikipedia.org/wiki/Renaissance_Technologies
======
smabie
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 internal Medallion fund. And before anyone
says that's a fluke, let's calculate the probability of such a "fluke" using
some simplifying assumptions:

1\. S&P 500 returns are log-normally distributed with a log-return of 10% and
volatility of 10% 2\. RenTec made a mean annualized return of 71.9% over 20
years 3\. The returns of RenTec are independent from year to year

We get a P<1.64E-14. Therefore, I think we all can agree that we can reject
the null hypothesis of RenTec having no alpha.

And before someone says that it's a scam, there's no outside investors in the
Medallion fund anymore, so if it is a scam, they would only be scamming their
own employees. And if that was the case, I think we would know.

~~~
soVeryTired
Sounds like you've assumed that rentech are running the same volatility as the
S&P 500. That's very unlikely to be true - most systematic hedge funds ran
crazy high risk in the '80s and '90s. But even if you assume it's a coin toss
as to whether they perform well in any given year, twenty good years in a row
is impressive.

My best guess is that it's a combination of luck, skill, and hindsight bias.
Rentech probably had (has?) an edge. They were also partly lucky: in
investment, you can do everything right and still lose money. There were also
many other players: had LTCM not blown themselves up, we might be marvelling
at their investment prowess now.

~~~
bumby
I'd be curious what their risk-adjusted returns are, especially in a leverage
free environment. Anybody know where to find such information for RenTec (or
other hedge/mutual funds for that matter)?

~~~
smabie
According to the book, they were running a SR of 2 through the 90s and early
2000s. After overhauling their strategies, they started running a SR of around
7! I’m not sure where you can get information about other funds besides
finding articles in BB or WSJ, but the HFRI Index publishes return information
for different classes of funds. Regardless, I don’t think you’re going to be
able to access SR unless you’re an investor or work at a portfolio analytics
company.

------
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.

~~~
gwern
Don't forget the yachts in the Stony Brook marina! I always smiled as I passed
the giant 'Matrix Rose'. No need to ask where the money for that one came
from.

~~~
rosege
Just googled the yacht - its pretty small for someone of his wealth. Check out
the late Paul Allen's yacht Octopus or MY Eclipse for what some billionaires
go for.

~~~
moscovium
Let's see Paul Allen's yacht...

...look at that tasteful off-white coloring, the thickness of it. Oh my god --
it even has a water mark.

------
cjken
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't in it: I've been told
by reliable sources that if you pick any one strategy (however you are able to
separate/define that) from the Medallion portfolio and it will not be
individually remarkable--probably less than a 1.0 Sharpe (net of trading
costs, gross of fees). There are countless hedge funds with equally performant
models and sub-strategies.

What makes RenTec different is their ability to generate orthogonal strategies
at a remarkable scale. They generate more ideas with less philosophical and
empirical overlap than anyone else, by a wide margin. The software and theory
required to do this for a fund as large as Medallion is absolutely as rare and
valuable as their returns have proven.

Wrote more about it here: [https://www.bridgealternatives.com/medallion-isnt-
magic-prob...](https://www.bridgealternatives.com/medallion-isnt-magic-
probably/)

~~~
logjammin
This is really interesting, and what I'm about to say makes me feel more
bleeding-heart than I feel I am most days, but there's something deeply
melancholy about the fact that this collection of the best intelligence our
species has to offer, working together to achieve something utterly unheard of
- so unheard of that many other smart people think there's something criminal
going on - is exerting its collective effort to - when you put it in plain
English - hack a casino.

We're hurtling at an accelerating rate to ecological ruin, with millions
(hundreds of millions?) of deaths a plausible outcome in the next 100 years,
not to mention a fall in the standard of living for basically everyone, and
our best and brightest are doing the Manhattan Project of cash.

As a stupid person, I can't do much other than shrug - hell, I can't even say
I wouldn't do the same as these brain-genius PhDs if I had their capabilities.
But it still kinda sucks, is all.

~~~
solveit
The problem is that our society is _terrible_ at rewarding positive
externalities. Even worse than we are at punishing negative externalities.

I do object to your phrasing. Quantitative finance isn't hacking a casino. It
does generate actual value. The problem is that finance is one of the few
fields where you can expect to be rewarded in proportion to the value you
generate because the amount of value you generate is easy to measure. Cue all
the smart, realistic people rushing into finance instead of having a larger
impact for peanuts doing fundamental science or something.

~~~
logjammin
Thanks for this. What you say about proportion of compensation makes a sort of
sense, but I don't have the chops or the knowledge of the field to evaluate
it. The 'easy to measure' thing is definitely insightful and useful to me as I
think about it. Money does have that clarity to it.

The "hacking a casino" thing I'll defend, though: to the extent that getting
better at gambling games and finance both can involve prediction,
probabilities, data collection, and the like, I don't see how the analogy
fails on anything but its crudeness, which I'll happily grant (while also
saying I was going for a chuckle with it). I didn't mean to imply that getting
good at either is something to be embarrassed about, only that it feels a
little ... maybe "small", next to other concerns. I think that superlatively
intelligent people do have god-given opportunities the rest of us don't have,
and that while they're free to do as they please, the rest of us sometimes
hope they'll use them wisely (and, selfishly in this case, to our benefit in
some small way).

I'll also say that I meant "hack" in the older, more optimistic 1970's way,
like "figure out what makes it tick and do cool things with it" instead of the
more sinister modern sense. I don't attribute any malice or ill intent to
Simons/RenTec, at least not without evidence.

I guess I could reinterpret/update my comment in light of what you've said to
now say that "whatever value these men and women are creating inside this
secretive firm, there's a strong case to be made that it's not the most urgent
or needed kind these days".

I'm curious and sincerely so, though, when I ask: what actual value does
quantitative finance create?

