Renaissance Technologies

2016-07-21

Renaissance Technologies LLC is an East Setauket, New York-based[4] American investment management firm founded in 1982 by James Simons, an award-winning mathematician and former Cold War code breaker, which specializes in systematic trading using only quantitative models derived from mathematical and statistical analyses. Renaissance is one of the first highly successful hedge funds using quantitative trading — known as "quant hedge funds" — that rely on powerful computers and sophisticated mathematics to guide investment strategies. In 1988 the firm established its most profitable portfolio, the Medallion fund, which used an improved and expanded form of Leonard Baum's mathematical models improved by algebraist James Ax to explore correlations from which they could profit. Simons and Ax started a hedge fund and christened it Medallion in honor of the math awards that they had won.[5][6] Renaissance's flagship Medallion fund, which is run mostly for fund employees,[7] "is famed for one of the best records in investing history, returning more than 35 percent annualized over a 20-year span."[4] From 1994 through mid-2014 it averaged a 71.8% annual return.[8] Renaissance offers two portfolios to outside investors - Renaissance Institutional Equities Fund (RIEF) and Renaissance Institutional Diversified Alpha (RIDA).[9] Simons ran Renaissance until his retirement in late 2009.[10] The company is now jointly run by Peter Brown and Robert Mercer, two computer scientists specializing in computational linguistics who joined Renaissance in 1993 from IBM Research.[1][9][11] Simons continues to play a role at the firm as non-executive chairman and remains invested in its funds, particularly the secretive and consistently profitable black-box strategy known as Medallion.[12] Because of the success of Renaissance in general and Medallion in particular, Simons has been described as the best money manager on earth.[13][14][15] By October 2015, Renaissance had roughly $65 billion worth of assets under management, most of which belong to employees of the firm.[16]

Academia and research[edit]

James Simons founded Renaissance Technologies following a decade as the Chair of the Department of Mathematics at Stony Brook University. Simons is a 1976 recipient of the Oswald Veblen Prize of the American Mathematical Society, which is geometry’s highest honor.[17] He is a known in the scientific community for his work, Chern–Simons theory, which today define many esoteric aspects of modern physics, including advanced theories of how invisible fields like those of gravity interact with matter to produce everything from superstrings to black holes.[18]


Quantitative trading[edit]

The firm is an early pioneer of quantitative trading, where researchers tap decades of diverse data in its vast petabyte-scale data warehouse to assess statistical probabilities for the direction of securities prices in any given market. Experts attribute the breadth of data on events peripheral to financial and economic phenomena that Renaissance takes into account, and the firm's ability to manipulate enormous amounts of data by deploying highly efficient and scalable technological architectures for computation and execution, for its consistent success in beating the markets.[19] In many ways, Renaissance Technologies, along with a few other firms, has been synthesizing terabytes of data daily and extracting information signals from petabytes of data for almost two decades now, well before big data and data analytics caught the imagination of mainstream technology.[20]


For more than twenty years, the firm's Renaissance Technologies hedge fund, which trades in markets around the world, has employed complex mathematical models to analyze and execute trades, many of them automated. The firm uses computer-based models to predict price changes in easily traded financial instruments. These models are based on analyzing as much data as can be gathered, then looking for non-random movements to make predictions. Some also attribute the firm's performance to employing financial signal processing techniques such as pattern recognition. The Quants describes the hiring of speech recognition experts, many from IBM, including the current leaders of the firm.



Founder: James Harris Simons

Founded: 1982

Headquarters: East Setauket, Brookhaven, New York, United States

Website www.rentec.com

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