Renaissance Technologies

“If it's happening, I've said that the leading candidate would be Renaissance Technologies on Long Island.”

“Jim Simons, the founder of Renaissance technologies and Elon Musk, and both of them, what they would do is when they needed time to think, they would find a quiet place, usually in the dark, and they would lay on their back flat. They can't see anything. They …”

“Jim Simon's son had a kid in my oldest child's class in high school, and I tried, I approached, I said, look, I can't do it unless you want me to do it. There's no point. And he said like, Dad, just like, no, no, no.”

“In the first seven years of Renaissance, which is now known as the premier quant trading fund around the world, but the first seven years, we also had about half the money in venture, and for the first five years, venture dominated the returns.”

“Whoever has the most data wins and Renaissance even today has 50 years of data. Tick by tick data to do research on. No one else has that. That's why they're still doing so well, even, even today.”

“So he never hired a Anyone who knew anything about the markets, because he was hiring mathematicians, statisticians, physicists, astrophysicists, people who understood time series, number series, big data. And he didn't want them to be colored by thinking they…”

“And Jim once said to me, if somebody comes to me with a much better algorithm for trading, and another guy comes to me with a new source of data no one else has, I'm much more, I'd much rather pay for the data. You know, we'll figure out the algorithms.”

“Renaissance technologies, which goes on to make over a hundred billion dollars in profit and continues to make what I hear billions of dollars in profit every year to this day”

“Medallion scored a gain of 55.9% in 1990. A dramatic improvement on its four percent loss the previous year.”

“That, like, Jim Simons at Rentac versus, like, Robert Carroll, like, who would be a better earlier stage, early stage investor? And I think it's actually, like, Robert Carroll. Like, I think, like, literary nonfiction done really, really well, or journalism do…”

“Jim Simons, who made more money using math and data than anyone in history, said, be guided by beauty.”

“Jim Simons, founder of Renaissance Technologies, RIP would famously speed everywhere. Because he just made the economic calculation that it's not worth it to him.”

“And he decoded the stock market and the medallion fund has a year on year, a 33% return, which as you know, is fucking insane. And it's just done through like computational modeling.”

“You're not allowed to talk about shit, and no one's ever leaked. There's been zero leaks about what they do.”

“Investing is one of the very few endeavors in life where the harder you try, the worse you're probably going to do. And yes, there are exceptions to that. Renaissance technologies. Of course, you can name the exceptions for people who tried very hard and did v…”

“Their thirty-year track record managing billions of dollars has better returns than anyone you have ever heard of, including Berkshire Hathaway, Bridgewater, George Soros, Peter Lynch, or anyone else.”

“To add to everything else that I just said, Rentech's flagship medallion fund doesn't take any outside investors. The partners of the firm have become so wealthy from the billions that the fund has generated that the only investors they allow in are themselves…”

“Not just is this the start of his entrepreneurial career, the seeds of this financially are what go on to start Rentech.”

“So they come together and they publish a paper called Probabilistic Models for and Prediction of Stock Market Behavior. And everything that they suggest in this paper really is Rentech. Just 20 years before Rentech.”

“The Franklin Electronic Dictionaries? Yeah, that was one of their biggest investments. That one investment is half of Jim's net worth.”

“I think Jim made as much money from his investments in first round as Howard did from his LP stake in Rentech.”

“I would estimate probably a 152 hundred billion dollars that have come out of Medallion over the last 35 years.”

“From 1990 onward, they never lose money, and on a gross basis, they never even do less than 30%.”

“No other at scale investment firm period, and especially quant firm operates this way today with just one model.”

“And I believe, if I have my research right, in 2004, they actually achieved a Sharpe ratio of 7.5.”

“Okay, so, in 2001, they raised the carrier to 36%. 2002, they raised it to 44%. And then, in 2003, they actually say, hey, we can't incentivize you out of the fund, outside investors. We are gonna kick you out. So, starting in 2003, everybody who's an outside …”

“2007 medallion does a 136% gross. 2008 medallion does a 152% gross.”

“So, from at least the data that we were able to find on Medallion's performance over the past few years, twenty-twenty, they were up a 149% gross and 76% net.”

“So during the entire lifetime so far of Medallion, from 1988 To twenty-twenty-two, that's 34 years. The total net annual return number is 40%. Four zero over 34 years after fees. It's 68% before fees. Which equates to total lifetime carry dollars for the whole…”

“There are less than 400 employees that work at Rentech, only half of which work in research and engineering, and the other half are either back office or institutional sales for the open funds.”

