[jmh530]

I mean, it's kind of ridiculous to just make blanket statements like that. This is a hedge fund that has a long history of good performance. The whole point of a ponzi scheme is that you have to keep getting more money from outside investors to pay the original investors. Rentec does the exact opposite. They refuse outside money and keep their employees from investing too much in it.

With that out of the way, obviously no one except those who work for them knows what they actually do. What we do know for sure if that they are highly levered, use an entirely systematic/algorithmic investment process, and do a shit load of trading. So even if they don't earn a lot on each trade, they do so many that are just barely profitable and highly levered that it ends up being a lot of money.

[chrisweekly]

Ok sure, but 80 (eighty) percent returns? That's... inconceivable.

[throwawaymath]

It’s all relative. Renaissance is famous because they do it on (low) double digit billions. On the other hand, 80% at a proprietary trading firm - where you might be working with double digit millions - isn’t spectacular. I can tell you that several small outfits in Chicago and the Bay Area return well over 200% consistently. But they are severely capacity constrained and basically disburse profits to the partners and traders each year. Their capital is only in the eight figure range.

[shostack]

Can you elaborate on what drives the capacity constraint for someone not in the industry?

[thedufer]

I don't think its inconceivable, but comparing it to a hedge fund makes it look pretty crazy. First note that they look more like a prop fund, in which typically returns are labor-constrained rather than cash-constrained. Annual returns there aren't really comparable to investing, as they're more performing services (like arbitrage) for the market than putting in money. Second, the fact that being able to invest is a perk of employment means that part of their pay structure is via Medallion returns. Income that other firms would have to subtract from returns because it is spent on payroll still counts for Rentech even though said returns are going to employees.

[paulie_a]

Why? You don't need to do a ton of constant trades. While my portfolio is fairly small, I make probably half a dozen year and sometimes less or more but in total it averages to 500-1000 percent a year

A good starting point..if wall Street is consistently shitting on a stock, it's probably something to check out and do some research on.

[hendzen]

their gross return is probably just a couple percent but then they leverage the crap out of it, which they can easily do since the strategy is designed to have very low volatility.

[hn_throwaway_99]

But leverage magnifies volatility to the extent that it increase gains.

[throwawaymath]

Correct. There's no free lunch when it comes to volatility.

[wtvanhest]

I disagree. But more importantly, it doesnt matter.

We cant invest and dont have enough information to assess whether it is a ponzi scheme or not.

Its possible that this one fund has generated excessive outperformance with low volatility, but we should start by assuming it didnt, then prove otherwise