~~~
strangedynamics
My experience is limited, so take with a grain of salt: my sense so far is
that it helps stamp out any statistical/numerical inefficiencies in the
markets that humans would otherwise be inefficient/slow to adjust to. For
instance, if a straight up arbitrage opportunity exists across exchanges,
automated strategies ensure that it goes away very quickly, much more quickly
than discretionary human traders would. If there are proven statistical trends
to the markets, then those should be acted on as well, because it means we'll
arrive at the fair price of an asset sooner rather than later. A simple
example: if a stock closely tracks the price of oil, and there's a quick
uptick in the price of oil, it's better for the price of the stock to get
immediately adjusted upwards rather than after a delay (and purely
quantitative, automated strategies make this happen). I think the name of the
game is that you have a bunch of people acting in their best interest, and
thereby giving us an efficient market, which benefits the rest of the world by
ensuring low slippage, fair prices, high liquidity, etc.

~~~
solveit
Basically this. I'll slightly elaborate on why an efficient market is a good
thing.

It means that anyone can change money into a different currency without having
to worry about being ripped off. There is one exchange rate and you'll be
paying that plus a small margin.

It means that anyone can invest in publicly traded companies without having to
spend an inordinate amount of time and effort trying to value them. Pension
funds would be next to impossible without this. To the extent that the market
is efficient, you don't have to worry about the imminent collapse of IBM. If
_anybody_ knew, the prices will reflect it even if the rest of the world has
no idea why the prices are as they are. (The further markets get from being
efficient, the further this gets from being true. Compare investing in the S&P
500 to the shenanigans happening with penny stocks. Be glad that your pension
fund gets to invest in the former so it can pass on the latter.)

It means that companies can raise money without too much difficulty. They'll
sell a part of themselves, and a legion of quants will give them as fair a
price as humanly possible. If the price were unfair, someone could exploit it
to make money , correcting the price in the process. Ergo the price will be
fair. While this sounds far removed from the welfare of the people, this is
what greases the engine that runs the jobs of virtually everyone in the
developed world. It also lets people pool risk to try risky but worthwhile
things. The impact this has on innovation cannot be overstated.

Of course, I agree with the above poster that finance probably isn't the best
place for smart people to spend their lives. I'm just claiming that finance
people aren't overpaid, everyone else is ludicrously underpaid.

~~~
logjammin
This is a really good case for quantitative finance, and it's also really
clear, so thanks for both. Consider my perspective changed for the better.

There's still a bit of dissonance in this for me, but it's abstract and strays
a bit what you're saying, so don't feel a need to respond: I think, for
example, about the friends and acquaintances I have in finance who I've often
heard lament about the lack of meaning, utility, and social value in their
work despite the good pay. They're smart men and women, every single one, so
I'm sure they know they case you're making - so what gives? (This is clearly
more a question for them than for you.)

I also wonder idly what proportion of the explosion in the finance industry
since the 1970's is taken up by the sorts of plainly beneficial and useful
efforts you describe, and what proportion is simply craven, greedy bullshit.
Clearly the latter is more salient in the cultural and moral imagination, in
no small part because of the Madoffs and the Beskys and the Milkens of the
world, not to mention everyone involved in the 08 crisis. That the former
isn't as salient makes me think, like, how many Jack Bogles are there for
every Gordon Gekko? I know a ton of Gekkos - I went to college with them! -
but few Bogles.

~~~
solveit
I feel both of your questions and have no answer for either :(

------
txt
I use to service pools back in high school on the north shore of long island.
And I remember doing Simons house, unbelievable property. The house keepers
house was 5x bigger then mine..and the pool was massive, right on the edge of
a cliff overlooking the long island sound. Sry if its offtopic but this read
made me think of it!

~~~
JohnJamesRambo
I like anecdotes like this, thank you.

------
graycat
Simons hired "the best" people?

On who Simons hired: IIRC there is an interview with Simons where he explains
that he hired good mathematicians, etc. who had published interesting work or
some such. In particular, he required no MBA or business degrees, experience
with accounting, reading corporate annual reports, SEC filings, or business.

So, my guess would be that at least for the early years of Simons's work, such
people would not be very welcome in the rest of _Wall Street_ and usually not
considered the "best" or even good at all.

Point: That he hired "the best" has to do with what criteria one is using for
_goodness_!

By the way, in this thread there is mention of Thorpe! So, yes, his _Beat the
Market_ had in the back that some argument was from "measure theory". So,
before my Ph.D., I was working carefully through Royden, _Real Analysis_! I
was getting through the two exercises on upper and lower semi-continuity when
I went to grad school. Right away I took the 700 level course in analysis
(measure theory and functional analysis) and probability. The prof was a star
student of E. Cinlar, long head of Operations Research and Financial
Engineering at Princeton. Got to meet him once! So, that background should be
of interest on Wall Street? After some good efforts, not as far as I could
tell although then I didn't yet know of Simons.

