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Renaissance’s Medallion hiked investment caps 50 percent after Trump’s election

52 points by champagnepapi 9y ago

chollida1 9y ago
It's amazing how a fund's focus switches from when it makes money collecting management fees from other people's money to when it only invests the partners capital:) There aren't too many funds out there who actively give back capital on a quarterly basis to investors to ensure they aren't over capacity, and the ones you do hear about are usually shutting down a fund or kicking out the outside money all together. > The firm told staff that they would be allowed to increase their Medallion stakes by at least 50 percent. The catch: they had just weeks to come up with the money. This seems a bit punitive to the "rank and file" employees as if RenTech is like any other fund then... - most of the executives probably have orders of magnitude more money in the fund already so a flat 50% increase benefits them alot more. - its much easier for someone will 100's of millions in existing assets to get a loan in a week than someone with single digit millions or less. As a side note, the link in the article was posted before but its still a terrific article if you want a look at RenTech https://www.bloomberg.com/news/articles/2016-11-21/how-renaissance-s-medallion-fund-became-finance-s-blackest-box https://www.bloomberg.com/news/articles/2016-11-21/how-renai... Just for fun RenTech just filed their 13F here are positions they sold or reduced: AMD US (Advanced Micro Devices Inc), CVS US (CVS Health Corp), PCLN US (Priceline Group Inc/The), TEVA IT (Teva Pharmaceutical Industries Ltd), TSLA US (Tesla Inc), AET US (Aetna Inc), CMCSA US (Comcast Corp), FB US (Facebook Inc), MRK US (Merck & Co Inc), PX US (Praxair Inc), and positions they added: ADSK US (Autodesk Inc), AIG US (American International Group Inc), MCK US (McKesson Corp), PFE US (Pfizer Inc), WDAY US (Workday Inc), BMY US (Bristol-Myers Squibb Co), CL US (Colgate-Palmolive Co), DPZ US (Domino's Pizza Inc), EA US (Electronic Arts Inc), NVDA US (NVIDIA Corp) Top holdings: NetEase Inc.-ADR: up 456,300 shares, to 2.73 million valued at $819.5 million Johnson & Johnson: down 970,500, to 6.13 million valued at $811.2 million Bristol-Myers: up 7.02 million, to 13.5 million valued at $751.6 million Gilead Sciences Inc.: up 2.7 million, to 10.4 million valued at $736.7 million Colgate: up 2.9 million, to 9.75 million valued at $723 million The hedge fund manager's disclosed holdings rose 9.5 percent in value in the second quarter to $78.3 billion. The Standard & Poor's 500 index advanced 2.6 percent.
- champagnepapi 9y ago
  Interesting. I wonder what (if anything) the 13F means for a company like RenTech. Who knows how long they hold positions for (minute or less, or days and beyond), perhaps this could have just been a snapshot of an instant, or no? I ask this, since humans apparently do not trade there, they are not like a more traditional fund like Appaloosa, where humans decide when to get in/out of a position.
  - jandrewrogers 9y ago
    RenTech is not a fast-twitch fund, they generally hold their positions for a significant period of time.
    - whatok 9y ago
      Even if you were to subscribe to that notion, it's still on a quarter lag.
- rayuela 9y ago
  Your write ups are always spot on Chris! I always look forward to your response in these finance related discussions.
- bingojess 9y ago
  Also Medallion has performance fees of 44% compared to the typical 20% of other funds. That's pretty crazy
- vpribish 9y ago
  you can't be sure of much from their 13-Fs. Derivatives, swaps, forex, debt, cash, commodities, and shorts aren't reported and since you don't know how much leverage they use (reputed to be "a lot") you don't know how important those billions in equities are - they might be the hedges and the actual exposure is negative and the alpha is in the term structure of some derivative. of course, you did say 'just for fun' since it seems you know this stuff :)
- SonOfLilit 9y ago
rayuela 9y ago
It's interesting that the Medallion fund generated an 11.6 percent return during the first six months of this year, lower than the gains of 21 percent and 18 percent during the first halves of 2016 and 2015, respectively. It's also only marginally better than what a passive investment in the SP500 during that same period would have returned.
- aphextron 9y ago
  That makes sense. The point of investing is not to beat the market in any given year, but to minimize losses. The market in general is doing fantastic right now, so it's hard to beat even for Rennaisance. But when the downturn comes you can bet they'll be ahead of the game.
  - pedrocr 9y ago
    What makes you confident in this fund in particular vs the rest given that in aggregate they can't beat the market? The history of past returns I assume?
    - revmoo 9y ago
      Pushing people towards index funds is literally the same thing as saying past returns can predict future results.
    - jacobkranz 9y ago
      I don't have a source on this but from what I read they returned ~80% in '09. From the research I've done on them, they generally make tons of very small bets on assets they think are mispriced. Generally speaking, when volatility goes dramatically up is when more assets are mispriced thus leading to larger gains for them. However, we've seen historically low volatility so it makes sense that they're not returning as much right now.
whack 9y ago
The article from a year ago, summarizing Millenium's history and culture, was a fascinating read as well. It certainly sounds like a place packed with geniuses, but I can't help but notice that it also sounds eerily similar to LTCM. https://www.bloomberg.com/news/articles/2016-11-21/how-renaissance-s-medallion-fund-became-finance-s-blackest-box https://www.bloomberg.com/news/articles/2016-11-21/how-renai... https://en.wikipedia.org/wiki/When_Genius_Failed https://en.wikipedia.org/wiki/When_Genius_Failed
- maxxxxx 9y ago
  Considering how well-connected they probably are I bet they can augment their genius with some insider knowledge from time to time. Some years ago I knew some Wall Street guys and they all pretty much said that the successful traders have information that's not available to the rest. Some get greedy and get caught but the others are just a little more subtle.
  - jraines 9y ago
    Impossible to know as an outsider, but it's interesting to me that Simons tried pretty hard to isolate Renaissance from Wall Street & other hedge funds. He hired people out of academia, saddled them with an extremely onerous non-compete agreement, and was leery of Wall St. traders because he figured if they left their current fund, they'd leave him, too, once they learned the secret sauce. And he put the headquarters in Long Island, away from the loci of Greenwich and Wall St.
- jraines 9y ago
  I think the main points to consider would be: how much leverage do they use, and how quickly can they get out of their positions? On the latter, we know it's not comparable to LTCM because a long-held position for Rennaisance is like 8 seconds (so I heard). On the former, I don't know. But LTCM had to use huge leverage to achieve their returns because their bets were ones with very small profit margins but that they were extremely confident in.
dogruck 9y ago
RenTech is unparalleled and Medallion has proven itself for decades. This interview with Jim Simons is fantastic: https://youtu.be/QNznD9hMEh0 https://youtu.be/QNznD9hMEh0
- jcmoscon 9y ago
  Very interesting guy! They should show this to every high school in the USA. Teacher: "See this, that's why you need to learn math!"
  - dogruck 9y ago
    Jim founded an organization, Math for America, to help: http://www.mathforamerica.org/about/board/james-simons http://www.mathforamerica.org/about/board/james-simons (This story appears to have nothing to do with Trump, despite the headline.)
peterkshultz 9y ago
Does anyone understand how too much money in the fund can lead to diminishing returns?
- dragonwriter 9y ago
  Investment opportunities of any given quality are not unlimited.
- Thetawaves 9y ago
  Eventually you go from playing the market to BEING the market.

