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It still feels very fishy to me that a closed capped fund has insane returns while the public fund that investors can invest in, has lukewarm results (not even

It still feels very fishy to me that a closed capped fund has insane returns while the public fund that investors can invest in, has lukewarm results (not even beating the market from what I recall). Seems like too many people, especially those that have no experience in the industry bought into the myth that genius mathematicians beat the market etc. The truth is that the market is mostly a zero sum competition between its participants. If RenTech is so good, they should have people that are a class above everyone else. Does someone claim that RenTech has more smart traders than Jane Street, Citadel etc? All of these people hire IMO Gold Medallists etc, and after a point there are diminishing returns on intelligence, someone who won IMO gold is not that much better than someone who got silver in intelligence. Even assuming RenTech got the cream of the cream, only golds while Jane street got the Silvers, I doubt there is enough alpha there for RenTech to have the insane spectacular market performance that they show. But that is likely not the case, they have people of similar caliber to Jane Street, Citadel etc which makes their outsized performance even more intriguing. The only possibilities I can think of, is 1 they are cooking the books, this would be insanely risky but not something unheard of in this industry. 2 they have discovered a few trading strats that they have maintained as a closely guarded secret all these years that allows them to get their edge on the market. Or similarly, some of their founding team are just godlike traders who always beat the market and once they’re gone RenTech will also fall. This feels even more unlikely, considering employee attrition and such but might be possible. For what it’s worth, I’ve had friends that interviewed with RenTech mention to me that it was an okay interview, heavily focused on C++ technical details (especially latest C++11 features and above) but not harder than an equivalent Citadel interview etc.

logicchains 2y ago
> All of these people hire IMO Gold Medallists etc, and after a point there are diminishing returns on intelligence, someone who won IMO gold is not that much better than someone who got silver in intelligence. Being an IMO gold medallist doesn't make someone a good mathematician; there's a very big difference between the kind of math in the IMO and the kind of mathematical research a successful mathematician does. Jim Simons was an extremely successful mathematician, who won a Millenium Prize, and hired mathematicians and physicists with a strong publication history. There's a quote from someone at Rentech like: "We hire the A-grade mathematicians. Other firms hire the B or C-grade mathematicians, and don't even know the A-grade mathematicians exist". It's like, if a startup hired a bunch of fresh CS Olympiad Gold Medalists straight out of university, do you think they'd be able to compete with Google (especially Google of 10 years ago, when its search was still so dominant)?
- lern_too_spel 2y ago
  Only Grigori Perelman has won a Millennium Prize.
phyalow 2y ago
>If RenTech is so good, they should have people that are a class above everyone else What does this mean? All the firms you have posted do different things. > Does someone claim that RenTech has more smart traders than Jane Street, Citadel etc? Again this is not apples to apples. You know a bit, but not nearly enough. Citadel is actually two companies. Citadel Securities (Ken G's + managments prop capital, no external investors) have a tonne of strategies with extremely high sharpe ratios and returns (triple digits in some cases), but ultimately they are capacity limited. Jane Street too (prop capital) fits this mold. Citadel the hedge fund (external capital) has much lower sharpes, but a much higher capacity (65 or so billion) and looks roughly similar to RenTechs public funds (external capital). The idea is you keep as much of the juicy stuff to yourself as you can justify, and then trade on the public image + free option on management / performance fees to grow an external asset management business and rake that in parallel. I dont see any contradiction. In fact its the rational profit maximising thing to do. Also being "smart" isnt even a half of the formula to running a successful markets/trading/investing business. Alot of it is culture (as the article points out) and other hard to replicate edges. Hedge Funds by and large are not quantitative (and even when they proclaim to be, actually are not terribly sophisticated). What they really are is expert marketing / narrative machines enticing asset allocators to lend them AUM. Once you understand this, it begins to make sense that those who are truly quantatively gifted operate on another plane.
belter 2y ago
“In today’s regulatory environment, it’s virtually impossible to violate rules.” — Bernard Madoff in New York on Oct 20, 2007 “It’s a proprietary strategy. I can’t go into it in great detail.” — Bernard Madoff to Barron’s, May 7, 2001
- StopTheWorld 2y ago
  Madoff took in other people's money. The Medallion Fund stopped taking new outside money in 1993, and in 2005 it got rid of all outside money. The people making (or potentially losing) money are the people making the trades.
  - belter 2y ago
    That the Medallion Fund is a fraud or not, is not the point being argued by those quotes...
userabchn 2y ago
According to Zuckerman's book, the Medallion fund has to be small because it would move the market too much with the types of trades it does if it was bigger. That is why they limited investment in it. The publicly available funds use different types of trades where this is less of a problem, and so the funds can be larger, but this reduces the return.
nojito 2y ago
>It still feels very fishy to me that a closed capped fund has insane returns while the public fund that investors can invest in, has lukewarm results (not even beating the market from what I recall). The point of the public funds is to be less risky than the S&P 500. Simons and co will never ever suggest anyone invest a serious amount of money into the S&P.