It is true that the year I got my Ph.D. near DC, the ORSA (Operations Research
Society of America) conference was there and I submitted a resume. I was 110%
busy taking care of my (later fatally) sick wife so didn't go but some friends
said that on some bulletin board I had lots of requests from Wall Street! Gee!

At one time I interviewed at Morgan Stanley and mentioned my paper on multi-
variate, distribution-free anomaly detection. A computer systems management
guy was a little interested. Another guy wanted me to give him an outline of
the paper; I did and mentioned that I'd like to work on applied math of
trading -- his reaction seemed to be that neither he nor Morgan Stanley nor
anyone on Wall Street would be interested in any such thing!

Later a Bertsekas student from MIT gave me the rumor that Simons also liked
hiring Russian mathematical physicists!

Point: It seems to me from a distance that Wall Street has been slow to hire
people like Simons did.

On what Simons did: There's an old comment that a good casserole is like a
good marriage -- only the people who made it really know what is in it. My
guess is that this remark applies also to Simons! In particular I doubt that
we should regard him as a _quant_ much like the rest of Wall Street.

Bluntly, I suspect that there's no telling what the heck Simons did: E.g.,
there's no law that he had to have much contact with the Markowitz work, the
Sharpe work, the CAPM (capital asset pricing model), econometrics, classic
time series analysis, the Thorpe work, the Black-Scholes work, the Martingale
convergence theorem, the Doob decomposition, controlled Markov processes,
stochastic differential equations, the Brownian motion solution to the
Dirichlet problem -- he could have been doing things totally different!

Heck, quite generally it's beyond super tough to be on the outside trying to
know what's going on inside: E.g., I got interested in cooking, once took my
wife to André Soltner's Lutèce, but never got a clue about how he did it!
E.g., I made some progress with violin but never figured out how Heifetz did
it! E.g., I made some progress in physics but never figured out how Einstein
did it! E.g., I made some progress in math but really have no idea how Simons
did it. It's a Robert Frost one?? -- "We dance round and round and suppose
while the secret sits in the middle and knows."??

My approach to making money is not to try to get hired on Wall Street, out on
Long Island, or near the commodity pits in Chicago or Kansas City but just to
do my startup. There I don't have to know all the ways people got rich in
business -- it's enough for me to find just ONE way!

I don't have to know how all the cooking, music, physics, or math of the past
was done -- it's enough for me to do some math for the problem I'm trying to
solve.

I don't have to know every computer operating system, programming language,
memory management or concurrency algorithm -- it's enough for me to know
enough computing to get the code running for my startup.

Since I'm able to be a sole, solo founder, I don't have to convince people on
Wall Street or Silicon Valley that I might make them money -- I just need to
convince myself and then actually DO it!

And if I'm successful, my crucial core original applied math _secret sauce_
should remain secret!

Point: I don't believe I can figure out how Simons did it!

------
gibybo
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 create a machine learning model that took in lots of opaque
parameters and hire a team of very smart mathematicians and computer
scientists to optimize this model to perform profitable trades. In order to
easily generate alpha, I would subtlety feed in some parameters that were
correlated to the future market moving actions of fund B. Since I also run
fund B, I uniquely have this information.

I would use the performance of fund A to woo outside investors into investing
their money into fund B. In order to prevent fund A from overtaking fund B in
asset value and thus diminishing the value of the subtle signals, I would
close the fund to the public when it got sufficiently large and periodically
distribute its assets to its investors.

In order to avoid any of my employees from eventually figuring out what's
going on and reporting me, I'd incentivize them to avoid looking too closely
by requiring that they invest a large part of their income into the fund with
a long vesting date. I'd also require them to sign a long term non-compete so
that they cannot work anywhere else in the financial industry if they leave.

~~~
throwawaymath
To be frank, running this sham for 30 years sounds less plausible to me than
beating the market the boring way.

How would you stop investors in your two public funds (and their accountants)
from asking pointed questions about disbursements from one fund to the others?
Do you plan to fool them for this amount of time, or bring them into the
conspiracy?

And how will you sustain the conspiracy when your other two funds trail the
market index by a lower combined differential than your other, internal fund
is beating the index? Will you initiate a Ponzi, or something else?

There is a more realistic angle to attribute RenTech's returns to fraud. I
don't personally believe it as I have friends there, but I believe it would
technically work:

A nontrivial number of RenTech's employees have come from the intelligence
apparatus of the United States; namely the NSA. Simons was particularly
affiliated with them early on in his math career. It strikes me as plausible
(but again, highly unlikely) that if RenTech _is_ is a conspiracy, it is a
conspiracy sponsored by US intelligence. They would have the capability to run
a 30 year secretive conspiracy, and they would have they desire to attract top
talent in math, physics and computer science.

But I'm just speculating for fun year. I really don't think there's any
conspiracy :)

~~~
gibybo
There would be no disbursements from one fund to the other. Fund A would
purchase an asset slowly over time. When it has finished purchasing the asset,
fund B would purchase that asset quickly at a scale large enough to increase
the market price of it. As the price rose, fund A would sell its position.