52 points by champagnepapi 9y ago

It's amazing how a fund's focus switches from when it makes money collecting management fees from other people's money to when it only invests the partners capital:) There aren't too many funds out there who actively give back capital on a quarterly basis to investors to ensure they aren't over capacity, and the ones you do hear about are usually shutting down a fund or kicking out the outside money all together. > The firm told staff that they would be allowed to increase their Medallion stakes by at least 50 percent. The catch: they had just weeks to come up with the money. This seems a bit punitive to the "rank and file" employees as if RenTech is like any other fund then... - most of the executives probably have orders of magnitude more money in the fund already so a flat 50% increase benefits them alot more. - its much easier for someone will 100's of millions in existing assets to get a loan in a week than someone with single digit millions or less. As a side note, the link in the article was posted before but its still a terrific article if you want a look at RenTech https://www.bloomberg.com/news/articles/2016-11-21/how-renaissance-s-medallion-fund-became-finance-s-blackest-box https://www.bloomberg.com/news/articles/2016-11-21/how-renai... Just for fun RenTech just filed their 13F here are positions they sold or reduced: AMD US (Advanced Micro Devices Inc), CVS US (CVS Health Corp), PCLN US (Priceline Group Inc/The), TEVA IT (Teva Pharmaceutical Industries Ltd), TSLA US (Tesla Inc), AET US (Aetna Inc), CMCSA US (Comcast Corp), FB US (Facebook Inc), MRK US (Merck & Co Inc), PX US (Praxair Inc), and positions they added: ADSK US (Autodesk Inc), AIG US (American International Group Inc), MCK US (McKesson Corp), PFE US (Pfizer Inc), WDAY US (Workday Inc), BMY US (Bristol-Myers Squibb Co), CL US (Colgate-Palmolive Co), DPZ US (Domino's Pizza Inc), EA US (Electronic Arts Inc), NVDA US (NVIDIA Corp) Top holdings: NetEase Inc.-ADR: up 456,300 shares, to 2.73 million valued at $819.5 million Johnson & Johnson: down 970,500, to 6.13 million valued at $811.2 million Bristol-Myers: up 7.02 million, to 13.5 million valued at $751.6 million Gilead Sciences Inc.: up 2.7 million, to 10.4 million valued at $736.7 million Colgate: up 2.9 million, to 9.75 million valued at $723 million The hedge fund manager's disclosed holdings rose 9.5 percent in value in the second quarter to $78.3 billion. The Standard & Poor's 500 index advanced 2.6 percent.

