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Renaissance Technologies’ Return, AUM, and Holdings

Legendary Jim Simons, an awarded math genius and a former military code breaker, founded back in 1982 one of the nowadays largest quant hedge funds in the world, Renaissance Technologies. His curiosity for math developed very early as he dreamt about the numbers when he was only 3. Naturally, he graduated from a renowned MIT with a Bachelor degree in Mathematics and three years later he earned a doctorate. First, he worked as a teacher at MIT and then at Harvard, after which he was employed at the American Defense Department. Then, one (un)fortunate day when he openly stated out his pacifist views in regards to the war in Vietnam in public, he was fired, which made him return to intellectual circles.

Due to the years of exceptional returns Renaissance Technologies had under his leadership, Jim Simons became one of the wealthiest hedge fund managers in the world. Now, although being retired, he continuously earns by holding a large stake in the company, and in 2017 he was good for some $1.7 billion. Aside from being known as one of the smartest and most prolific investors in the world, Jim Simons is also well respected for his philanthropic work, as he has given more than $2.7 billion to various charities, and he also founded Math for America.

According to various sources, Renaissance Technologies has around $58 billion in AUM. The firm’s headquarters are in East Setauket, New York, on Long Island. Its main strategy is quant-oriented, which means that it relies only on mathematical and statistical methods for making investments. The team that Jim Simons gathered consists mostly of Ph.D. scientists from various fields such as Mathematics, Pure and Experimental Physicists, Computer Scientist, and Astronomers.

RENAISSANCE TECHNOLOGIES

The crucial year for the fund was 1988 when Jim Simons together with algebraist James Ax launched its flagship the Medallion Fund, one of the most successful funds in the world. What makes this fund special is the application of an enhanced form of Leonard Baum’s mathematical models. James Ax improved it and adapted it to research correlations. Medallion Fund uses high frequency-trading, taking advantage of the inefficiencies in the stock market, such as the execution of large transactions for example. This fund is known for achieving the best continuous returns in history – from 1994 through 2014 it generated an eye-popping return of 71.8% annually averaged; from 1990 until mid 2018, the fund brought back an averaged annualized return of 35%, while last year, when most of the funds struggled, Medallion Fund gained 10% through July.

Its Renaissance Institutional Equities Fund (RIEF) LLC Series B also had envying returns in recent years. In 2013 it delivered 17.64%, in 2014 it brought back 14.53%, followed by 17.37% in 2015, 21.46% in 2016, 15.22% in 2017, and 8.5% in 2018. The fund’s total return amounted to 319.31%, for a compound annual return of 11.5%, while its worst drawdown was 34.58%. Two more of its funds also posted positive returns for the tough 2018 – its Renaissance Institutional Equities generated a return of 7.7%, and its Renaissance Institutional Diversified Alpha Fund LP returned 2.7%. When looking at these amazing performances, one must think that there are no tough years for math geniuses at Renaissance Technologies.

Insider Monkey’s flagship strategy identifies the best performing 100 hedge funds at the end of each quarter and invests in their consensus stock picks. This way it is always invested in the best ideas of the best performing hedge funds and is able to generate much higher returns than the market. Since its inception in May 2014, our flagship strategy generated a cumulative return of 74%, beating the S&P 500 ETF (SPY) by about 24 percentage points (see the details here). Our short strategy outperformed the market by more than 40 percentage points since its inception two years ago.

On the next page, you can read about Renaissance Technologies’ portfolio changes made during the third quarter of 2018. Our analysis indicates that an equal weighted portfolio of RenTec’s top 5 stock picks generated a monthly return of 1.15% during the 10 year period between 2008 and 2017, and outperformed the S&P 500 Total Return Index by 37 basis points per month. So, it pays off to pay attention to RenTec’s top 5 picks even though this is a quant fund.

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