The net effect is that fund A sees increased returns and fund B sees decreased
returns.

~~~
rramdin
This is throwing any efficient-market hypothesis out the window. Msybe this
would work for a year, but why would anyone invest in fund B if it is a
consistent loser. If you can figure out a way to slowly buy an asset and then
quickly buy more of it and make both strategies profitable at all, then you're
onto something huge. Almost as huge as Ren Tech

~~~
gibybo
It assumes an efficient-market. The money is coming at the expense of fund B.
It doesn't need to be a consistent loser, it just needs to make less than it
otherwise would on average.

People invest in funds that under perform the market all the time. That
describes the majority of the finance industry.

------
melling
There was a book published last week on Jim Simons and Renaissance
Technologies:

[https://www.amazon.com/Man-Who-Solved-Market-
Revolution/dp/0...](https://www.amazon.com/Man-Who-Solved-Market-
Revolution/dp/073521798X/)

The author was interviewed on the Masters in Businesss podcast:

[https://www.bloomberg.com/news/audio/2019-10-30/gregory-
zuck...](https://www.bloomberg.com/news/audio/2019-10-30/gregory-zuckerman-on-
the-quant-revolution-podcast)

Simons is a serious mathematician:

[https://en.wikipedia.org/wiki/Jim_Simons_(mathematician)](https://en.wikipedia.org/wiki/Jim_Simons_\(mathematician\))

He won the Oswald Veblen Prize in 1976:

[https://en.wikipedia.org/wiki/Oswald_Veblen_Prize_in_Geometr...](https://en.wikipedia.org/wiki/Oswald_Veblen_Prize_in_Geometry)

~~~
tgb
He's still an active mathematician, too, for example a 2018 pre-print:
[https://arxiv.org/abs/1803.07129](https://arxiv.org/abs/1803.07129)

------
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...](https://www.google.com/amp/s/www.cnbc.com/amp/2014/05/09/mystery-13-billion-
philanthropists-revealed.html)) 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.

~~~
throw_this_one
Very cool. Do you have any info/resources on how the signal extraction works?

~~~
deepnotderp
Signal processing, information geometry and information theory mostly. You can
read the papers rentech authors publish before they leave

~~~
objektif
Do you have any examples?

------
philshem
I’m not a bot but I am always posting relevant and recent (2017) New Yorker
articles that are worth reading:

[https://www.newyorker.com/magazine/2017/12/18/jim-simons-
the...](https://www.newyorker.com/magazine/2017/12/18/jim-simons-the-numbers-
king)

And this interesting theme:

> Foundations are not taxed, so much of the money that supports them is money
> that otherwise would have gone to the government. Scientific mega-donors
> answer to no one but themselves. Private institutes tend to have boards
> chosen by their founders, and are designed to further the founders’ wishes,
> even beyond their deaths. Rob Reich, a professor of political science at
> Stanford University and an expert on philanthropy, told me, “Private
> foundations are a plutocratic exercise of power that’s unaccountable,
> nontransparent, donor-directed, and generously tax-subsidized. This seems
> like a very peculiar institutional and organizational form to champion in a
> democratic society.”

~~~
tasuki
I'm not a bot either, and why would you start your post by saying you're not a
bot?

~~~
philshem
Many of my comments are links to relevant NYer articles

------
superfish
It blows my mind how much RenTech does with some ~300 employees. I recently
had a phone screen with them (no offer otherwise I wouldn’t be writing this)
and all of my communication was with this MIT math PhD. No HR, just the PhD.

Compare them with a Big N that has 10,000s of SWE’s. It’s a safe assumption
that each engineer is individually less talented but even so, how do they
iterate/experiment with such few employees?

~~~
tasuki
> how do they iterate/experiment with such few employees?

Faster!

~~~
solveit
_Upon hearing this, the student achieved enlightenment._

------
zozbot234
> _This article is about the American hedge fund management company. For
> technical advancements during the European Renaissance period, see_
> [https://en.wikipedia.org/wiki/Renaissance_technology](https://en.wikipedia.org/wiki/Renaissance_technology)

~~~
Aardwolf
Thanks, something like that is what I expected and what piqued my interest
from the title :)

------
leto_ii
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.

~~~
kasey_junk
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.

~~~
Barrin92
working on nuclear or military technology is double-edged as it is serves both
national security interests and advances technological knowledge.

Rentech is an absolute technology black box that will both take its money and
knowledge into its grave with virtually no productive outcome for society at
large.

The NSA and US nuclear science at least drives innovation.

~~~
ipsa
The US economy (to which RenTech contributes with profits made on foreign
markets) is a national security interest. Working to be very rich and then
donating a large chunk of money to promote science - and maths education, also
advances technological knowledge. Those depricated CRUD apps I wrote a few
years back served neither.

We'd all like our opponent Poker players to play with their cards open, but if
they did, they'd never win. Have to accept that you don't get to see the cards
of winning players (which includes military technology until declassified).

