Renaissance Technologies | Wikipedia audio article
Renaissance. Technologies, LLC. As an American hedge fund firm based in East Setauket New York on Long Island, which specializes. In systemic. Trading, using quantitative, models, derived, from mathematical. And statistical analyses. The. Company, was founded in 1982. By, James Simon's, an award-winning. Mathematician. And former, Cold War Code Breaker in. 1988. The firm established, its most profitable, portfolio. The medallion, fund which used an improved, an expanded, form of Leonard Baum's mathematical. Models improved, by Algebra SJM's, acts to explore, correlations. From which they could profit. Simons. And axe started, a hedge fund and, named it medallion, in honor of the math awards, that they had won Renaissance's. Flagship, medallion, fund which is run mostly, for fund employees, is famed. For one of the best records in investing, history, returning. More than thirty-five percent, annualized. Over, a 20-year. Span. From. 1994. Through mid 201. For it averaged a seventy, one point eight percent annual. Return. Renaissance. Offers, two portfolios to outside. Investors. Renaissance. Institutional. Equities, fund reef and Renaissance, institutional. Diversified. Alfa Rida Simon's, ran Renaissance, until, his retirement in, late 2009. The. Company. Is now run by Peter Brown after Robert, Mercer resign, both of them were computer, scientists, specializing in. Computational. Linguistics, who joined Renaissance, in, 1993. From IBM research. Simon's. Continues, to play a role at the firm as non-executive. Chairman. And remains invested. In its funds particularly. The secretive, and consistently, profitable, black, box strategy. Known as medallion. Because. Of the success, of Renaissance, in general, and medallion, in particular, Simon's. Has been described, as the best money manager, on earth by. October, 2015. Renaissance, had roughly 65. Billion dollars, worth of assets under, management most. Of which belonged, to employees. Of the firm. Topic. Academia. And research. James. Simon's, founded, Renaissance Technologies following. A decade, as the chair of the department of mathematics at. Stony Brook University. Simon's. As a, 1976. Recipient. Of the Oswald, Veblen prize, of the American, Mathematical, Society. Which as geometries. Highest, honor he. Is known in the scientific, community for, his work chern-simons, theory. Which is fundamental. In modern theoretical, physics including, advanced, theories, of how invisible fields. Like those of gravity, interact, with matter to produce everything, from super, strings to black holes. Topic. Quantitative. Trading. The, firm as an early pioneer of quantitative, trading, where researchers, tap decades, of diverse, data in its vast petabyte, scale data. Warehouse, to assess statistical. Probabilities. For the direction, of securities, prices in any given market. Experts. Attribute, the breadth of data on events, peripheral, to financial. And economic, phenomena, that Renaissance takes, into account and, the firm's ability to manipulate enormous. Amounts, of data by deploying highly, efficient, and scalable, technological. Architectures. For computation. And execution. For its consistent. Success in, beating the markets, in many. Ways Renaissance, technologies. Along, with a few other firms, has been synthesizing. Terabytes, of data daily, and extracting, information signals. From petabytes, of data for, almost two decades now, well, before big data and data analytics.
Caught, The imagination of. Mainstream, technology. For more than 20 years, the firm's 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, the. Firm 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. Some. Also attribute, the firm's performance to, employing financial. Signal, processing, techniques, such as pattern, recognition. The. Book the quants describes, the hiring, of speech recognition, experts. Many from IBM, including. The current leaders of the firm. Topic. Quants. With. Non financial, background. Renaissance. Employs, specialists. With non-financial, backgrounds. Including, mathematicians. Physicists. Signal, processing, experts, and statisticians. The. Firm's latest, fund as the Renaissance, institutional. Equities, fund reef, reef. Has historically, trailed, the firm's better known medallion. Fund a separate, fund that contains, only the personal, money of the firm's executives, in a 2013. Article in, The Daily Telegraph, journalists. Our phrase Mainzer described, Renaissance, staff as math geniuses. Running, Wall Street of, his. 200, employees, ensconced. In a fortress like building, an unfashionable, Long, Island, New York a third have PhDs, not in finance, but in fields, like physics mathematics. And. Statistics. Renaissance. Has been called the best physics. And mathematics, department. In the world and according, to whether all avoids, hiring, anyone with even the slightest, width of Wall Street bonafides. Renaissance. As a firm run by and, for scientists, employing. Preferably, those with non-financial, backgrounds. For quantitative, finance research, like mathematicians. Statisticians. Pure. And experimental, physicists. Astronomers. And computer, scientists. Wall. Street Experience, as frowned on and a flair for science, as prized it, is. A widely, held belief, within Renaissance. That the herd-like mentality, among, business, school graduates, as to blame for poor investor, returns. About. A third of its about 300. Or so employees have, PhDs. Renaissance. Engages. Roughly, 150. Researchers. And computer, programmers, half of whom have PhDs, and scientific. Disciplines, at its tranquil, 50 acre east setauket campus. In Long Island New, York which, is near the State University of. New York at, Stony Brook. Mathematician. Assad or a singer, referred, to Renaissance, as East, at office as the best physics, and mathematics, department. In the world, the firm's administrative. And back-office functions are, handled, from its Manhattan, office in New York City, the. Firm is intensely, secretive. About the inner workings, of its business, and very little, as known about it the. Firm is known for its ability to recruit, and retain top, scientific. Talent for having a personnel, turnover that's nearly, non-existent and, for requiring its researchers, to agree to stringent intellectual. Property, obligations. By signing ironclad. Non-compete and. Non-disclosure. Agreements. Topic. Mon metrics. In. 1978. Simon's, left academia. And started, a hedge fund management, firm, called moan metrics, in a Long Island strip, mall the. Firm primarily, traded, currencies, at the start it, did not occur to Simon's, at first to apply mathematics.
