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> Renaissance Medallion https://en.wikipedia.org/wiki/Renaissance_Technologies#Medallion_Fund https://en.wikipedia.org/wiki/Renaissance_Technologies#Medal...

by 542458 11y ago

> Renaissance Medallion https://en.wikipedia.org/wiki/Renaissance_Technologies#Medallion_Fund https://en.wikipedia.org/wiki/Renaissance_Technologies#Medal... > "From 2001 through 2013, the fund’s worst year was a 21 percent gain, after subtracting fees. Medallion reaped a 98.2 percent gain in 2008, the year the Standard & Poor’s 500 Index lost 38.5 percent." Holy cow, that thing is kinda crazy. There has to be a catch, right? (Or everybody would be doing it.) Or is their algorithm genuinely so clever that nobody else has ever figured it out?

bradleyjg 11y ago
They were (one of?) the first serious quant fund, started by James Simon who before that was a math professor at Stony Brook. Along with the NSA they are one of the most aggressive non-academic would be employers of top notch math Phds. They also hire Phds in physics and statistics. The big draw isn't so much the salary as the ability to invest in Medallion. If you take some of the smartest people in the world and have them intensely focus on making money via trading you get Renaissance. Everyone can't do it because there are only so many some of the smartest people in the world intensely interested in making money via trading to go around.
- nswanberg 11y ago
  A side-note on the smart people: Nick Patterson, a cold-war cryptologist who had worked at Renaissance for a few years, talked a little about how they had employed some very smart people doing some very basic things like simple regression, and that the people needed to be smart to know how to apply these tools properly, and ensure the data they were applying it on was good. http://www.thetalkingmachines.com/blog/2016/2/26/ai-safety-and-the-legacy-of-bletchley-park http://www.thetalkingmachines.com/blog/2016/2/26/ai-safety-a...
- btilly 11y ago
  Everyone can't do it because there are only so many some of the smartest people in the world intensely interested in making money via trading to go around. No, everyone can't do it because they are in an 0-sum game. If everyone was as good as Renaissance, then Renaissance wouldn't make money. But if all the smart people are in Renaissance, then Renaissance makes money.
deleted 11y ago
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rajacombinator 11y ago
A fund that is closed to the public, yet whose results are made public, fueling other mediocre funds. Some woukd suspect there is a catch. ;)
lordnacho 11y ago
I certainly think they are smart guys, but I doubt whether what they are doing is highly complex in the sense of being inexplicable to ordinary math graduates. Like with a lot of math, you learn more about the basics once you are on to the advanced stuff. And the more advanced stuff you learn, the more you see limitations. Very advanced can very well mean brittle. I reckon what they have is a well distilled common sense setup where they are able to reject models that appear to be profitable but aren't. I'm guessing they are also able to procedurally generate models that capture the same few common sense notions in new ways as the market evolves. In contrast I reckon most quant shops are still at a stage where the models are hand coded, causing some severe issues that I'll touch upon. There's also an organisational aspect about them. They're all very very good at math. Any BS is likely to get rumbled. Intellectual carelessness will probably be detected and the boss is a proper math guy too. Here's a subtle thing that many people I've worked with would not detect: to calculate my fund's information ratio, I take the monthly returns, average them, and divide by the standard deviation. I have to multiply by root 12 because there's 12 months in a year. Standard procedure. Having worked with some mere mortals I can tell you a lot of time is spent convincing oneself of the intellectual merits of something one's found despite evidence to the contrary. I think the fact that quants tend to be low quality coders with high internal prestige causes a lot of funds to do less well than they should. A lot of effort goes into hand tuning models rather than trying a bunch of different ones. You get things like unconscious "optimizations" that are very hard to spot, and hard to argue against because the person doing the talking is of high rank.

by 542458 11y ago

bradleyjg 11y ago

They were (one of?) the first serious quant fund, started by James Simon who before that was a math professor at Stony Brook. Along with the NSA they are one of the most aggressive non-academic would be employers of top notch math Phds. They also hire Phds in physics and statistics. The big draw isn't so much the salary as the ability to invest in Medallion. If you take some of the smartest people in the world and have them intensely focus on making money via trading you get Renaissance. Everyone can't do it because there are only so many some of the smartest people in the world intensely interested in making money via trading to go around.

nswanberg 11y ago
A side-note on the smart people: Nick Patterson, a cold-war cryptologist who had worked at Renaissance for a few years, talked a little about how they had employed some very smart people doing some very basic things like simple regression, and that the people needed to be smart to know how to apply these tools properly, and ensure the data they were applying it on was good. http://www.thetalkingmachines.com/blog/2016/2/26/ai-safety-and-the-legacy-of-bletchley-park http://www.thetalkingmachines.com/blog/2016/2/26/ai-safety-a...
btilly 11y ago
Everyone can't do it because there are only so many some of the smartest people in the world intensely interested in making money via trading to go around. No, everyone can't do it because they are in an 0-sum game. If everyone was as good as Renaissance, then Renaissance wouldn't make money. But if all the smart people are in Renaissance, then Renaissance makes money.

deleted 11y ago

[deleted]

rajacombinator 11y ago

A fund that is closed to the public, yet whose results are made public, fueling other mediocre funds. Some woukd suspect there is a catch. ;)

lordnacho 11y ago

I certainly think they are smart guys, but I doubt whether what they are doing is highly complex in the sense of being inexplicable to ordinary math graduates. Like with a lot of math, you learn more about the basics once you are on to the advanced stuff. And the more advanced stuff you learn, the more you see limitations. Very advanced can very well mean brittle. I reckon what they have is a well distilled common sense setup where they are able to reject models that appear to be profitable but aren't. I'm guessing they are also able to procedurally generate models that capture the same few common sense notions in new ways as the market evolves. In contrast I reckon most quant shops are still at a stage where the models are hand coded, causing some severe issues that I'll touch upon. There's also an organisational aspect about them. They're all very very good at math. Any BS is likely to get rumbled. Intellectual carelessness will probably be detected and the boss is a proper math guy too. Here's a subtle thing that many people I've worked with would not detect: to calculate my fund's information ratio, I take the monthly returns, average them, and divide by the standard deviation. I have to multiply by root 12 because there's 12 months in a year. Standard procedure. Having worked with some mere mortals I can tell you a lot of time is spent convincing oneself of the intellectual merits of something one's found despite evidence to the contrary. I think the fact that quants tend to be low quality coders with high internal prestige causes a lot of funds to do less well than they should. A lot of effort goes into hand tuning models rather than trying a bunch of different ones. You get things like unconscious "optimizations" that are very hard to spot, and hard to argue against because the person doing the talking is of high rank.