I find this "Financial trading does not do any good for society" to be rather
simplistic, romantic, and envious. The carpenter who turns wood into a chair
is said to be producing value, but the investor who turned uncertainty into a
profitable hardwood trade is not.

~~~
Barrin92
trading is largely a zero sum game. Companies like rentech earn money through
speculation. If a craftsman makes a chair you have a char in the economy. If
renetch extracts a few billion by betting on the stock market someone else has
lost a few billion. The only hypothetical benefit is some liquidity but that
is pretty meaningless in today's economy and there's even some evidence that
high-frequency trading has negative net effects on volatility.

So no this has nothing to do with envy or romanticism. It's just a bad idea to
have people with PhDs who could be changing the world play zero-sum gambling
games on the stock market. These guys could be reinventing physics or bring us
to mars. That's what makes people criticize these activities.

And as far as charity is concerned. Yes, Simon has done a lot of good.
However, the other famous rentech guy is Robert mercer, and he is in the
business of funding climate denialism. So whether you get a good
philanthropist or a bad one is pure luck and has nothing to with the
discussion on financial speculation.

~~~
strangedynamics
Pretty sure the zero sum game trope is overplayed/inaccurate.

------
analogkid
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?

~~~
analogkid
I should add that Renaissance Technologies is hiring!

[https://www.rentec.com/Careers.action](https://www.rentec.com/Careers.action)

My group is looking for very strong Java/Kotlin developers.

~~~
throwawaymath
I know this is not likely, but you should consider setting up an anonymous
email in your HN profile to at least receive questions about the company as an
employee. Not to answer anything proprietary or to give anything away under
NDA, but so that people can speak candidly with someone not in HR without
having to rely on HN comments.

Denise is great, but I wouldn't say she's the best source to answer harmless
but very important questions prospective Java programmers might have that
_you_ can answer, for example :)

Here's an example question for you: do you want candidates to also have tax
and accounting experience, or is deep Java/Kotlin enough?

Something to consider.

~~~
analogkid
It's a small world. Denise used to sit outside my office until I moved moved
to a new location. ;-)

She has forwarded requests that people may occasionally send directly to me in
the past and I generally try to respond. I prefer all communication be done
through proper channels to avoid any "issues" that might arise.

I have a son who is a CS major in college now. I completely understand how
challenging (and borked) the hiring/interviewing process is now as I speak
with him about the frustrations he experiences. Which is why I try to be
approachable when people have queries.

~~~
lfowles
Can't say I had the most favorable phone interview with you guys, but I did
appreciate the _incredibly_ responsive process even through the "proper
channels".

------
eternalny1
Renaissance Explores Settlement as IRS Seeks Billions in Taxes

[https://www.bloomberg.com/news/articles/2019-04-10/renaissan...](https://www.bloomberg.com/news/articles/2019-04-10/renaissance-
explores-settlement-as-irs-seeks-billions-in-taxes)

~~~
sampo
Related HN discussion from 9 months ago:
[https://news.ycombinator.com/item?id=19063977](https://news.ycombinator.com/item?id=19063977)

------
initium
This made me remember this interview with James Simons on Numberphile:
[https://www.youtube.com/watch?v=sB_OdGGA450](https://www.youtube.com/watch?v=sB_OdGGA450)

~~~
nikofeyn
the full length one is very good. it gives an understanding as to why simons
has been so successful.

[https://youtu.be/QNznD9hMEh0](https://youtu.be/QNznD9hMEh0)

------
Tycho
Who audits their returns? They have not had any outside investors for over a
decade. I had not seen an update on their yearly performance for quite some
time, and was surprised to see an updated table published in this book. So I'm
curious, where did these numbers come from, and did RenTec confirm them, and
did an independent party confirm them?

------
XnoiVeX
So much negativity in this thread. We fear or doubt what we do not understand
I guess.

~~~
xgulfie
You must have some nice ruby-tinted glasses to be able to put a positive spin
on "secretive hedge fund with black-box trading algorithm hires scientists to
makes rich people lots of money"

~~~
nodesocket
I think you've been drinking too much of the Warren coolaid. If you are
American, vilifying wealth and building companies is quite a silly endeavour.
This blame game mentality is counterproductive and will only restrict and
impede your own financial success.

~~~
throw_this_one
I mean what is the end effect of this though? Basically some smart people get
very rich. Due to zero-sum game, other people lose. No benefit is derived in
the real economy. The only possible benefit is increased liquidity... which
really isn't that beneficial past a point right? I don't see the benefit. If
you have a different angle I'd be glad to hear it.

~~~
bhupy
> Due to zero-sum game

Wealth is not zero-sum, it's created. Real GDP (i.e. adjusted for inflation)
in the world has increased from ~$3.4T to ~$110T since the 1900s.

~~~
throw_this_one
Yeah, but what does that have to do with trading? When you create something
that physically benefits people/the world, you usually extract your own value
(profit) by providing even more value and selling it. When you trade like
this, what net value are you providing? It seems like they are just extracting
value.

Also, if all the smart minds were doing advanced trading in 1900, would the
GDP have risen as much? Instead people were creating aircraft, fighting
disease, creating the internet, etc.

