[jdietrich]

Nobody outside of RenTech knows what trading strategies RenTech are using, because they're extremely secretive. There is a strong suspicion that they are generating very high returns by passing on concealed risks to other, less sophisticated players - in the case of RenTech, literally anyone else in the market counts as less sophisticated.

[darawk]

That's really not true. Everyone knows what they're doing. They're doing statistical arbitrage. There's many firms that do it, Two Sigma, Citadel, etc.. The only thing secretive about it is the exact details of each strategy. Renaissance, for instance, pioneered techniques like using satellite imagery to track sales. One of their early strategies noticed that the market tended to go up on days when the weather was nice in NYC. Things like this are what they're doing, but on a grand scale and with a lot of very very smart people working on them.

While it is possible that they're making their profits by shifting risk onto unsophisticated players, it's certainly not necessary for them to do that to make money. They have the smartest people in the world working for them.