“The institutional funds have gotten big. They peaked at over a hundred billion, but they're currently between 60 and seventy billion that they manage on top of the 10 or 15 that's in the medallion fund.”

“If you work there, your four oh one K is the medallion fund.”

“Competitors generally had about seven dollars of financial instruments for every dollar of cash. By contrast, Medallion's option strategy allowed it to have 12 dollars and 50 cents worth of financial instruments for every dollar of cash.”

“Over time, eventually in 2021, the IRS said, no, you made all those trades. That was not a completely separate entity. And so you guys owed 6.8 billion dollars in taxes that you didn't pay. You're going to need to pay that with interest, with penalties. And by…”

“Yeah, it says right on their website they have 50,000 computer cores with a 150 gigabits per second of global connectivity and a research database that grows by more than 40 terabytes a day.”

“People don't leave period, and people especially don't leave and start their own firms.”

“Two years is kind of what I heard. That the model is fully restructured every two years. It's not like on a date every two years. It's being restructured every day, but collectively it's about a two-year cycle.”

“Peter Brown's academic advisor was Jeffrey Hinton.”

“They hold thousands of long and short positions at any given time, and their holding period ranges from one to two days or one to two weeks. They make between a 150,300 thousand trades a day, but much of that activity entailed buying or selling in small chunks…”

“Renaissance Technologies is actually not in the investment business. They are in the gambling business, and in particular, they're the house.”

“And the way they get their returns year after year is taking the leverage, the midday leverage up higher and higher and higher and higher. So they're making smaller and smaller profits on more and more volume, which gives them this big peak leverage risk, whic…”

“So, supposedly, the Core Medallion Fund, which is now all private capital of Rentech employees and Simons himself, like there's no outside investors, averaged a 66.1% annual return from 1988 to 2018.”

“I think that's part of the reason why the returns have been so ridiculous is that he's a unique breed. He could do both, the quant side, the mathematics side, but also the personal and relate to people and manage people.”

“And they developed the system, an automated type system, early trading model, and it cornered the market for Maine potatoes.”

“He hired this young economist as a consultant named Alan Greenspan, and he had his red phone that went off when news broke and they would try to beat everybody else in trading kind of thing.”

“We're talking on average about two days, and people lump them in with high frequency and they're not, but it's not to suggest they do it as they do it back then, but we're talking a few days on average, sometimes less, sometimes more, moments to months is how …”

“What they were doing wasn't so different from technical analysis. I mean, we all sort of poo poo, and we kind of look at it as alchemy and hocus pocus, but they saw themselves as maybe more sophisticated, more scientific approach to technical analysis in that …”

“Henry Laufer was the key guy. So he was a mathematician, a very quiet, humble, really super smart, well respected, and almost acclaimed in that field. And he's the one who came up with different approaches, things like days of the week, comparing what trades w…”

“Simon's almost pulled the plug. He gave his guys six months, and he goes, guys, that's it. We're gonna pull the plug. I'll give you six more months.”

“He found this glitch. He found a screw up on the part of Bob Mercer, who was a super duper programmer, but he had messed up. There's a number that wasn't updating. It was an S&P 500 number that was static. And it was really more their hedging and their offsett…”

“So today, and it's not so dissimilar from what it was back then, today it's about four or 5000 stocks that are long, four or 5000 stocks that are short.”

“So they don't even know the companies involved. They find that distracting.”

“He doesn't hire from wall street. He never has interest. If you worked on wall street, it's hard to get a job there. And that helps because when they leave, people don't usually go to wall street. So I don't know if I think he stumbled onto this. I don't think…”

“And they use leverage on top of that, sometimes as much as 10 to one or more, depending on the opportunities and such.”

“Medallion has been really only Jim Simons and his employees since around 2003. They kicked the last people out.”

“They've got these returns, 66% a year before fees. Only 39% after fees, yeah, after their five and 44 fees.”

“Machine learning is at the heart of the firm in modern times, and they were making trades without realizing why they were making the trades. The system teaches itself”

“Simons, when he gives speeches to you, he talks about the key is they never override the model, and they don't usually override the model, almost never do, but as I write in this story in the book, there are times when Simons has stepped in and said, guys, we'…”

“What I mean by that is they're not just PhDs, and yet they have a hundred out of like 300 people there, their PhDs. These are people that are groundbreaking scientists, physicists, astronomers.”

“They also do things like they embrace non-intuitive signals, signals that they don't really know why they work, but they're scientifically proven. And Lots of other firms are uncomfortable with that approach. I don't want to overdo it here. That's not a bulk o…”