~~~
patentatt
Agreed. And as you mentioned above, many believe the “real value” or whatever
of liquidity is indeed capped and has diminishing returns. Trading financial
instruments doesn’t just perform the capital allocation task that we were told
it does in Econ 101. It’s also a fantastic way to take other peoples money.
Why is that so hard to believe? And to those feeling a need to deny such
behavior as an attack on capitalism, I’d suggest that it’s the purest
expression of capitalism. The goal of investors or capitalists isn’t to do
anything useful other than acquire more money. To the extent useful stuff
happens, that’s just a side effect of acquiring more money. There’s no
altruism involved. So it should be something that a true capitalist would
embrace.

------
rb808
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.

~~~
hogFeast
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 smarter then you will keep
outperforming. The view of most investors, not just in quant, is: I went to X
university, I am very smart, anyone who does better than me is
cheating/insider trading/committing fraud/etc. But the majority of people
won't outperform regardless of "intelligence".

AHL has been doing quant for nearly four decades now, they only hire the
elite, they even have their own quant finance institute at Oxford...results?
Still shit because it isn't as easy as just hiring a ton of "intelligent"
people. For some reason, smart people tend to believe that the real world is
like university or government where success is achieved by other people
thinking you are smart...it isn't like that. Obtaining results is the
combination of many things (i.e. most quant firms churn and burn employees,
most quant firms have trouble retaining staff, etc.).

~~~
tomp
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”).

~~~
hogFeast
Winton is fundamentally dissimilar to AHL. Winton have a reputation for skill
and outperformance. AHL have a reputation for blundering incompetence (that is
why the 'H' in AHL left to start Winton, and became a billionaire doing so).

The only goal is to make money. I understand your point in that AHL are
dissimilar to RenTech but I didn't say any way was correct. The right way is
whatever makes money. You have firms that look like AHL and do better.

I would look at who they actually hire. From what I know, there is almost no-
one in their quant team who didn't go into Oxbridge (at least for PG). That is
not a low bar.

Btw, I have seen this elsewhere. I know of non-quant firms that only hire from
Oxbridge, and they get the same result as firms that don't have a specific
analyst program (i.e. everyone rotates through admin/sales/marketing).

The point isn't that this doesn't work. RenTech have a high bar, it works. The
point is that you have to really understand why you are doing it. Hiring
"smart" people without thought only results in a higher wage bill.

And if we are going to get into it: one big issue with AHL has been the
management (that is why David Harding left). They have got better but I don't
think they are totally out the woods (I have heard they are trying to do momo
in illiquid and esoteric markets...which won't work).

Saying it is the clients is one of the worst excuses in investment management.
That is actually true one time in a hundred (BlueCrest is one). It is like the
crap football teams complaining about good teams having all the money. Good
fund managers have good clients because they don't fuck up all the time. The
issue is AHL, for whatever reason, kept trying to do the same thing for
decades, and expected to print money.

~~~
tomp
Thanks, interesting and insightful comment.

Regarding analyst/graduate rotations, what do you think is the actual value
there? To me it seems just a way for the team to lose a potentially decent
employee just as they’re done training him/her. If the idea is to familiarize
juniors with the firm, what it does and how it works, wouldn’t a shorter
program with direct lessons work better (e.g. what some investment banks do -
send everyone to the HQ for a few weeks - or Jane Street, where everyone first
learns OCaml)?

~~~
hogFeast
The value is that they hire a ton of people with a very low bar. The smartest
go into investment research, the next lot go into sales, the next into
marketing, the rest into admin.

The effect, I believe, is two-fold: one, these guys are cheap. And two, you
don't have to rely on someone's education, you can see if they actually can
function in the workplace.

But this places a huge burden on actually being able to train people who
aren't particularly intelligent to do a complex job and creating a team-based
culture (i.e. where the sum is greater than the parts).

One example of this is Aberdeen Asset Management. They went from one guy in an
office to one of the largest asset managers in the UK (and the world) by
hiring this way. A big part of their growth came from acquiring firms with
lots of lazy Oxbridge types, firing them all, and moving in their low-cost
team of guys.

This isn't like what IBs do, it isn't what Jane Street. Both are highly
selective, and hire into specific jobs. IBs will do a big training program
over a few weeks to get everyone up to speed (i.e. on accounting, whatever)
but what I am talking about is 3-month rotations through every part of the
business.

HR at IBs hire "geniuses", they hire the best of the best...if you do this, it
makes no sense to pay them a big salary and then stick them in the back office
(they will probably get poached). Now most of these people aren't actually any
good, most will get promoted up to VP because they have been there X years,
and then get laid off during a recession...but the hiring culture is totally
different (and btw, massively overstates the ability of HR too). And btw, it
is semi-efficient because most IBs understand they will end up with a bunch of
overpaid turnips...it is worth it to find the next rainmaker (but the
rainmaker in asset management never pays off because they get poached).

~~~
tomp
Interesting.. yeah you're right, AFAIK better banks (Goldman, BAML) hire for
specific roles even for non-IB teams... All in all, I often wonder if/how it's
possible to improve on both of these approaches, how to figure out both if
someone is _actually_ intelligent (as opposed to just booksmart, or got the
interview questions from the recruiter) _and_ whatever else is needed to
perform (drive, common sense, not IYI, ... I'm probably not experienced enough
even to know, let alone to judge...), particularly for computer developers or
generally researcher types.

