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> The complaint alleges that Horwitz and 1inMM promised investors returns in excess of 35% If someone offers you a 35% return and they aren't the Renaissance M

> The complaint alleges that Horwitz and 1inMM promised investors returns in excess of 35% If someone offers you a 35% return and they aren't the Renaissance Medallion Fund, you should probably do your due diligence. https://en.wikipedia.org/wiki/Renaissance_Technologies#Medallion_Fund https://en.wikipedia.org/wiki/Renaissance_Technologies#Medal...

hinkley 6y ago
If one vendor is offering a solution that vastly exceeds the expectation of all other vendors, current and former, you should ask a lot of questions. Either they're full of shit, or you're about to learn about some new breakthrough that everyone will be using in the future (unfortunately some of the former will claim to be the latter).
deleted 6y ago
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Exuma 6y ago
Wow thats fascinating. So there's no way in I imagine... are their trades public?
- deleted 6y ago
  [deleted]
- bussierem 6y ago
  >The Medallion fund is considered to be one of the most successful hedge funds ever. It has averaged a 71.8% annual return, before fees, from 1994 through mid-2014.[33] The fund has been closed to outside investors since 1993[34] and is available only to current and past employees and their families.
  - noname123 6y ago
    This number has been cited often. This is not to be skeptical rather to crunch the claim: Suppose Rentech started with $50M AUM in 1994 (reasonable assumption for a small hedge fund); 50M * (1.718)^20 = 2.51 Trillion in 2014. What am I missing here?
    - primitivesuave 6y ago
      If you had a 10% return one year and a 90% return the next, for an average of 50%, your total principal would increase by 1.1 * 1.9 = 2.09. If you calculate by the average instead (1.5 * 1.5 = 2.25) the rate of return is higher, and that error may have compounded in your calculation.
      - deleted 6y ago
        [deleted]
    - robertk 6y ago
      The Medallion Fund does not compound... the return is not re-invested into the principal but disseminated to investors annually. The strategy they play only works up to a certain level of capital.
    - jackt89 6y ago
      They have a maximum capacity of a few billion dollars in the fund. Every year they return the money they made so the fund stays the same size. Strategies don't scale indefinitely
fractionalhare 6y ago
This probably comes as a shock to people outside the quant finance industry, but RenTech isn't the only game in town when it comes to regularly beating the market by one or two standard deviations, year after year. They're just the most famous and have a certain je nais se quois. The red flag to look out for is extraordinarily low variance of returns, not extraordinarily high mean of returns. Madoff never promised more than about 12%, but he promised to be within 1% of that all the time. If you look at RenTech's Medallion returns since 1988, they're consistently between 30% and 120%. They're not slamming down the same percentile every year. It's one thing to beat the market - it's still an incredibly difficult feat to do it consistently, but there's an element of chance involved. You won't beat by the same margin every year, even if you do beat every year. If you're hitting similar returns year after year, that implies your work is completely decoupled from the inherent randomness of market dynamics.
- duxup 6y ago
  IIRC the folks who tried to raise the red flag on Madoff early on was because of what you describe. The numbers just didn't follow any kind of market change often enough / have enough fluctuation to make sense at all.
- standeven 6y ago
  If you don't mind me asking, who are the other games in town?
  - fractionalhare 6y ago
    Basically any established HFT, though they're market making instead of market taking. TGS. Baupost. Soros had an excellent run for like 30 years. Simons' family office, Euclidean, does well. A lot of under the radar family offices which don't have stringent reporting requirements. Various groups in Citadel, Point72 and Millenium. Appaloosa. A bunch of prop trading groups in the Chicago area. And outside of quant, the top long/short equity funds regularly do well. Like Coatue.
    - TedDoesntTalk 6y ago

hinkley 6y ago

If one vendor is offering a solution that vastly exceeds the expectation of all other vendors, current and former, you should ask a lot of questions. Either they're full of shit, or you're about to learn about some new breakthrough that everyone will be using in the future (unfortunately some of the former will claim to be the latter).

deleted 6y ago

[deleted]

Exuma 6y ago

Wow thats fascinating. So there's no way in I imagine... are their trades public?

deleted 6y ago
[deleted]
bussierem 6y ago
>The Medallion fund is considered to be one of the most successful hedge funds ever. It has averaged a 71.8% annual return, before fees, from 1994 through mid-2014.[33] The fund has been closed to outside investors since 1993[34] and is available only to current and past employees and their families.
- noname123 6y ago
  This number has been cited often. This is not to be skeptical rather to crunch the claim: Suppose Rentech started with $50M AUM in 1994 (reasonable assumption for a small hedge fund); 50M * (1.718)^20 = 2.51 Trillion in 2014. What am I missing here?
  - primitivesuave 6y ago
    If you had a 10% return one year and a 90% return the next, for an average of 50%, your total principal would increase by 1.1 * 1.9 = 2.09. If you calculate by the average instead (1.5 * 1.5 = 2.25) the rate of return is higher, and that error may have compounded in your calculation.
    - deleted 6y ago
      [deleted]
  - robertk 6y ago
    The Medallion Fund does not compound... the return is not re-invested into the principal but disseminated to investors annually. The strategy they play only works up to a certain level of capital.
  - jackt89 6y ago
    They have a maximum capacity of a few billion dollars in the fund. Every year they return the money they made so the fund stays the same size. Strategies don't scale indefinitely

fractionalhare 6y ago

This probably comes as a shock to people outside the quant finance industry, but RenTech isn't the only game in town when it comes to regularly beating the market by one or two standard deviations, year after year. They're just the most famous and have a certain je nais se quois. The red flag to look out for is extraordinarily low variance of returns, not extraordinarily high mean of returns. Madoff never promised more than about 12%, but he promised to be within 1% of that all the time. If you look at RenTech's Medallion returns since 1988, they're consistently between 30% and 120%. They're not slamming down the same percentile every year. It's one thing to beat the market - it's still an incredibly difficult feat to do it consistently, but there's an element of chance involved. You won't beat by the same margin every year, even if you do beat every year. If you're hitting similar returns year after year, that implies your work is completely decoupled from the inherent randomness of market dynamics.

duxup 6y ago
IIRC the folks who tried to raise the red flag on Madoff early on was because of what you describe. The numbers just didn't follow any kind of market change often enough / have enough fluctuation to make sense at all.
standeven 6y ago
If you don't mind me asking, who are the other games in town?
- fractionalhare 6y ago
  Basically any established HFT, though they're market making instead of market taking. TGS. Baupost. Soros had an excellent run for like 30 years. Simons' family office, Euclidean, does well. A lot of under the radar family offices which don't have stringent reporting requirements. Various groups in Citadel, Point72 and Millenium. Appaloosa. A bunch of prop trading groups in the Chicago area. And outside of quant, the top long/short equity funds regularly do well. Like Coatue.
  - TedDoesntTalk 6y ago