To His business, but he gradually, realized, that it should be possible to make mathematical, models of the data he was collecting. Mown. Metrics, name was changed to Renaissance, Technologies in. 1982. Simon's, started recruiting some of the best mathematicians and. Data modeling, experts, from his days at the Institute, for Defense analyses Ida. And Stony, Brook University. His. First recruit, was Leonard Baum a cryptanalyst. From Ida who was also the co-author of the bomb Welch algorithm. When. Baum abandoned. The idea of, trading, with mathematical. Models and took two fundamental, trading, Symonds brought in pioneering, algebra, james axe from cornell, university. Axe, expanded. Bombs models, for trading currencies. To cover any commodity, future, and subsequently, simon set up ax with his own trading account ax comm limited, which eventually gave, birth to the wildly, profitable fund. Medallion. During. The 1980s, acts and his researchers. Improved, on bombs models, and used them to explore, correlations. From which they could profit. Topic. Medallion, fund from 2001. Through 2013. The funds worst year was a 21%, gain, after subtracting, fees. Medallion. Reaped a ninety eight point two percent gain, in 2008. The year the Standard, & Poor's 500, index, lost, thirty, eight point five percent in 1988. Renaissance. Established. Its most famous and profitable, portfolio. The medallion, fund which used an improved, an expanded. Form of, Leonard Baum's mathematical. Models improved, by pioneering, algebra. James acts to explore, correlations. From which they could profit. Simons. And axe started, a hedge fund and named it medallion, in honor of the math Awards that they had won the. Mathematical. Models the company, developed, worked better and better each year and by 1988. Simon's, had decided to base the company's trades. Entirely, on the models by April, 1989. Peak, to trough losses. Had mounted, to about 30%. Acts. Had, accounted, for such, a drawdown, in his models, and pushed to keep trading. Simons. Wanted, to stop to research what was going on after. A brief standoff Simon's. Pulled rank and axe left, Simons. Turned to elwyn berlekamp to. Run medallion, from Berkley California a, consultant. For acts calm whom Simons, had first met at the Ida Burrell camp had bought out most of axis stake in acts comm and became its CEO. He. Worked with Sandor, Strauss Jim, Simons and another consultant, Henry, Laufer to overhaul, medallions, trading, system, during a six-month stretch, in. 1990. Burrell camp led medallion, to a, 55.9%. Gain. Net of fees and then returned, to teaching math at University. Of California. Berkeley, after selling, out to Jim, Simon's, at six times the price for which he had bought his axe com interest, sixteen months earlier. Strauss. Took the reins of medallions revamped. Trading, system, and medallion, returned. 39.4%. In. 1991. 34, percent in 1992. And, 39.1. Percent in. 1993. According, to medallion. Annual, reports, the medallion, fund is considered, to be one of the most successful, hedge funds ever it. Has averaged, a seventy, one point eight percent annual. Return, before fees, from, 1994. Through mid, 201. For, the. Fund has been closed, to outside, investors, since 1993. And is available only, to current, and past employees, and their families, the. Firm bought out the last investor. In the medallion, fund in 2005. And the investor, community has not seen its return since then, about. 100. Of Renaissance's. 275. Or so employees, are what it calls qualified. Purchasers. Meaning, they generally, have at least five million dollars, in assets to, invest the. Remaining, are accredited, investors. Generally, worth at least 1, million dollars. Since. Its inception in March 1988. Simon's. Flagship. 3.3. Billion dollars, medallion. Fund has amassed annual, returns, of, 35.6%. Compared, with, 17.9%. For, the Standard, & Poor's 500 index. For. The 11, full years ended, December, 1999. Medallions. Cumulative. Returns, are an eye-popping, two thousand, four hundred seventy eight point six percent. Among. All offshore funds, over that same period according. To the database run, by veteran, hedge fund observer, Antoine, Bernheim, the next best performer, was Soros Quantum, Fund with, a. 1,700. 10.1%. Return, see table page 44. Simon's. As number one says, Bernheim, ahead. Of George Soros, ahead. Of Mark Kingdon ahead, of Bruce Kovner ahead. Of Monroe trout by the year 2000. The computer-driven. Medallion. Fund had made an average of 34, percent a year after fees since 1988. Simons. Ran Renaissance, until, his retirement in, late 2009. Between. January, 1993. In April, 2005. Medallion. Only had 17, monthly. Losses, and out of 49 quarters. In the same time period medallion, only posted, three quarterly, losses. Between. 1989. To, 2005. Medallion. Had only one year showing a loss, 1989. Topic. Medallion. As a retirement. Fund. Renaissance. One the labor department, s permission. To put pieces of medallion, inside, roth iras, that.