logicchains 2y ago

> All of these people hire IMO Gold Medallists etc, and after a point there are diminishing returns on intelligence, someone who won IMO gold is not that much better than someone who got silver in intelligence. Being an IMO gold medallist doesn't make someone a good mathematician; there's a very big difference between the kind of math in the IMO and the kind of mathematical research a successful mathematician does. Jim Simons was an extremely successful mathematician, who won a Millenium Prize, and hired mathematicians and physicists with a strong publication history. There's a quote from someone at Rentech like: "We hire the A-grade mathematicians. Other firms hire the B or C-grade mathematicians, and don't even know the A-grade mathematicians exist". It's like, if a startup hired a bunch of fresh CS Olympiad Gold Medalists straight out of university, do you think they'd be able to compete with Google (especially Google of 10 years ago, when its search was still so dominant)?

lern_too_spel 2y ago
Only Grigori Perelman has won a Millennium Prize.

phyalow 2y ago

>If RenTech is so good, they should have people that are a class above everyone else What does this mean? All the firms you have posted do different things. > Does someone claim that RenTech has more smart traders than Jane Street, Citadel etc? Again this is not apples to apples. You know a bit, but not nearly enough. Citadel is actually two companies. Citadel Securities (Ken G's + managments prop capital, no external investors) have a tonne of strategies with extremely high sharpe ratios and returns (triple digits in some cases), but ultimately they are capacity limited. Jane Street too (prop capital) fits this mold. Citadel the hedge fund (external capital) has much lower sharpes, but a much higher capacity (65 or so billion) and looks roughly similar to RenTechs public funds (external capital). The idea is you keep as much of the juicy stuff to yourself as you can justify, and then trade on the public image + free option on management / performance fees to grow an external asset management business and rake that in parallel. I dont see any contradiction. In fact its the rational profit maximising thing to do. Also being "smart" isnt even a half of the formula to running a successful markets/trading/investing business. Alot of it is culture (as the article points out) and other hard to replicate edges. Hedge Funds by and large are not quantitative (and even when they proclaim to be, actually are not terribly sophisticated). What they really are is expert marketing / narrative machines enticing asset allocators to lend them AUM. Once you understand this, it begins to make sense that those who are truly quantatively gifted operate on another plane.

belter 2y ago

“In today’s regulatory environment, it’s virtually impossible to violate rules.” — Bernard Madoff in New York on Oct 20, 2007 “It’s a proprietary strategy. I can’t go into it in great detail.” — Bernard Madoff to Barron’s, May 7, 2001

StopTheWorld 2y ago
Madoff took in other people's money. The Medallion Fund stopped taking new outside money in 1993, and in 2005 it got rid of all outside money. The people making (or potentially losing) money are the people making the trades.
- belter 2y ago
  That the Medallion Fund is a fraud or not, is not the point being argued by those quotes...

userabchn 2y ago

According to Zuckerman's book, the Medallion fund has to be small because it would move the market too much with the types of trades it does if it was bigger. That is why they limited investment in it. The publicly available funds use different types of trades where this is less of a problem, and so the funds can be larger, but this reduces the return.

nojito 2y ago

>It still feels very fishy to me that a closed capped fund has insane returns while the public fund that investors can invest in, has lukewarm results (not even beating the market from what I recall). The point of the public funds is to be less risky than the S&P 500. Simons and co will never ever suggest anyone invest a serious amount of money into the S&P.