Renaissance Technologies LLC (also known as RenTec or RenTech) is an American

hedge fund A hedge fund is a Pooling (resource management), pooled investment fund that holds Market liquidity, liquid assets and that makes use of complex trader (finance), trading and risk management techniques to aim to improve investment performance and ...

based in

East Setauket, New York East Setauket is a hamlet and census-designated place (CDP) in the Town of Brookhaven, in Suffolk County, on Long Island, New York, United States. It was first listed as a CDP in the 2020 census, at which time it had a population of 10,998. Be ...

, on

Long Island Long Island is a densely populated continental island in southeastern New York (state), New York state, extending into the Atlantic Ocean. It constitutes a significant share of the New York metropolitan area in both population and land are ...

, that specializes in

systematic trading Systematic trading (also known as mechanical trading) is a way of defining trade goals, risk controls and rules that can make investment and trading decisions in a methodical way. Systematic trading includes both manual trading of systems, and full ...

using quantitative models derived from mathematical and

statistical analysis Statistical inference is the process of using data analysis to infer properties of an underlying probability distribution.Upton, G., Cook, I. (2008) ''Oxford Dictionary of Statistics'', OUP. . Inferential statistical analysis infers properties of ...

. Renaissance was founded in 1982 by James Simons, a

mathematician A mathematician is someone who uses an extensive knowledge of mathematics in their work, typically to solve mathematical problems. Mathematicians are concerned with numbers, data, quantity, mathematical structure, structure, space, Mathematica ...

who worked as a code breaker during the

Cold War The Cold War was a period of global Geopolitics, geopolitical rivalry between the United States (US) and the Soviet Union (USSR) and their respective allies, the capitalist Western Bloc and communist Eastern Bloc, which lasted from 1947 unt ...

. In 1988, the firm established the Medallion Fund, a form of Leonard Baum's

mathematical models A mathematical model is an abstract description of a concrete system using mathematical concepts and language. The process of developing a mathematical model is termed ''mathematical modeling''. Mathematical models are used in applied mathemati ...

expanded by algebraist

James Ax James Burton Ax (10 January 1937 – 11 June 2006) was an American mathematician who made groundbreaking contributions in algebra and number theory using model theory. He shared, with Simon B. Kochen, the seventh Frank Nelson Cole Prize in ...

, to explore correlations from which it could profit. The hedge fund was named Medallion in honor of the math awards Simons and Ax had won. Simons ran Renaissance until his retirement in late 2009. He continued to play a role at the firm as non-executive chairman until 2021. He remained invested in its funds, particularly the Medallion fund, until his death in 2024. The company is now run by Peter Brown (after Robert Mercer resigned). Both were

computer scientists Computer science is the study of computation, information, and automation. Computer science spans theoretical disciplines (such as algorithms, theory of computation, and information theory) to applied disciplines (including the design an ...

specializing in

computational linguistics Computational linguistics is an interdisciplinary field concerned with the computational modelling of natural language, as well as the study of appropriate computational approaches to linguistic questions. In general, computational linguistics ...

who joined Renaissance in 1993 from

IBM Research IBM Research is the research and development division for IBM, an American Multinational corporation, multinational information technology company. IBM Research is headquartered at the Thomas J. Watson Research Center in Yorktown Heights, New York ...

. The fund has $165 billion in discretionary assets under management (including leverage) as of April 2021.

Academia and research

James Simons founded Renaissance Technologies following a decade as the Chair of the Department of Mathematics at

Stony Brook University Stony Brook University (SBU), officially the State University of New York at Stony Brook, is a public university, public research university in Stony Brook, New York, United States, on Long Island. Along with the University at Buffalo, it is on ...

. Simons in 1976 was a recipient of the Oswald Veblen Prize of the

American Mathematical Society The American Mathematical Society (AMS) is an association of professional mathematicians dedicated to the interests of mathematical research and scholarship, and serves the national and international community through its publications, meetings, ...

. He is known in the scientific community for co-developing the

Chern–Simons theory The Chern–Simons theory is a 3-dimensional topological quantum field theory of Schwarz type. It was discovered first by mathematical physicist Albert Schwarz. It is named after mathematicians Shiing-Shen Chern and James Harris Simons, who intr ...

, which is used in modern theoretical physics.

Quantitative trading

The firm uses

quantitative trading Mathematical finance, also known as quantitative finance and financial mathematics, is a field of applied mathematics, concerned with mathematical modeling in the financial field. In general, there exist two separate branches of finance that requ ...

, where staff tap data in its

petabyte The byte is a unit of digital information that most commonly consists of eight bits. Historically, the byte was the number of bits used to encode a single character of text in a computer and for this reason it is the smallest addressable un ...

