Renaissance Technologies, every mention
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Verbatim, from the transcripts: the passages where Renaissance Technologies comes up
Vanguard: The communist capitalist who saved investors a trillion dollars (Audio) · Acquired
- ▶ 1:40:28 David Rosenthal We can generate annual returns in the twenties, thirties, even higher percentages like Rentech in our episode there.
10 Years of Acquired (with Michael Lewis) · Acquired
- ▶ 1:43:38 David Rosenthal Rentec, Renaissance Technologies.
Microsoft Volume I: The Complete History and Strategy of founding through Windows 95 (Audio) · Acquired
- ▶ 33:32 David Rosenthal It's funny, at Harvard, you know, kind of like Jim Simons that we talked about at MIT on the Rentech episode.
- ▶ 4:01:03 David Rosenthal It's like Rentech.
Renaissance Technologies (Audio) · Acquired
- ▶ 1:34 Ben Gilbert Today, listeners, we tell the story of the best performing investment firm in history, Renaissance Technologies, or Rentech.
- ▶ 2:07 Ben Gilbert Their founder, Jim Simons, worked for the U.S. government in the Cold War as a codebreaker before starting Renaissance.
- ▶ 2:53 Ben Gilbert To add to everything else that I just said, Rentech's flagship medallion fund doesn't take any outside investors.
- ▶ 3:19 Ben Gilbert So, what exactly does Renaissance do?
- ▶ 5:49 David Rosenthal By the way, we knew all this because we have to thank Greg Zuckerman, author of The Man Who Solved the Market, which is the only book out there that is solely dedicated to Rentech and Jim Simons, and we actually got to talk to Greg in our…
- ▶ 6:32 Ben Gilbert A quant fund coming up at the same time as Rentech.
- ▶ 7:40 David Rosenthal I mean, these famous stories of the conference rooms at Rentech and the war rooms when the market is going through like a crazy gyration and it's just filled with cigarette smoke and it's all Jim.
- ▶ 11:42 David Rosenthal So this realization that Jim has about himself, though, both that he's not the smartest person in the room at a place like MIT, but he can hang with them, and that he has this taste concept, I think becomes one of the most important keys…
- ▶ 16:43 David Rosenthal Not just is this the start of his entrepreneurial career, the seeds of this financially are what go on to start Rentech.
- ▶ 19:19 David Rosenthal And this culture ends up getting translated whole cloth right into Rentech.
- ▶ 21:14 David Rosenthal And everything that they suggest in this paper really is Rentech.
- ▶ 21:20 David Rosenthal Just 20 years before Rentech.
- ▶ 23:58 David Rosenthal What they are really doing here at IDA and then soon in Rentech is early machine learning.
- ▶ 24:56 David Rosenthal Similar to Rentech, they were also early to recognize the value of AI to gather, process, and analyze those massive troves of data to provide solutions for their customers and mitigate risk, like when they incorporated AI into their cash…
- ▶ 26:37 Ben Gilbert One more playbook theme in common between Rentech and JPMorgan Payments, they both analyzed data to uncover patterns and insights you may never think to look for.
- ▶ 46:42 Ben Gilbert Which was essentially spun out of Renaissance?
- ▶ 46:46 Ben Gilbert Like, it was kind of the venture capital work that they were doing at Renaissance that didn't fit with the rest of Renaissance?
- ▶ 47:34 David Rosenthal And in 1982, Jim actually winds down monometrics and he and Howard co-found a new firm together.
- ▶ 47:57 David Rosenthal And Howard's gonna bring in private company technology investing, and they pick a name for a firm that is gonna reflect this, Renaissance Technologies.
- ▶ 48:10 David Rosenthal And that is why Rentech is called Rentech.
- ▶ 49:15 David Rosenthal But in these early days of rent tech,
- ▶ 49:23 David Rosenthal And in fact, a couple years after they get started, the currency trading side of the firm almost blows up when Lenny goes super long on government bonds, and the market goes against him, and the whole portfolio drops 40%, which is wild.
- ▶ 49:46 David Rosenthal And they sell off Lenny's entire portfolio, and he leaves the firm.
- ▶ 49:52 David Rosenthal I mean, blow up risk is always an issue in the markets, but this happened to Rentech.
- ▶ 50:29 David Rosenthal So as a result of that, for a while, Rentech is truly almost entirely a venture capital firm.
- ▶ 51:48 David Rosenthal It's called Axcom, A-X-C-O-M, and we'll contract with Axcom to run what's left of the trading operations here for Rentech.
- ▶ 52:07 Ben Gilbert This very favorable contractual relationship where they're gonna hire them to be the manager for this pot of money that Renaissance has raised.
- ▶ 52:15 Ben Gilbert But, you know, it's technically not Renaissance.
- ▶ 52:54 David Rosenthal That's what he was doing at Stony Brook, and that's what he came into Renaissance to build.
