Hi there,I just saw that the Renaissance Technologies' Medallion Fund apparently had a return well above 80% for the year 2008. I'm aware that, among hedge funds, by pure chance alone there will be some that will do very well over time. However, don't the investors get very nervous with these kinds of numbers. From what I, as an undergrad, know you can basically only get returns like this from "safe bets" like arbitrage etc. via a huge leverage. Or you just went mad with shorts during the crisis and then leaned back.My question is: Is there any information about how they achieved this (very few large bets, small dribble of leveraged arbitrage,...)? If so, where did they lend from? I find it somehow worrying that people apparently just accept these returns without much thought. But then again his clients probably are diversified and see their investment as high risk anyway...Thanks!

Medallion is essentially all insider money and is supposed to be a stat arb fund. I would tkae those advertised numbers with a pinch (or handful) of salt. Reason beign the Renaissnace's investable funds (RIEF and RIFF) did very poorly. I can understand that RIEF would do badly as it has a net 100% exposure (not beta) to equity markets but RIFF is not restricted and was one of the few poor performing systematic funds in 2008.

Medallian Fund has been up like 35% each year after fees over last 20 years with almost no down years (if at all). I'd trust their returns, also they are so secretive and almost noone there ever leaves and they only hire exclusively people with no wall street background noone has a clue what they really do.

They have an extremely secretive fund that offers unbelievable returns.Do any of you guys/gals have any experience trading with them or brokering any of their orders? I know they're mostly electronic, but have they ever been on the other end of an "obvious error" bust request or anything? What exactly do they do beyond the broad generalizations of "statistical arbitrage" and whatnot?

QuoteOriginally posted by: plaserMedallian Fund has been up like 35% each year after fees over last 20 years with almost no down years (if at all). I'd trust their returns, also they are so secretive and almost noone there ever leaves and they only hire exclusively people with no wall street background noone has a clue what they really do.Noone knows what they do yet the only two products that they have put out in the public domain havent done terribly well. RIEF because of the constraint but RIFF has no excuse. I don't know how you think you can trust the returns. I wouldn't.

In an interview I've read Simons talks a lot about 'good bets' in a mathematical sense. He says that if he finds an 'apparent' 70/30 bet he will trade long enough for the good events to occur. To me it sounds like a fair bit of data mining, what else can it be. Quote`Working On Statistics' The firm accuses Alexander Belopolsky and Pavel Volfbeyn of appropriating trade secrets. Belopolsky and Volfbeyn deny the charges. In a July decision, the two briefly described three strategies that Renaissance had explored. One involved swaps, which are contracts to exchange interest or other payments; another used an electronic order matching system that anonymously links buyers and sellers; and a third made use of Nasdaq and New York Stock Exchange limit order books, which are real-time records of unexecuted orders to buy or sell a stock at a particular price. With his myriad positions in different markets, Simons likens his approach to the extensive farming he once practiced in Colorado, using center pivot irrigation to grow wheat on thousands of acres.Article on the court caseIsn't the problem that all these past relationships can change in an instant and wipe you out? Is his trick that he places enough bets and has enough emergency capital to come out ahead. I've never worked at a hedge fund (not at all as a matter of fact) but do these guys wait for the one bet that makes their returns (like Soros seems to do) or is it really a small dribble of returns? The one bet strategy is hugely risky and does not require that much skill (sure afterwards you can make up some story why it did or didn't work without knowing much more than you did before).I think that the claim that you can with certainty find a 70/30 bet that will work exactly like that in the future is bogus. It sounds more like the doubling down approach: If you loose your first bet, double down on the next and so forth - you will be right sometime. If not, you get wiped out...I am just very sceptical I guess. And a bit disillusioned about the whole investment thing.

QuoteOriginally posted by: IncThey have an extremely secretive fund that offers unbelievable returns.Hmm. Quite like Madoff's.

it was only a matter of time before someone started to make comparisons

It is all based on this secret mathematical formula.

This secret formula makes as much sense

Judging from the court case its pretty standard stuff. Order anticipation. I'm assuming that is for the equity fund though.

And what exactly does that formula describe? Share some knowledge.Y.

A lot of people have an idea what they do but no one knows for sure. They come in & out of the markets from time to time when they can find an edge but in other areas they are in the markets 100% of the time. Anyone asking what they do (in an attempt to understand or create similar strategies) I would say stick with the easy stuff first. Trying to understand what RT does is like trying to go toe to toe with GETCO HFT. The few people who have moved on or retired from RT do not speak very much about what the firm does.

QuoteOriginally posted by: katastrofaQuoteOriginally posted by: IncThey have an extremely secretive fund that offers unbelievable returns.Hmm. Quite like Madoff's.Too bad it is so hard to build a Ponzi scheme when the only investor is the company itself !

Perhaps Simons makes his money by avoiding the Wall-Street bonus culture. He hires only researchers from academics and low-salary scientific backgrounds. When certain strategies have very profitable runs, these types of employees have no sense of entitlement to the returns. So he is able to lever up and dial in whatever is working with double the returns and half the risk of city firms, because he isn't splitting the profits with anyone. He buys pizza for the whole office at lunch, knows the name of everyone's dogs and daughters, and everyone is happy.The employees are well paid because they are comparing their pay to NASA salaries, not to the amount of money their research is generating. $400,000 is a lot in a year, unless of course your work produces a few million or more. Some types of employees go after their share, some don't. You hire the ones that don't, your returns will be incredible.