-scale

data warehouse In computing, a data warehouse (DW or DWH), also known as an enterprise data warehouse (EDW), is a system used for Business intelligence, reporting and data analysis and is a core component of business intelligence. Data warehouses are central Re ...

to assess statistical probabilities for the direction of

securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...

prices in any given market. Staff attribute the breadth of data on events peripheral to financial and economic phenomena that Renaissance takes into account, and the firm's ability to manipulate large amounts of data by deploying scalable technological architectures for computation and execution. Renaissance Technologies'

has employed mathematical models to analyze and execute trades, many of them automated. The firm uses computer-based models to predict price changes in easily traded financial instruments. These models are based on analyzing as much data as can be gathered, then looking for non-random movements to make predictions. Some also attribute the firm's performance to employing

financial signal processing Financial signal processing is a branch of signal processing technologies which applies to signals within financial markets. They are often used by quantitative analysts to make best estimation of the movement of financial markets, such as stock ...

techniques such as pattern recognition. The book ''

The Quants ''The Quants'' is the debut New York Times best selling book by Wall Street journalist Scott Patterson. It was released on February 2, 2010 by Crown Business. The book describes the world of quantitative analysis and the various hedge funds th ...

'' describes the hiring of speech recognition experts, many from

IBM International Business Machines Corporation (using the trademark IBM), nicknamed Big Blue, is an American Multinational corporation, multinational technology company headquartered in Armonk, New York, and present in over 175 countries. It is ...

, including the current leaders of the firm.

"Quants" with non-financial background

Renaissance employs specialists with non-financial backgrounds, including

computer scientist A computer scientist is a scientist who specializes in the academic study of computer science. Computer scientists typically work on the theoretical side of computation. Although computer scientists can also focus their work and research on ...

physicist A physicist is a scientist who specializes in the field of physics, which encompasses the interactions of matter and energy at all length and time scales in the physical universe. Physicists generally are interested in the root or ultimate cau ...

signal processing Signal processing is an electrical engineering subfield that focuses on analyzing, modifying and synthesizing ''signals'', such as audio signal processing, sound, image processing, images, Scalar potential, potential fields, Seismic tomograph ...

experts and

statistician A statistician is a person who works with Theory, theoretical or applied statistics. The profession exists in both the private sector, private and public sectors. It is common to combine statistical knowledge with expertise in other subjects, a ...

s. The firm's latest fund is the Renaissance Institutional Equities Fund (RIEF). RIEF has historically trailed the firm's better-known Medallion fund, a separate fund that contains only the personal money of the firm's executives. Renaissance is a firm run by and for scientists, employing those with non-financial backgrounds for quantitative finance research like mathematicians, statisticians, theoretical and experimental physicists, astronomers, and computer scientists. According to a piece in ''The New York Times, "''

Wall Street Wall Street is a street in the Financial District, Manhattan, Financial District of Lower Manhattan in New York City. It runs eight city blocks between Broadway (Manhattan), Broadway in the west and South Street (Manhattan), South Str ...

experience is frowned on and a flair for science is prized." One former employee speculated that the herdlike mentality among business school graduates is to blame for poor investor returns. Renaissance engages roughly 150 researchers and computer programmers, half of whom have PhDs in scientific disciplines, at its 50-acre East Setauket campus in

Long Island, New York Long Island is a densely populated continental island in southeastern New York (state), New York state, extending into the Atlantic Ocean. It constitutes a significant share of the New York metropolitan area in both population and land are ...

, which is near the

State University of New York at Stony Brook Stony Brook University (SBU), officially the State University of New York at Stony Brook, is a public university, public research university in Stony Brook, New York, United States, on Long Island. Along with the University at Buffalo, it is on ...

. Mathematician

Isadore Singer Isadore Manuel Singer (May 3, 1924 – February 11, 2021) was an American mathematician. He was an Emeritus Institute Professor in the Department of Mathematics at the Massachusetts Institute of Technology and a Professor Emeritus of Mathemat ...

referred to Renaissance's East Setauket office as the best physics and mathematics department in the world. The firm's administrative and back-office functions are handled from its

Manhattan Manhattan ( ) is the most densely populated and geographically smallest of the Boroughs of New York City, five boroughs of New York City. Coextensive with New York County, Manhattan is the County statistics of the United States#Smallest, larg ...

office in

New York City New York, often called New York City (NYC), is the most populous city in the United States, located at the southern tip of New York State on one of the world's largest natural harbors. The city comprises five boroughs, each coextensive w ...

. The firm is secretive about the workings of its business and very little is known about them. The firm is known for low personnel turnover and for requiring its researchers to agree to

intellectual property Intellectual property (IP) is a category of property that includes intangible creations of the human intellect. There are many types of intellectual property, and some countries recognize more than others. The best-known types are patents, co ...

obligations by signing non-compete and non-disclosure agreements.