- ▶ 56:35 David Rosenthal And Howard, of course, remains an investor in Rentech.
- ▶ 57:01 David Rosenthal As Howard did from his LP stake in Rentech.
- ▶ 57:11 Ben Gilbert I think I read basically every primary source thing on Jim or Renaissance on the whole internet, but I assume you got that from Howard.
- ▶ 57:43 David Rosenthal So, when Howard spins out the venture activities, Jim then decides to set up a new fund as a joint venture between Rentech and Axcom.
- ▶ 58:16 Ben Gilbert The Medallion Fund is the crown jewel, or you might even say actually the only interesting thing about Renaissance.
- ▶ 58:33 Ben Gilbert Maybe that should be a deeper part of the fold here at Rentech, and we shouldn't have let that get away or frankly given up on the quantitative trading strategies too early.
- ▶ 1:06:43 David Rosenthal But this, certainly for early Rentech,
- ▶ 1:12:18 David Rosenthal So just like dollars out of the firm, it's probably twice that.
- ▶ 1:12:34 David Rosenthal He rolls everything in the Medallion fund back into Rentech itself, moves everything back to Stony Brook.
- ▶ 1:12:54 David Rosenthal So once Jim takes control and moves everything back, he basically decides that he's going to turn Rentech into an even better, even more idealized version of IDA and the math department at Stony Brook.
- ▶ 1:14:11 Ben Gilbert Is the story of Renaissance.
- ▶ 1:14:17 Ben Gilbert It is a very complex reality of a whole bunch of different people that came in and out at different eras where the firm was trying different things and eventually became phenomenally successful with a very particular approach.
- ▶ 1:14:55 Ben Gilbert And we haven't even introduced the two people who would become the co-CEOs of this company for 20 years.
- ▶ 1:15:13 David Rosenthal In 1991, the next year, the firm does 54.3% gross returns and 39.4% net returns after fees.
- ▶ 1:19:03 Ben Gilbert It's almost this honeypot for Renaissance's systems.
- ▶ 1:19:21 David Rosenthal And in 1993, one of the mathematicians that Jim had recruited to Rentech, a guy named Nick Patterson,
- ▶ 1:19:35 David Rosenthal And this is, I think, one of the keys to Rentech and the culture there.
- ▶ 1:20:35 Ben Gilbert Well, the actual work that goes into speech recognition, natural language processing, is kind of the same signal processing that Renaissance is doing to analyze the market.
- ▶ 1:21:55 David Rosenthal And this is what's so important, and why the two of them become probably the most critical hires in Rentech's history, even including all the great academics that came before them.
- ▶ 1:22:24 David Rosenthal And the current talent at Rentech coming from academia has just never experienced that or built anything like it.
- ▶ 1:25:08 David Rosenthal They bring Peter and Bob and one of their programming colleagues, David Magerman, over from IBM into Rentech.
- ▶ 1:26:36 David Rosenthal It turns out that this was actually the second most important innovation that Bob and Peter bring to Rentech, the actual product and performance of having one model.
- ▶ 1:27:09 David Rosenthal Before this, there were separate models within Rentech, so insights and innovations and work that one team was doing on one model wouldn't get applied or translate over to
- ▶ 1:28:09 David Rosenthal Everything at Rentech, so all the wood is going behind one arrow.
- ▶ 1:29:05 David Rosenthal In Rentech's case, this would be the model.
- ▶ 1:30:33 David Rosenthal Rentech is getting into equities.
- ▶ 1:34:07 David Rosenthal And part of it might be that the model wasn't tuned right yet because nobody at Rentech had seen this type of behavior in the market before.
- ▶ 1:35:11 David Rosenthal There's a parallel story when Jim ultimately does retire in 2009 and Peter and Bob take over as co-CEOs, where a year or so before the quote unquote quant quake had happened, where similar to the tech bubble bursting, there was all of a…
- ▶ 1:37:47 Ben Gilbert Or what you can do as Rentech is both.
- ▶ 1:41:26 Ben Gilbert And in some ways, that's what Renaissance is doing here to themselves or to their investors.
- ▶ 1:42:31 David Rosenthal So, starting in 2003, everybody who's an outside investor, who's not part of the Rentech family, you know, current employee or alumni of the firm, gets kicked out.
- ▶ 1:43:27 Ben Gilbert And the strategy that Rentech is employing right now, they're just deeming doesn't work at north of five billion dollars.
- ▶ 1:43:34 David Rosenthal So, in 2003, they start kicking all the outside investors out of Medallion, but clearly there's still lots of institutional demand to invest with Renaissance.
- ▶ 1:46:27 David Rosenthal It's not like there's any lack of demand of outside capital that wants to invest with Rentech.
- ▶ 1:46:59 Ben Gilbert It's a renaissance product.