Btw, I'd love to meet and chat about this. If you're in London, feel free to
email me tom.primozic at gmail

------
insiderthrow
Either really good math or really good insider trading.

~~~
s_dev
Heres Numberphile interviewing James:
[https://www.youtube.com/watch?src_vid=gjVDqfUhXOY&v=QNznD9hM...](https://www.youtube.com/watch?src_vid=gjVDqfUhXOY&v=QNznD9hMEh0)

He's a MIT/Berkley Math professor.

~~~
dhruvmittal
I met him a few times when I was a grad student at Stony Brook (Physics). I
can't speak for his particular math skills, but he's in possession of an
incredibly sharp mind.

The Simons Center for Geometry and Physics has an art gallery and an
associated lecture series, and James often shows up to participate in these
events. Luckily, these events are free to enter for all graduate students. At
one of these events, I'd commented that a particular piece reminded me of a
crystalline structure I was interested in studying (as a li-ion cathode).
James overheard me and came over to quiz me on some of my group's work. About
8 months later, I ran into him at another lecture. While he didn't remember my
name, he asked how my hollandite simulations had turned out.

This anecdote doesn't really prove anything, other than that Dr Simons is a
pretty cool dude.

------
edward
Recently published book on this topic:

The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution by
Gregory Zuckerman

------
anonu
Nobody really knows how RenTech makes their money. There have been some
interesting data points over time, mainly through lawsuits where interesting
tidbits of info were divulged.

There are indications that the main rentech fund is a combination of high
leverage and some potentially risky tax plays through structured products.

~~~
dredmorbius
Correction: nobody who knows, if they've talked publicly, have been taken as
seriously credible.

Someone, I suspect, knows.

------
mason55
A decent book about Jim Simons just came out last week

[https://www.amazon.com/Man-Who-Solved-Market-Revolution-
eboo...](https://www.amazon.com/Man-Who-Solved-Market-Revolution-
ebook/dp/B07P1NNTSD)

I'm most of the way through it, it's an interesting read

------
spyder
A related promising company in this field is Numerai:
[https://numer.ai](https://numer.ai)

Building a meta model from predictions submitted by the community (based on
encrypted training data provided by Numerai).

More info in their video below. Also Howard Morgan the Co-Founder of
Renaissance Technologies too is talking about them and a group of investors
led by him invested $1.5m in the company:

[https://www.youtube.com/watch?v=dhJnt0N497c](https://www.youtube.com/watch?v=dhJnt0N497c)

Their performance is not public, the only hint you can find about it is in
their recent video about some backtests (which doesn't mean it's their real-
world performance):

[https://youtu.be/zeGx7gVgK0o?t=172](https://youtu.be/zeGx7gVgK0o?t=172)

~~~
chillee
I'm very skeptical about numer.ai. I participated in their contests for quite
some time (made a significant chunk of change), but I have huge doubts that
any of our predictions are actually useful to them, for a multitude of
reasons.

------
naringas
Do they produce/create anything? or do they simply trade finacial assets in a
way such that they accumulate profit?

and by "simply trade" I really mean "trade in an incredibly sophisticated and
clever way"

~~~
tcgv
In an interview I watched on youtube Jim Simons says their trades provide
liquidity and efficiency to financial markets, as to say they are effectively
contributing to the economy, and not just earning money.

------
account73466
Performance of the 100bln fund is given at

[https://whalewisdom.com/filer/renaissance-technologies-
llc](https://whalewisdom.com/filer/renaissance-technologies-llc)

------
ipsa
So, assuming nothing against the law, how would they do it legitly? I am
guessing:

\- Treat the markets as a complex dynamical system and use the tools from
statistical physics such as the Gibbs Ensemble, to derive internal states from
input and output.

\- Treat the markets as an encryption algorithm and use the tools from
cryptanalysis, such as differential cryptanalysis: Even when unable to
decipher the full algorithm (total break), one may still derive details and a
subset of system functionality.

\- They were probably the first to heavily use Hidden Markov Models (see
Baum–Welch algorithm and the IBM speech recognition recruitment) and keep on
the frontline with new machine learning algorithms (their deep learning
revolution would have started 10-15 years before industry).

\- They'd have an extremely solid backtesting pipeline, where any new feature
can be stress-tested for signal. Features could be very arcane (% of mentions
of the currency on neighboring state television) and are constantly (re-)added
and removed: concept drift and market competition would gradually weaken
signals, but fresh signals are added to keep the performance.

\- All features are fed into a single final model (which may be an ensemble of
many different forecasting techniques as to lower the variance). This model is
very dynamic year-by-year (with just a few long-term signal features).

\- Finally, I suspect there are strategies that only become available when you
have 1 billion under control. In a physics sense: That is a lot of energy /
control theory experimentation budget. Normally, hedge funds would like to
avoid feedback loops and their trades moving the markets, but I suspect there
is a lot of money to be made when you can calculate in which direction the
market would move when the system is deprived of - or infused with a jolt of
energy. More hands-off: Buy for 1 billion in stock at market open, sell at
market close. Buy signal will take a few hours to converge and result in a
higher price, so you make a profit when you sell your portfolio to the very
buyer's market you created, causing a drop in price to complete the loop.

\- The extreme returns for 2007/2008 could be due to the increase in
volatility of the crisis (you can make more money when there is a lot of
action, and competitors suffer from human herd bias / hysteria), but also, in
part, due to them being the first to effectively exploit signals in growing
social media platforms and search engines. A few years later it was public
knowledge that gauging frequency and sentiment on Twitter was once a valuable
signal.

\- The NSA/CIA type recruits would not work on industrial spying, but on
cryptanalysis, (graph) data mining, OSINT, HUMINT, IMINT, and for the security
of the firm (which probably runs a tighter security than the intelligence
agencies of smaller countries).

