Renaissance Technologies
Encyclopedia
Renaissance Technologies is a hedge fund
management company of about 275 employees and more than $ billion in assets under management
in three funds. It operates in East Setauket, Long Island, New York, near Stony Brook University
with administrative functions handled in Manhattan
.
, Renaissance currently has more than $15 billion in assets under management. Since 1989, the company's $5 billion Medallion Fund has averaged 35% annual returns after fees . The Medallion Fund is one of the most successful hedge funds.
In 2011, out of 144 tech pro, Renaissance Technology was ranked as no. 4 of the best IT department in financial services.
Renaissance 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.
s, 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 Axcom Trading Advisors
after that company's dissolution in 1992.
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.
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.
, 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.
Renaissance employs some with non-financial backgrounds, including mathematicians, physicists, astrophysicists and statistician
s. About a third of the 275 employees at the East Setauket office have Ph.Ds
.
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."
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".
’ Quantum Fund, with a 1,710.1 percent return. A measurement of the risk (e.g., beta
, volatility
, or leverage
figures) which accompanied Medallion's 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.
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
management company of about 275 employees and more than $ billion in assets under management
Assets under management
Assets under management is a financial term used denote the market value of funds being managed by a financial instutition on behalf of its clients, investors, depositors, etc. This metric is a sign of size and success against competition...
in three funds. It operates in East Setauket, Long Island, New York, near Stony Brook University
State University of New York at Stony Brook
The State University of New York at Stony Brook, also known as Stony Brook University, is a public research university located in Stony Brook, New York, on the North Shore of Long Island, about east of Manhattan....
with administrative functions handled in Manhattan
Manhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...
.
History
Started in 1982 by James SimonsJames Harris Simons
James Harris "Jim" Simons is an American hedge fund manager, mathematician, and philanthropist.In 1982, Simons founded Renaissance Technologies, a private investment firm based in New York with over $15 billion under management; Simons is still at the helm, as CEO, of what is now one of the...
, Renaissance currently has more than $15 billion in assets under management. Since 1989, the company's $5 billion Medallion Fund has averaged 35% annual returns after fees . The Medallion Fund is one of the most successful hedge funds.
In 2011, out of 144 tech pro, Renaissance Technology was ranked as no. 4 of the best IT department in financial services.
Renaissance charges a management fee of 5% and a profit participation
Carried interest
Carried interest or carry, in finance, specifically in alternative investment management, is a share of the profits of a successful investment partnership that is paid to the investment manager of the partnership as a form of compensation that is designed as an incentive to the manager to maximize...
of 36%, both of which are higher than the industry standard of 2% and 20%, respectively.
Funds
The Medallion Fund has traded non-stock instruments and is international. American-traded instruments include commodities futures and US Treasury bonds. Foreign-traded instruments include currency swapCurrency swap
A currency swap is a foreign-exchange agreement between two parties to exchange aspects of a loan in one currency for equivalent aspects of an equal in net present value loan in another currency; see foreign exchange derivative. Currency swaps are motivated by comparative advantage...
s, commodities futures
Futures contract
In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange...
, and foreign bonds
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
. 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 Axcom Trading Advisors
Axcom Trading Advisors
Axcom Trading Advisors was an early alternative investment management company founded by Elwyn Berlekamp and based in Berkeley, CA. It was acquired by Renaissance Technologies Corp in 1992, whereafter its investment instruments were either subsumed into Renaissance's flagship Medallion Fund. The...
after that company's dissolution in 1992.
The Nova Fund has traded NASDAQ
NASDAQ
The NASDAQ Stock Market, also known as the NASDAQ, is an American stock exchange. "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations". It is the second-largest stock exchange by market capitalization in the world, after the New York Stock Exchange. As of...
stocks only, executing purely electronically, with a desk staffed by 1-2 traders overseeing operations. In the mid-1990s, Nova was one of Instinet
Instinet
Instinet is an institutional, agency-only broker. As such, it executes trades for roughly 1,500 “buyside” clients such as asset management firms, hedge funds, insurance companies, mutual funds and pension funds...
's largest volume customers. On one day in 1997 Nova executions accounted for 14% of the share volume of the NASDAQ.
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.
Investment strategy
For more than twenty years, Simons' Renaissance Technologies hedge fundHedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
, 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.
Renaissance employs some with non-financial backgrounds, including mathematicians, physicists, astrophysicists and statistician
Statistician
A statistician is someone who works with theoretical or applied statistics. The profession exists in both the private and public sectors. The core of that work is to measure, interpret, and describe the world and human activity patterns within it...
s. About a third of the 275 employees at the East Setauket office have Ph.Ds
Doctor of Philosophy
Doctor of Philosophy, abbreviated as Ph.D., PhD, D.Phil., or DPhil , in English-speaking countries, is a postgraduate academic degree awarded by universities...
.
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."
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
Long (finance)
In finance, a long position in a security, such as a stock or a bond, or equivalently to be long in a security, means the holder of the position owns the security and will profit if the price of the security goes up. Going long is the more conventional practice of investing and is contrasted with...
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".
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 SorosGeorge Soros
George Soros is a Hungarian-American business magnate, investor, philosopher, and philanthropist. He is the chairman of Soros Fund Management. Soros supports progressive-liberal causes...