- ▶ 1:47:57 Ben Gilbert Well, the 13 F for Renaissance has 4300 stocks in these tiny little chunks, and there's a little bit of
- ▶ 1:52:58 David Rosenthal So, after the historic performance during the financial crisis, as I alluded to earlier, Jim retires at the end of 2009, and Peter and Bob become co-CEOs, co-heads of the firm in 2010.
- ▶ 1:53:24 David Rosenthal And really with no impact, which I assume means that Rentech was getting better, and the models were getting better, because otherwise they would have gone to 10 before.
- ▶ 1:56:28 David Rosenthal Which equates to total lifetime carry dollars for the whole firm of sixty billion dollars, Justin Carey, by our calculations.
- ▶ 1:57:07 David Rosenthal And, well, speaking of a lot of money, we do need to mention, before we finish the story here, that, that Rentech money has bought a lot of influence in society.
- ▶ 1:57:39 David Rosenthal Now, lest you think that Rentec dollars are solely being funneled into one side of the political spectrum, Jim Simons is a major Democratic donor, as are many other folks at Rentec.
- ▶ 1:57:59 David Rosenthal Tens of millions of dollars, many tens of millions of dollars on all sides and through many campaign cycles here from Rentech employees and alumni.
- ▶ 1:58:08 David Rosenthal This did become a flashpoint for the firm in the wake of the 2016 election.
- ▶ 1:58:14 David Rosenthal Mercer obviously became a controversial figure, both externally and internally within the firm.
- ▶ 1:58:29 David Rosenthal Ultimately, Jim asked Bob to step down as co-CEO in 2017, which he did, but he did remain a scientist at the firm and a contributor to the models, even though he wasn't leading the organization with Peter from a leadership standpoint any…
- ▶ 1:59:05 Ben Gilbert Yes, Bob Mercer is no longer the CEO of Renaissance Technologies, or the co-CEO.
- ▶ 1:59:09 Ben Gilbert He still works there.
- ▶ 1:59:19 Ben Gilbert Like everything with Renaissance, it works a little bit different than the rest of the world.
- ▶ 1:59:36 David Rosenthal I think this qualifies as the Rentech playbook, but I really kind of think of it as the Rentech tapestry.
- ▶ 1:59:43 David Rosenthal And I was inspired by Costco here, because we were talking to folks in the research, and everybody said, you know, Rentech, it just has these puzzle pieces that fit together.
- ▶ 1:59:53 David Rosenthal On the surface, Rentech does the same things that Citadel, D.
- ▶ 2:00:38 David Rosenthal There are three very interrelated things that make Rentech unique.
- ▶ 2:01:34 David Rosenthal At Rentech, though, because of the one model architecture, everyone works together on the same investment strategy and the same investment infrastructure.
- ▶ 2:01:46 David Rosenthal That means everyone sees everybody else's work, everybody who works at Rentech on the research team, on the infrastructure team, they have access to the whole model.
- ▶ 2:02:52 Ben Gilbert Most of the people at Rentech are not gonna have another job.
- ▶ 2:03:01 Ben Gilbert Yeah, I just got LinkedIn Premium, and you can see median tenure, and it's crazy, there's only like, three, 400 employees at Renaissance, and the median tenure, at least as reported by LinkedIn, is like, 14 years.
- ▶ 2:03:20 David Rosenthal There are less than 400 employees that work at Rentech,
- ▶ 2:03:40 David Rosenthal Every other peer firm of Rentech, you know, Citadel, D Shaw, Two Sigma, et cetera, all of them, you lump Jane Street, you know, jump the high frequency guys in here.
- ▶ 2:03:57 David Rosenthal It is an order of magnitude more people who are working at the other firms versus who are working at Rentech.
- ▶ 2:05:04 Ben Gilbert And since Renaissance doesn't recruit from finance jobs, it's kind of unlikely that you know someone else in finance.
- ▶ 2:05:42 David Rosenthal Rentech's hiring established scientists and PhDs.
- ▶ 2:05:56 Ben Gilbert If you look up Renaissance Technologies at Google and you go and look at the photos on campus, it's a little courtyard and winding walking path and woods all around it, tennis courts.
- ▶ 2:06:08 David Rosenthal So then there's the last piece of the small team element, which is just the magnitude of the financial impact, which I don't think is true, but let's say that there were another quant fund that made the same number of dollars of…
- ▶ 2:06:25 David Rosenthal At Rentech, you're splitting that a couple hundred ways.
- ▶ 2:06:47 David Rosenthal I think the third puzzle piece of what makes Rentech so unique and defensible is Medallion's structure itself.
- ▶ 2:08:19 David Rosenthal When people come into Rentech, they obviously have way less wealth than the people who've been there for a long time, both from the direct returns that you're getting every year from working there, and just your investment percentage of…
- ▶ 2:08:45 David Rosenthal At Rentech, be the medallion fund.
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