~~~
deepnotderp
> Treat the markets as a complex dynamical system and use the tools from
> statistical physics such as the Gibbs Ensemble, to derive internal states
> from input and output.

No. This is what people like LTCM believe. It does not work, the underlying
processes driving markets constantly change.

> \- Treat the markets as an encryption algorithm and use the tools from
> cryptanalysis, such as differential cryptanalysis: Even when unable to
> decipher the full algorithm (total break), one may still derive details and
> a subset of system functionality.

\- They were probably the first to heavily use Hidden Markov Models (see
Baum–Welch algorithm and the IBM speech recognition recruitment) and keep on
the frontline with new machine learning algorithms (their deep learning
revolution would have started 10-15 years before industry).

Yes, and as a fun note, Peter Brown, their current CEO, was Geoff Hinton's
grad student.

\- They'd have an extremely solid backtesting pipeline, where any new feature
can be stress-tested for signal. Features could be very arcane (% of mentions
of the currency on neighboring state television) and are constantly (re-)added
and removed: concept drift and market competition would gradually weaken
signals, but fresh signals are added to keep the performance.

\- The extreme returns for 2007/2008 could be due to the increase in
volatility of the crisis (you can make more money when there is a lot of
action, and competitors suffer from human herd bias / hysteria), but also, in
part, due to them being the first to effectively exploit signals in growing
social media platforms and search engines. A few years later it was public
knowledge that gauging frequency and sentiment on Twitter was once a valuable
signal.

\- The NSA/CIA type recruits would not work on industrial spying, but on
cryptanalysis, (graph) data mining, OSINT, HUMINT, IMINT, and for the security
of the firm (which probably runs a tighter security than the intelligence
agencies of smaller countries).

All correct.

------
gesman
Access to superior information under the disguise of math and science.

------
atlgator
I wish I was good enough to work for them. It must be fascinating.

------
kweinber
You can’t separate Renaissance from Bob Mercer...the guy who helped fund
Brexit, helped create Cambridge Analytica, the major founder of Breitbart
news, and who got Trump elected mostly to avoid paying taxes.

He and his firm did more than anyone I know to make the world a more unstable
place.

------
nfRfqX5n
they talked about this on the Masters in Business podcast on Oct 30th. pretty
interesting stuff.

~~~
notlukesky
[https://www.bloomberg.com/opinion/articles/2019-11-01/rithol...](https://www.bloomberg.com/opinion/articles/2019-11-01/ritholtz-
s-masters-in-business-getting-jim-simons-to-talk)

~~~
npongratz
Direct download:
[https://traffic.bloomberg.fm/BLM3980613543.mp3](https://traffic.bloomberg.fm/BLM3980613543.mp3)

------
trpc
Jim Simons and David E. Shaw are legends who should have some HBO series about
them. Both were researchers who left academia to beat the scumbags of wall
streets in their own game with no finance background and they made
unbelievably so much money in a very short of time that they would have been
jailed or killed if they weren't in the US.

~~~
objektif
I have seen more scumbags in academia than i have in WS btw.

------
viewbase
Back in late 2017, RenTec made an unusual move of raising capital to
capitalize on "market opportunities arising from Trump’s presidential
victory":

[https://www.bloombergquint.com/business/renaissance-s-
medall...](https://www.bloombergquint.com/business/renaissance-s-medallion-
made-stunning-shift-after-trump-election)

By Occam's razor, it is more likely that Robert Mercer made use of his close
ties with Trump administration to gain insider knowledge, than RenTec
consistently having superior quantitative analysis than their competitors in
an extremely competitive and saturated industry.

------
sjg007
I dunno, I would take reliable weather reports a year out and try to predict
crop prices. I am assuming demand will be linear. Maybe you can do this within
the US, maybe not.

------
champagnepapi
Here is a link to the book recently written about Jim Simons and RenTech
[https://www.goodreads.com/book/show/43889703-the-man-who-
sol...](https://www.goodreads.com/book/show/43889703-the-man-who-solved-the-
market)

------
unchocked
A 66% annualized return over 30 years - from a completely opaque investment
strategy. Extraordinary result for sure, how did he do it?

Run by Robert Mercer, the money man who associated with prominent money
launderers.

Based on my priors, Occams Razor says Rentech is a laundromat, not a hedge
fund.

~~~
rb808
66% CAGR is impossible. That would mean every million dollars you invested
turns into $4 Trillion.

~~~
rat_1234
Well, the thing is that they cap the size of the fund at $10B so it's not
really a CAGR per se as the original capital isn't appreciating at that rate.

It's just they have $10B invested and then they distribute $6.6B per year and
that's it (i.e., the fund doesn't become $16.6B next year).

Still take your point that it's an insane figure!

