It looks like the three Renaissance Technologies funds that are open to outside investment are well on their way to posting their best performances in several years.
Through December 12, the East Setauket, New York-based firm’s Renaissance Institutional Equities Fund (RIEF) is up 13 percent. This compares with a 7.6 percent return for the S&P 500 during the same period. This year’s performance marks a welcome reversal of fortunes for the fund, which has fallen short of its stated return goals for the past couple of years. It is also a major rebound from earlier this year, when the fund was down 2.09 percent for the first six months of the year.
The RIEF fund, with a net-long investment strategy that trades both U.S. and non-U.S. equity securities listed on U.S. exchanges, was created to generate gross annual returns of 400 to 600 basis points, or 4 to 6 percentage points, above the S&P 500 over rolling three- to five-year periods using average leverage of about 2.5 to 1. Last year the fund rose 17.6 percent. However, this worked out to slightly more than half the 32 percent gain for the S&P 500, meaning that RIEF underperformed the benchmark by 14 percentage points. In 2012, the fund lagged the index by 6 percentage points.
But in 2011 RIEF exceeded the benchmark by an astounding 32 percentage points, and it beat it by about half a percentage point in 2010. So, over the most recent five-year period, the fund has stacked up pretty well compared with its targeted benchmark.
Meanwhile, the Renaissance Institutional Futures Fund (RIFF) gained 7.26 percent through December 12. As a result, it will probably post its best results since 2010, when it surged 22.80 percent. The fund employs an absolute return investment strategy that uses leverage to trade global futures and forwards, aiming for low correlation to other asset classes. Finally, the Renaissance Institutional Diversified Alpha Fund (RIDA), launched on March 1, 2012, seems poised to post its best year in its short history. It is up 10.96 percent through December 12. Last year it rose 7.1 percent, while in its first partial year of trading it reported a 0.70 percent loss.
It is not known how Renaissance’s legendary Medallion Fund has fared, since it has been closed to outsiders for a very long time now. It is also not known what drives performance at the famed quant shop founded by James Simons, who serves as the nonexecutive board chairman of the firm, which now manages $27 billion.
One thing we do know is that Simons now devotes most of his time to philanthropy. In September, for example, his Simons Foundation gave Stony Brook University another $25 million to boost interdisciplinary research and programming at the Simons Center for Geometry and Physics. Altogether, Stony Brook University has now received $105 million from the foundation and its co-founders, Simons and his wife Marilyn Simons. Simons is a former chair of Stony Brook’s mathematics department, while his wife received a B.A. and Ph.D. in economics from the university.