champagnepapi 9y ago
Interesting. I wonder what (if anything) the 13F means for a company like RenTech. Who knows how long they hold positions for (minute or less, or days and beyond), perhaps this could have just been a snapshot of an instant, or no? I ask this, since humans apparently do not trade there, they are not like a more traditional fund like Appaloosa, where humans decide when to get in/out of a position.
- jandrewrogers 9y ago
  RenTech is not a fast-twitch fund, they generally hold their positions for a significant period of time.
  - whatok 9y ago
    Even if you were to subscribe to that notion, it's still on a quarter lag.
rayuela 9y ago
Your write ups are always spot on Chris! I always look forward to your response in these finance related discussions.
bingojess 9y ago
Also Medallion has performance fees of 44% compared to the typical 20% of other funds. That's pretty crazy
vpribish 9y ago
you can't be sure of much from their 13-Fs. Derivatives, swaps, forex, debt, cash, commodities, and shorts aren't reported and since you don't know how much leverage they use (reputed to be "a lot") you don't know how important those billions in equities are - they might be the hedges and the actual exposure is negative and the alpha is in the term structure of some derivative. of course, you did say 'just for fun' since it seems you know this stuff :)
SonOfLilit 9y ago

rayuela 9y ago

It's interesting that the Medallion fund generated an 11.6 percent return during the first six months of this year, lower than the gains of 21 percent and 18 percent during the first halves of 2016 and 2015, respectively. It's also only marginally better than what a passive investment in the SP500 during that same period would have returned.

aphextron 9y ago
That makes sense. The point of investing is not to beat the market in any given year, but to minimize losses. The market in general is doing fantastic right now, so it's hard to beat even for Rennaisance. But when the downturn comes you can bet they'll be ahead of the game.
- pedrocr 9y ago
  What makes you confident in this fund in particular vs the rest given that in aggregate they can't beat the market? The history of past returns I assume?
  - revmoo 9y ago
    Pushing people towards index funds is literally the same thing as saying past returns can predict future results.
  - jacobkranz 9y ago
    I don't have a source on this but from what I read they returned ~80% in '09. From the research I've done on them, they generally make tons of very small bets on assets they think are mispriced. Generally speaking, when volatility goes dramatically up is when more assets are mispriced thus leading to larger gains for them. However, we've seen historically low volatility so it makes sense that they're not returning as much right now.

whack 9y ago

The article from a year ago, summarizing Millenium's history and culture, was a fascinating read as well. It certainly sounds like a place packed with geniuses, but I can't help but notice that it also sounds eerily similar to LTCM. https://www.bloomberg.com/news/articles/2016-11-21/how-renaissance-s-medallion-fund-became-finance-s-blackest-box https://www.bloomberg.com/news/articles/2016-11-21/how-renai... https://en.wikipedia.org/wiki/When_Genius_Failed https://en.wikipedia.org/wiki/When_Genius_Failed

maxxxxx 9y ago
Considering how well-connected they probably are I bet they can augment their genius with some insider knowledge from time to time. Some years ago I knew some Wall Street guys and they all pretty much said that the successful traders have information that's not available to the rest. Some get greedy and get caught but the others are just a little more subtle.
- jraines 9y ago
  Impossible to know as an outsider, but it's interesting to me that Simons tried pretty hard to isolate Renaissance from Wall Street & other hedge funds. He hired people out of academia, saddled them with an extremely onerous non-compete agreement, and was leery of Wall St. traders because he figured if they left their current fund, they'd leave him, too, once they learned the secret sauce. And he put the headquarters in Long Island, away from the loci of Greenwich and Wall St.
jraines 9y ago
I think the main points to consider would be: how much leverage do they use, and how quickly can they get out of their positions? On the latter, we know it's not comparable to LTCM because a long-held position for Rennaisance is like 8 seconds (so I heard). On the former, I don't know. But LTCM had to use huge leverage to achieve their returns because their bets were ones with very small profit margins but that they were extremely confident in.

dogruck 9y ago

RenTech is unparalleled and Medallion has proven itself for decades. This interview with Jim Simons is fantastic: https://youtu.be/QNznD9hMEh0 https://youtu.be/QNznD9hMEh0

jcmoscon 9y ago
Very interesting guy! They should show this to every high school in the USA. Teacher: "See this, that's why you need to learn math!"
- dogruck 9y ago
  Jim founded an organization, Math for America, to help: http://www.mathforamerica.org/about/board/james-simons http://www.mathforamerica.org/about/board/james-simons (This story appears to have nothing to do with Trump, despite the headline.)

peterkshultz 9y ago

Does anyone understand how too much money in the fund can lead to diminishing returns?

dragonwriter 9y ago
Investment opportunities of any given quality are not unlimited.
Thetawaves 9y ago
Eventually you go from playing the market to BEING the market.