4 ms·

They mostly hire Physics Ph.D.s in the same close range of fields. As much as I find the insider trading narrative to be more plausible than any secret sauce, I

They mostly hire Physics Ph.D.s in the same close range of fields. As much as I find the insider trading narrative to be more plausible than any secret sauce, I think their hiring speaks against that.

jebarker 3y ago
Eh, I've worked with Math and Physics Ph.D.s throughout my career (and I am one myself). Those qualifications are definitely insufficient evidence on their own that you could beat the market. Not to say that hiring isn't their secret sauce, but you'd have to hire the _right_ Physics Ph.D.s, whatever that means.
- deleted 3y ago
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- dna_polymerase 3y ago
  I'm not saying that they make money because of Physics Ph.D.s. I'm saying it would be kind of useless to hire those specific people only to end up doing insider trades the whole time.
sdfghswe 3y ago
> As much as I find the insider trading narrative to be more plausible than any secret sauce I would be interested in hearing why you find it more plausible. I'll start. I find it less plausible because you actually go to jail for that.
- n2d4 3y ago
  If it's a secret sauce that is based on public information (aka not insider trading), then it's unlikely that no one else but this one company has discovered it. It's just extremely unlikely. Plus, plenty of "godlike investors" were clearly willing to do things that landed them in jail (SBF, Madoff, etc). Hiring as an edge makes a lot more sense. Quant trading is often not about a single strategy but about the sum of many small ones. And other quants that have been taking similar hiring approaches also had incredible success (eg. Jane Street, Citadel, Jump Trading, Optiver, etc). RenTec just has a reputation of being "the best", which in turn makes the best people more likely to join them, which again in turn makes RenTec better, like a vicious cycle. I also want to mention that in some years, there's a massive discrepancy between RenTec's internal Medallion fund (+76% in 2020), and its external funds (-19% to -31% in 2020). Not saying there is something to it (they never claimed using the same strategies), but it does seem at least a bit suspicious.
  - sdfghswe 3y ago
    > Hiring as an edge makes a lot more sense. Quant trading is often not about a single strategy but about the sum of many small ones. And other quants that have been taking similar hiring approaches also had incredible success (eg. Jane Street, Citadel, Jump Trading, Optiver, etc). RenTec just has a reputation of being "the best", which in turn makes the best people more likely to join them, which again in turn makes RenTec better, like a vicious cycle. Weren't you meant to make the case for insider trading? This isn't insider trading. > I also want to mention that in some years, there's a massive discrepancy between RenTec's internal Medallion fund (+76% in 2020), and its external funds (-19% to -31% in 2020). Not saying there is something to it (they never claimed using the same strategies), but it does seem at least a bit suspicious. Are you telling me that the insiders keep the good stuff for themselves and the outsiders get fucked? I don't find that suspicious at all.
    - n2d4 3y ago
      I'm supporting dna_polymerase's point, that RenTec's edge is much more likely to be hiring smart people than insider trading and more likely to be insider trading than some secret special trading algorithm that no one else managed to come up with in 20 years.
- dna_polymerase 3y ago
  To my knowledge, RenTec aren't market makers, they supposedly run directional bets. It is highly unlikely to do that with their size of funds ($130B) for that long (>20 years) with that success rate (>60% p.a.)
sokoloff 3y ago
Without signing on to the belief that RennTech is generating returns from insider trading, I will observe that hiring a bunch of Physics/Math PhDs would be a reasonable cover story and therefore wise thing to do, even if your core returns came from insider trading.
- SkyMarshal 3y ago
  In addition, it could be that the PhDs' technical research and work is about how to structure a portfolio strategy such that it can profit from insider trading when the opportunity arises without triggering any SEC alerts. For example, maintain a portfolio across as wide an asset base as possible, while trading each asset frequently enough that any insider trade inserted into the mix looks random, or at least plausibly deniable, and thus a low-odds case for the SEC to prosecute.

jebarker 3y ago

Eh, I've worked with Math and Physics Ph.D.s throughout my career (and I am one myself). Those qualifications are definitely insufficient evidence on their own that you could beat the market. Not to say that hiring isn't their secret sauce, but you'd have to hire the _right_ Physics Ph.D.s, whatever that means.

deleted 3y ago
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dna_polymerase 3y ago
I'm not saying that they make money because of Physics Ph.D.s. I'm saying it would be kind of useless to hire those specific people only to end up doing insider trades the whole time.

sdfghswe 3y ago

> As much as I find the insider trading narrative to be more plausible than any secret sauce I would be interested in hearing why you find it more plausible. I'll start. I find it less plausible because you actually go to jail for that.

n2d4 3y ago
If it's a secret sauce that is based on public information (aka not insider trading), then it's unlikely that no one else but this one company has discovered it. It's just extremely unlikely. Plus, plenty of "godlike investors" were clearly willing to do things that landed them in jail (SBF, Madoff, etc). Hiring as an edge makes a lot more sense. Quant trading is often not about a single strategy but about the sum of many small ones. And other quants that have been taking similar hiring approaches also had incredible success (eg. Jane Street, Citadel, Jump Trading, Optiver, etc). RenTec just has a reputation of being "the best", which in turn makes the best people more likely to join them, which again in turn makes RenTec better, like a vicious cycle. I also want to mention that in some years, there's a massive discrepancy between RenTec's internal Medallion fund (+76% in 2020), and its external funds (-19% to -31% in 2020). Not saying there is something to it (they never claimed using the same strategies), but it does seem at least a bit suspicious.
- sdfghswe 3y ago
  > Hiring as an edge makes a lot more sense. Quant trading is often not about a single strategy but about the sum of many small ones. And other quants that have been taking similar hiring approaches also had incredible success (eg. Jane Street, Citadel, Jump Trading, Optiver, etc). RenTec just has a reputation of being "the best", which in turn makes the best people more likely to join them, which again in turn makes RenTec better, like a vicious cycle. Weren't you meant to make the case for insider trading? This isn't insider trading. > I also want to mention that in some years, there's a massive discrepancy between RenTec's internal Medallion fund (+76% in 2020), and its external funds (-19% to -31% in 2020). Not saying there is something to it (they never claimed using the same strategies), but it does seem at least a bit suspicious. Are you telling me that the insiders keep the good stuff for themselves and the outsiders get fucked? I don't find that suspicious at all.
  - n2d4 3y ago
    I'm supporting dna_polymerase's point, that RenTec's edge is much more likely to be hiring smart people than insider trading and more likely to be insider trading than some secret special trading algorithm that no one else managed to come up with in 20 years.
dna_polymerase 3y ago
To my knowledge, RenTec aren't market makers, they supposedly run directional bets. It is highly unlikely to do that with their size of funds ($130B) for that long (>20 years) with that success rate (>60% p.a.)

sokoloff 3y ago

Without signing on to the belief that RennTech is generating returns from insider trading, I will observe that hiring a bunch of Physics/Math PhDs would be a reasonable cover story and therefore wise thing to do, even if your core returns came from insider trading.

SkyMarshal 3y ago
In addition, it could be that the PhDs' technical research and work is about how to structure a portfolio strategy such that it can profit from insider trading when the opportunity arises without triggering any SEC alerts. For example, maintain a portfolio across as wide an asset base as possible, while trading each asset frequently enough that any insider trade inserted into the mix looks random, or at least plausibly deniable, and thus a low-odds case for the SEC to prosecute.