’ Quantum Fund, with a 1,710.1 percent return. A measurement of the risk (e.g., beta
Beta coefficient
In finance, the Beta of a stock or portfolio is a number describing the relation of its returns with those of the financial market as a whole.An asset has a Beta of zero if its returns change independently of changes in the market's returns...
, volatility
Volatility (finance)
In finance, volatility is a measure for variation of price of a financial instrument over time. Historic volatility is derived from time series of past market prices...
, or leverage
Leverage (finance)
In finance, leverage is a general term for any technique to multiply gains and losses. Common ways to attain leverage are borrowing money, buying fixed assets and using derivatives. Important examples are:* A public corporation may leverage its equity by borrowing money...
figures) which accompanied Medallion's 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.
Personnel
- Jim SimonsJames Harris SimonsJames Harris "Jim" Simons is an American hedge fund manager, mathematician, and philanthropist.In 1982, Simons founded Renaissance Technologies, a private investment firm based in New York with over $15 billion under management; Simons is still at the helm, as CEO, of what is now one of the...
, Founder, President & CEO - Gudjon Hermansson, Production Manager, Medallion Fund. Stony Brook University, PhD, Computer Science, 1993
- Henry LauferHenry LauferHenry B. Laufer is Vice President of Research at Renaissance Technologies.Laufer received his PhD from Princeton University in 1965, studying with Robert Gunning. He joined the mathematics department at the State University of New York at Stony Brook in 1971. His research focused on complex...
, Vice President of Research - Robert Lourie, Head, Futures Research
- Nathaniel Simons, Principal, Vice Chairman, and Director
- George ZweigGeorge ZweigGeorge Zweig was originally trained as a particle physicist under Richard Feynman and later turned his attention to neurobiology...
Renaissance Alumni
- Alexander Astashkevich - Research, Medallion Fund, committed murder and suicide in February, 2006
- James AxJames AxJames Burton Ax was a mathematician who proved several results in algebra and number theory by using model theory. He shared the seventh Frank Nelson Cole Prize in Number Theory with Simon B. Kochen, which was awarded for a series of three joint papers on Diophantine problems.James Ax earned his...
, founder of Axcom Trading AdvisorsAxcom Trading AdvisorsAxcom Trading Advisors was an early alternative investment management company founded by Elwyn Berlekamp and based in Berkeley, CA. It was acquired by Renaissance Technologies Corp in 1992, whereafter its investment instruments were either subsumed into Renaissance's flagship Medallion Fund. The...
, predecessor to the Medallion Fund, and a noted mathematician - Elwyn BerlekampElwyn BerlekampElwyn Ralph Berlekamp is an American mathematician. He is a professor emeritus of mathematics and EECS at the University of California, Berkeley. Berlekamp is known for his work in information theory and combinatorial game theory....
, president of Axcom Trading AdvisorsAxcom Trading AdvisorsAxcom Trading Advisors was an early alternative investment management company founded by Elwyn Berlekamp and based in Berkeley, CA. It was acquired by Renaissance Technologies Corp in 1992, whereafter its investment instruments were either subsumed into Renaissance's flagship Medallion Fund. The...
, predecessor to the Medallion Fund, and a noted mathematician - Leonard E. Baum, the coauthor for the Baum-Welch algorithmBaum-Welch algorithmIn electrical engineering, computer science, statistical computing and bioinformatics, the Baum–Welch algorithm is used to find the unknown parameters of a hidden Markov model . It makes use of the forward-backward algorithm and is named for Leonard E. Baum and Lloyd R...
, built early trading models for Axcom Trading AdvisorsAxcom Trading AdvisorsAxcom Trading Advisors was an early alternative investment management company founded by Elwyn Berlekamp and based in Berkeley, CA. It was acquired by Renaissance Technologies Corp in 1992, whereafter its investment instruments were either subsumed into Renaissance's flagship Medallion Fund. The... - Robert J. Frey, 1992-2004, Managing Director Emeritus
- Nick Patterson, Research, Medallion Fund; noted chess player, formerly with the UK's GCHQGovernment Communications HeadquartersThe Government Communications Headquarters is a British intelligence agency responsible for providing signals intelligence and information assurance to the UK government and armed forces...
; now at MIT's Broad InstituteBroad InstituteThe Broad Institute is a genomic medicine research center located in Cambridge, Massachusetts, United States. Although it is independently governed and supported as a 501 nonprofit research organization, the institute is formally affiliated with the Massachusetts Institute of Technology, Harvard... - Kresimir Penavic, Research, Medallion Fund (retired)
- Alkes Price, Research, Medallion Fund; now at Harvard
- Peter J. WeinbergerPeter J. WeinbergerPeter Jay Weinberger is a computer scientist best known for his early work at Bell Labs. He now works at Google.Weinberger was an undergraduate at Swarthmore College, graduating in 1964...
(the "w" in AWKAWK (programming language)The AWK utility is a data extraction and reporting tool that uses a data-driven scripting language consisting of a set of actions to be taken against textual data for the purpose of producing formatted reports...
), Medallion Fund, left Renaissance for GoogleGoogleGoogle Inc. is an American multinational public corporation invested in Internet search, cloud computing, and advertising technologies. Google hosts and develops a number of Internet-based services and products, and generates profit primarily from advertising through its AdWords program...
in 2003
External links
- Official website
- Corporate profile - Hoovers
- High Frequency Trading - Bulldog Trust
- http://www.computerworld.com - Survey ranks best IT departments in financial services