Means No taxes, ever on the future, earnings, of a fund that averaged, a seventy, one point eight percent annual. Return, before, fees, from. 1994. Through mid 201. For. Renaissance. Technologies, terminated. Its 401k. Retirement plan. In 2010, and employees, account, balances. Were put into individual. Retirement, arrangements. Contributions. Could be made to a standard, individual, retirement, arrangements. And then converted, to a Roth IRA regardless. Of income, by. 2012. Renaissance, was granted, a special exemption by the United, States Labor, Department. Allowing, employees to invest their retirement. Money in medallion, arguing, that medallion, had, consistently. Outperformed. Their old, 401k. Plan in. 2013. Renaissance, as IRA plans, had, two hundred fifty nine participants. Whose, eighty six point six million dollars, contribution. Grew to one hundred fifty three million dollars, that year without fees, or annual, taxes. Renaissance. Set up a new 401k. Plan and in November, 2014, the Labor Department. Allowed that plan to be invested, in medallion, as well. Topic. Renaissance. Institutional. Equities, fund, reef. In, 2005. Renaissance. Institutional. Equities, fund reef was created. Reef. Has historically. Trailed, the firm's better known medallion. Fund a separate, fund that only contains, the personal money, of the firm's executives. Renaissance. Also, offers, to Renaissance, institutional. Diversified. Alpha rider to outsiders. Simon's. Ran Renaissance, until, his retirement in, late 2009. Renaissance. Institutional. Equities, Fund had difficulty. With the higher volatility, environment. That persisted, throughout the end of the summer of 2007. According. To an article in Bloomberg in, August, 2007. James. Simon's, as twenty, nine billion, dollars. Renaissance. Institutional. Equities, Fund fell eight point seven percent 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 Quint, hedge fund, now has declined, seven, point four percent for the year, Simon. Said, other hedge funds have been forced, to sell positions. Short-circuiting. Statistical. Models, based on the relationships. Among securities. On the, 25th, of September, 2008. Renaissance. Wrote a comment letter, to the Securities. And Exchange Commission. Discouraging. Them from implementing. A rule change that, 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. Topic. Governmental. Affairs. Topic. Tax avoidance. Investigation. 2014. In, July, 2014. Renaissance. Technologies, was included, in a larger investigation, undertaken, by, Carl Levin and the permanent, Subcommittee, on investigations, on. Tax evasion by wealthy, individuals. The. Focus, of the tax avoidance, investigation. Was Renaissance, as trading strategy, which. Involved, transactions. With banks, such as Barclays. Plc and, Deutsche Bank AG through. Which profits, converted, from rapid, trading, were converted, into lower taxed, long-term, capital gains. The. Strategy, was also questioned, by the Internal, Revenue Service.
IRS. The. Higher rates for the five years under investigation, would, have been forty, four point four percent as compared, to thirty five percent whereas, the lower rate was fifteen percent as compared, to twenty three point eight percent. The. IRS, contend, Eady that the arrangement, Renaissance's, medallion, fund had with the banks in which the fund owned option, contracts. Rather than the underlying financial. Instruments. Is a ruse, and that the fund investors, owe taxes, at the higher rate. Because. Medallion, could claim that it owned just one asset, the option, and held it for more than a year investors. Could declare their gains to be long-term investments. Topic. Campaign. Contributions. According. To the Center for Responsive, Politics. Renaissance. As the top financial firm, contributing. To federal campaigns, in the 2016. Election, cycle donating. 33, million one hundred eight thousand, dollars by July, by. Comparison. Over that same period sixth, ranked Soros, Fund management, has contributed thirteen, million two hundred thirty eight thousand, five hundred fifty one dollars. Renaissance's. Managers, have also been active, in the 2016. Cycle contributing. Nearly thirty million dollars, by June with Mercer ranking, as the number one individual. Federal donor, largely, to Republicans. And Simon's, ranked number five largely, to Democrats. They. Were a top donor to the presidential. Campaigns, of Hillary Clinton, and Donald Trump, during the 2016, campaign, cycle. Simons contributed, twenty six million two hundred seventy, seven thousand, four hundred fifty dollars ranking. As the fifth largest individual. Contributor. Simons. Directed, all but twenty-five thousand, dollars of his funds towards, liberal candidates. Robert. Mercer contributed. Twenty five million, fifty, nine thousand, three hundred dollars, ranking, as the seventh largest individual. Contributor. Robert. Mercer directed. All funds contributed towards. Conservative. Candidates. Since. Nineteen, ninety Renaissance, has contributed fifty, nine million, eighty one thousand, one hundred fifty, two dollars to, federal campaigns, and since 2001. Has spent three million seven, hundred thirty, thousand, dollars on lobbying. Topic see also Winton, group de Shah and curl. PDT, partners. To. Sigma investments. Renaissance. Technologies current. Holdings.