What bearish said +
SEC and CFTC cases indicate scrutiny of trade allocations and 'cherry picking'
The SEC gets to see whatever they want, say on a regular inspection (infrequent, in my experience) or a surprise inspection prompted by a whistleblower tip or some other concern. If you're a money manager, eventually they will park themselves in your conference room, and they will review the trade allocations. And, let's say 5 years later, they'll be back: Preparing for an On-Site SEC Audit
(I got a chuckle out of #3, not something the firm I worked for ever did or even contemplated!)
Interesting. And interesting it is always commodities where the crooks seem to be most blatant (before the post crash
reforms - REMIT etc- giving a large voice limit order to brokers was a true act of faith in my experience, the faith rarely being repaid!)
In my stint in a fund environment, the regulators and, more so, the auditors were pretty toothless but the investors were all over
any possible conflicts with some pretty blunt questioning. However that was all in very low frequency discretionary environments.
In the HFT world, who can say if some bit of code, deep down in 1000s of lines is saying where to book trades given economic performance.
Back to the book, it is a clearly a remarkable story. I find these books a bit frustrating that over-dramatise various bits (invariable around big losses
or big gains) and under-describe other more interesting parts. For instance, Simons' life was described at ~1 page per year till he got into
his 40s. That had all the detail about the big research results in geometry, decisions about working in pure research vs for the military
about running an ambitious growing maths department, and crucially the feelings around giving up academia to run a fund (having run a more mainstream
business in parallel).
However the book has two gold mines of subject matter, one which it exploits and one which it doesn't.
The first is the contrast between Simons and Mercer, which given the current political situation I would thought would be front and centre.
Simons is clearly bold and confident and profoundly entrepreneurial. He comes across as deeply engaging and able to build up teams of
motivated and loyal people. Exactly the sort of person you want to spend time with. It is fascinating that he handled all the investor contacts from the start and also was trying to cross invest in start ups from the 1980s.
Mercer comes across as equally smart but the exact opposite. The kind of conversational skill that would put Dirac to shame whose
chosen method of social interaction is to needle.and provoke - liking nothing more than to stay at home with a giant model
railway and a huge gun collection.
The other part (I guess stressed elsewhere) is to contrast how Renaissance looked from an external investor perspective
The book doesn't mention the dates when Medallion was closed to external investment but does dutifully include an appendix
with the stellar returns and has a handy returns comparison table with Buffett, Soros Dalio etc.
It also alludes to the fact, but does not dwell upon it, that when the alternative funds were opened (RIEF etc.) they drew in
huge amounts of investment but hit early drawdowns on the quant fund crashes in 2007 on much larger sums than Medallion.
The sums mentioned in the text suggested there must have redemptions on loss making positions...