Their success is based on an unusual type of information asymmetry -- they have better mathematics than everyone else. They invest heavily in development of novel mathematics that can be applied to find new types of patterns analytically that are not discoverable with existing mathematical methods and algorithms. This allows them to mine patterns that no one else has discovered yet because the barrier to discovery is anomalously high since it requires esoteric invention. Most firms just rearrange the existing methods in new ways or with new data.
It is an efficient market but they are unusually profitable because they have little competition for the patterns they exploit.
As I’ve pointed out before, there are a lot of quant firms out there. I doubt Rentech have the massive edge that people seem to think they do. I think it’s much more likely that many firms had a small edge, and we notice the luckiest among them.
That said, I don’t doubt that they’ve had an edge. Maybe they were doing trend following in the 90’s, or HFT in the 2000s. Most firms’ strategies eventually leak via lateral hires, but rentech is a small shop and no-one has managed to nab one of their employees. So there’s no way to know for sure.
They do have massive edge, but I doubt it comes from novel mathematics. My guess is it comes from very well designed systems at every stage of the process, honed over decades.
You don't notice the other firms because they've likely not been in existence as long and do not run as much money as Rentech does. Rentech has public pension money in it which by itself will attract more scrutiny. Chances are if you aren't running more than a few hundred million it could be all internal capital or a HNW individual or two.
Their success is based on an unusual type of information asymmetry -- they have better mathematics than everyone else. They invest heavily in development of novel mathematics that can be applied to find new types of patterns analytically that are not discoverable with existing mathematical methods and algorithms. This allows them to mine patterns that no one else has discovered yet because the barrier to discovery is anomalously high since it requires esoteric invention. Most firms just rearrange the existing methods in new ways or with new data.
It is an efficient market but they are unusually profitable because they have little competition for the patterns they exploit.