||Robert Mercer, co-CEO of Renaissance Technologies
(Photo Courtesy World Poker Tour).
Last year was very humbling for the hedge fund industry,
which suffered only its third-ever year of net redemptions
— led by many of the largest and best-known firms. As
we have chronicled several times, many firms also cut some fees
in response to a mounting campaign among investors unhappy with
their mediocre returns over the past few years.
So it is all the more remarkable that in 2016,
Renaissance Technologies enjoyed a 42 percent increase in
assets, to $42 billion. Part of this big bump is the result of
strong performance at its three funds that are open to outside
However, the East Setauket, New York–based
quantitative giant, founded by math whiz
James Simons, also enjoyed about $7 billion in inflows last
year. This includes money from both internal and external
investors in its existing funds and its newest offering, the
Renaissance Institutional Diversified Global Equities Fund
(RIDGE), launched in April 2016.
This surge is much greater than what virtually any other
hedge fund firm experienced last year. However, this is not too
surprising for Renaissance — arguably the most
successful hedge fund firm ever — given the recent
performance of its funds that are still available to outside
investors. For example, the firm’s Renaissance
Institutional Equities Fund (RIEF) gained 20.6 percent last
year and has posted consistent gains ranging between roughly 14
percent and 20.6 percent in each of the past four years.
RIEF deploys a net-long investment strategy that trades both
U.S. and non-U.S. equity securities listed on U.S. exchanges.
It was created to generate gross annual returns of 400 to 600
basis points, or 4 to 6 percentage points, above the Standard
& Poor’s 500 stock index over rolling three-
to five-year periods using average leverage of about
Last year RIEF beat the benchmark by 8.6 percentage points
and by 15.1 percentage points the previous year. In 2014 its
net performance roughly matched the S&P 500, while in 2013
its net gain came in at a little more than half the astounding
32.4 percent surge in the benchmark. In the first quarter of
this year, RIEF gained 3.25 percent, less than the 6.1 percent
gain posted by the S&P 500.
The Renaissance Institutional Diversified Alpha Fund (RIDA),
launched in March 2012, trades global futures and forwards, as
well as U.S. and non-U.S. equities listed on U.S. exchanges. It
has posted double-digit gains in each of the past three years,
including 10.6 percent in 2016. The fund rose 4.2 percent in
the first quarter of this year.
Meanwhile, RIDGE has climbed about 6 percent in the 12
months since its April 2016 launch, including 4.3 percent in
the first quarter of this year.
It is a market-neutral fund designed to have a low
correlation to the global equities market. It had planned to
trade more than 4,000 equity securities listed on U.S. and
As is usually the case with Renaissance and other quant
firms, it is not known what trades or strategies drove
Simons no longer runs Renaissance on a day-to-day basis. He
serves as chairman and spends most of his time on philanthropy
and his foundation. The firm is headed by co-presidents
Robert Mercer, who famously helped to bankroll Ted
Cruz’s failed bid to be president and then
Donald Trump’s campaign through political
action committees (PACs), and Peter Brown, who prefers a much