[dahak27]

You're right overall that most of these places are a lot less flashy on the inside (have worked at a couple). Linear models everywhere as you said

However I think you're underestimating RenTech here. They're genuinely just in another league compared to what most people consider the "elite" quant shops. You're not getting in unless you're an actually impressive academic with a track-record, so I wouldn't be surprised if they're trying some weird stuff that other shops can't even understand (although I would imagine in small size vs. more vanilla stuff).

IMO places like JS/CitSec do a really good job of bombarding campuses to inculcate this idea they're the absolute apex of mathematical wizardry, but the places that are really doing some dark magic shit aren't trying to get undergrads to apply to them. Ofc maybe I'm falling for the same kind of propaganda for RenTech

[DebtDeflation]

>However I think you're underestimating RenTech here. They're genuinely just in another league compared to what most people consider the "elite" quant shops.

People said the same thing about LTCM. They had multiple Nobel Prize winners on staff, literally the people who wrote the Economics and Finance textbooks.

Then a decade later, history repeated with all of the prop trading outfits doing securitization.

It's always the same ingredients: 1) a theoretically sound strategy for taking advantage of some arbitrage opportunity 2) the assumption that positions can actually be liquidated on demand at the prevailing price and 3) enormous amounts of leverage. Then something happens that wasn't accounted for (e.g., sovereign default, counterparty default, etc.) and suddenly the strategy is no longer sound ("in a crisis all correlations go to one"), the liquidity assumption is no longer true ("where are all the buyers?"), and the leverage puts you out of business ("the market can stay irrational longer than you can stay solvent"). People never learn.

[bidirectional]

RenTech was founded years before LTCM and is still going strong. It's not repetition of history, they've outlasted or are older than most of the trading desks ever. They're basically a business providing a service to other market participants and executing that incredibly well, it's quite unlike the arbitrage LTCM was involved with.

[DebtDeflation]

And Bernie Madoff founded his firm two decades before Ren Tech, hell at one point he was the Chairman of NASDAQ.

[carnitine]

That was a scam. Are you accusing RenTech of being dangerously overextended like LTCM, or a scam like Madoff? Considering the Medallion fund takes no outsider capital, that would be quite a strange way to run a Ponzi scheme.

[noduerme]

All of this wizardry operates under the premise that given just the right meta-meta-meta-formulae some tiny edge over randomness can be squeezed from the mountain of historical data by sheer willpower and brute force computation. It cannot. The sooner people accept this as an iron rule, the sooner they'll stop falling for scams that promise to foretell the future.

[carnitine]

But it obviously can. The returns of Renaissance’s Medallion fund cannot be explained by randomness. If every company in America was a hedge fund since 1776, the returns of Medallion would not arise by chance. They clearly have an edge (and don’t even accept outsider money, so no need to falsify).

[ackbar03]

I think your definitely idolizing them a bit too much. Maybe a bit ahead of the curve but not doing anything super fancy (although I guess those two statements are somewhat contradictory).

Just from snippets I've sort of heard/read about, I think they were one of the earlier ones to move into HFT (although maybe not the super fast infrastructure heavy type these days). In some interview Simmons said they realized returns became more predictable they shorter the time frame they looked at and they pushed it to the extreme. I think there is also reason to suspect that they may have adopted some NLP strategies early on as well since Mercer was involved in that or something, and they initially hired a bulk of their team from IBMs NLP research team. Also they did not dodge 2008 completely, in some interview they said they lost close to / more than half their portfolio value in the market crash, but because they didn't have stupid leverage or outside investors or something like that, and also because they trusted their models, they didn't sell and held on. So maybe just slightly better execution but mostly the same.

Anyways, I was reading about these guys back in 09 when quant trading wasn't so blown up. Now every kid whose decent at math seems to want to be the next renaissance, which just makes me feel like the best years for that are over.

[carnitine]

I’m not idolising them, I’m just framing their returns in the correct perspective. The probability of any of the top firms existing by chance is astronomically small, that’s all I’m saying. Same is true of BlueCrest etc.

As far as I know the NLP stuff is more to do with similar techniques being applied to market data, rather than actual speech recognition or whatever. Hidden Markov models and the like.

[WanderPanda]

I’m not so sure the best years are over. The passive investing trend might work to the contrary and make the markets less efficient

[randomcarbloke]

fancy or not an edge is an edge.

[evanpw]

Medallion distributes their earnings and stays a fixed size rather than compounding, so it's a category error to compare their returns to most hedge funds. (At 66% return for 30 years, they'd own everything in the world otherwise). They're more like an internal prop-trading firm, which makes their returns good but not insane.

[carnitine]

I’m well aware it’s not compounded, it’s still a worthwhile comparison. We’re comparing ability to capture alpha, they’re clearly among the best in the world at that. 66% is insane for 30 years as a prop desk even with a fixed capacity, what makes you say it’s just good? Who is doing better?

[throwaway198843]

They are well known for insider trading and other market abuses. Of course they'd rather everyone believed it was all the PhDs they've hired, but it's just a smokescreen.

[carnitine]

The SEC will pay you a lot of money if you can substantiate those claims.

[pfortuny]

https://www.cityam.com/renaissance-hedge-fund-pay-5bn-back-t...

That is one example.

[carnitine]

That’s neither insider trading nor market abuse. They did something in a grey area regarding taxes, then decided to pay the bill rather than fighting in court to determine if it was or wasn’t legal.

[pfortuny]

They are the best at extracting information from publicly available data at fast speed, no more than that.

If you hire very intelligent people to do just that, you are doing it right. But the info is out there for everybody to see. They just arrive earlier than others. How? That is the secret.

[PascLeRasc]

Clarification: the data appears random to you.