Renaissance Technologies Corp., the $22 billion brainchild
of quant whiz James Simons and one of the more consistent
outperformers in over the past two decades, appears to be
losing some of its shine.
Last year its Renaissance Institutional Futures Fund (RIFF)
lost 3.17 percent, versus a gain of just 1.84 percent in 2011.
The loss in 2012 was worse than the average 1.59 percent
decline reported by the Barclays CTA Index, though its profit
in 2011 was better than the average CTA, which lost money that
year as well. The fund employs an absolute return investment
strategy that mainly trades futures and forwards throughout the
Given that RIFF has been a money-making product of Simons'
Ph.D. experts, it comes somewhat as a surprise to see its
returns falling in line with the industry norm. At year-end the
fund had $788 million in total assets, down from $4 billion in
2011. (Many of the partners and insiders shifted money from
RIFF to a new fund, Institutional Diversified Alpha Fund, in
the past year.)
Renaissance Institutional Equities Funds (RIEF), whose
net-long investment strategy trades both U.S. and non-U.S.
equity securities listed on U.S. exchanges, had a slightly
different story, but not significantly better: It was up 8.43
percent in 2012.
This was a disappointing outcome for the East Setauket, New
York–based firm, considering that it's about half of
what the S&P 500 returned in 2012 and the fund was created
to generate gross annual returns of 400 to 600 basis points
above the S&P 500 over rolling three- to five-year periods.
Over the past three years, RIEF managed to do that only on a
cumulative basis. In 2012, the fund lagged the index by 600
basis points, but it exceeded it by 3,200 basis points in 2011
and by 45 basis points in 2010. The fund had $5.7 billion at
the end of 2012.
The Institutional Diversified Alpha Fund, launched on March
1, did not quite have a blockbuster debut performance,
reporting a 1.28 percent loss. The fund, with $4.9 billion in
assets under management at year-end, trades stocks listed on
U.S. exchanges as well as futures and forwards.
Not much is known about a fifth fund, Kaleidoscope, a
fund-of-funds of undetermined size that invests in each of the
Of course, the performance of Simons' legendary Medallion
Fund, which had been known to regularly produce returns of 40
to 80 percent per year net (after Renaissance gets its 5
percent management fee and 44 percent performance fee), is a
closely guarded secret, and one that has drawn intense
speculation. The fund, employing a short-term, quant strategy
across many asset classes, has been closed to outside investors
By some reckoning, the fund is believed to have generated
returns of at least 30 to 40 percent in 2012, although they may
have been much higher than that, according to sources. Assets
under management stood at $9 billion at the beginning of
Firmwide assets under management now stand at $22 billion,
from $20 billion in 2011. RIFF, RIEF and DAF together
contribute about half the total. A big chunk of the capital is
said to belong to Simons and other insiders.
Peter Brown and Robert Mercer took over as co-CEOs in 2010,
the culmination of a succession plan that was set in motion
back in 2002.
While not involved in day-to-day operations, Simons, an
award-winning mathematician, remains as nonexecutive chairman
of the firm and guiding force. Simons also heads Euclidean
Capital, a family office.
An avid philanthropist, Simons has given large sums of money
away, including to the State University of New York at Stony
Brook, where he earlier served as chairman of its math
department and created Math for America, a program that trains
and places math and science teachers in high schools.