Monemetrics

In 1978, Simons left academia and started a hedge fund management firm called Monemetrics in a Long Island strip mall. The firm primarily traded currencies at the start. It did not occur to Simons at first to apply mathematics to his business, but he gradually realized that it should be possible to make mathematical models of the data he was collecting. Monemetrics' name was changed to Renaissance Technologies in 1982. Simons started recruiting some of the mathematicians and data-modeling types from his days at the Institute for Defense Analysis (IDA) and Stony Brook University. His first recruit was Leonard Baum, a

cryptanalyst Cryptanalysis (from the Greek ''kryptós'', "hidden", and ''analýein'', "to analyze") refers to the process of analyzing information systems in order to understand hidden aspects of the systems. Cryptanalysis is used to breach cryptographic se ...

from IDA who was also the co-author of the

Baum–Welch algorithm In electrical engineering, statistical computing and bioinformatics, the Baum–Welch algorithm is a special case of the expectation–maximization algorithm used to find the unknown parameters of a hidden Markov model (HMM). It makes use of the ...

. When Baum abandoned the idea of trading with mathematical models and took to fundamental trading, Simons brought in algebraist

from Cornell University. Ax expanded Baum's models for trading currencies to cover any commodity future and subsequently Simons set up Ax with his own trading account, Axcom Ltd., which eventually gave birth to the profitable fund — Medallion. During the 1980s, Ax and his researchers improved on Baum's models and used them to explore correlations from which they could profit.

Medallion Fund

In 1988, Renaissance established its most profitable fund, the Medallion fund (previously the Limroy Colombian fund), which used an expanded form of Leonard Baum's

improved by algebraist James Ax to explore correlations from which they could profit. Simons and Ax, who were classmates at

UC Berkeley The University of California, Berkeley (UC Berkeley, Berkeley, Cal, or California), is a public land-grant research university in Berkeley, California, United States. Founded in 1868 and named after the Anglo-Irish philosopher George Berkele ...

, started Medallion, which they named after their awards in mathematics. The initial success of the company's models led Simons to base the fund's trades entirely on the models. By April 1989, however, peak-to-trough losses had mounted to about 30%. Ax claimed to have accounted for such a decline in his models and insisted on continuing to trade. Simons wanted to pause and reevaluate; Simons, as majority owner, prevailed, and Ax departed. Simons then asked

Berkeley Berkeley most often refers to: *Berkeley, California, a city in the United States **University of California, Berkeley, a public university in Berkeley, California *George Berkeley (1685–1753), Anglo-Irish philosopher Berkeley may also refer to ...

professor

Elwyn Berlekamp Elwyn Ralph Berlekamp (September 6, 1940 – April 9, 2019) was a professor of mathematics and computer science at the University of California, Berkeley.Henry Laufer, to overhaul Medallion's trading system over the course of six months. In 1990, Berlekamp led Medallion to a 55.9% gain, net of fees, and then returned to his duties as a Berkeley professor after selling out to Simons at six times the price for which he had bought his Axcom interests sixteen months earlier. Straus then took Berlekamp's place, running Medallion's revamped trading system, which returned 39.4% in 1991, 34% in 1992 and 39.1% in 1993, according to Medallion annual reports. The Medallion fund is considered to be one of the most successful hedge funds ever. From 1994 through mid-2014, it averaged a 71.8% annual return, before fees. The fund has been closed to outside investors since 1993 and is available only to current and past employees and their families. The firm bought out the last investor in the Medallion fund in 2005 and the investor community has not seen its returns since then. About 100 of Renaissance's some 275 employees are "qualified purchasers", meaning they generally have at least $5 million in assets to invest. The remaining are "accredited investors", generally worth at least $1 million. By 2000, the computer-driven Medallion fund had an average annual return of 34% after fees from its 1988 inception. Simons ran Renaissance until his retirement in late 2009. Between January 1993 and April 2005, Medallion only had 17 losing months and out of 49 quarters over the same period, Medallion had only three losing quarters. Between 1989-2005 Medallion had only one year showing a loss: 1989. During 2020 the Medallion fund surged 76%.

Medallion as a retirement fund

Renaissance Technologies terminated its

401(k) In the United States, a 401(k) plan is an employer-sponsored, defined-contribution, personal pension (savings) account, as defined in subsection 401(k) of the U.S. Internal Revenue Code. Periodic employee contributions come directly out of their ...

retirement plan in 2010 and employees' account balances were put into

Individual Retirement Account An individual retirement account (IRA) in the United States is a form of pension provided by many financial institutions that provides tax advantages for retirement savings. It is a trust that holds investment assets purchased with a taxpayer's ...

s. Contributions could be made to a standard Individual Retirement Accounts and then converted to a

Roth IRA A Roth IRA is an individual retirement account (IRA) under United States law that is generally not Taxation in the United States, taxed upon distribution, provided certain conditions are met. The principal difference between Roth IRAs and most othe ...

regardless of income. By 2012, Renaissance was granted a special exemption by the United States Labor Department allowing employees to invest their retirement money in Medallion arguing that Medallion had consistently outperformed their old 401(k) plan. In 2013, Renaissance's IRA plans had 259 participants whose $86.6 million contribution grew to $153 million that year without fees or annual taxes. Renaissance set up a new 401(k) plan, and in November 2014 the Labor Department allowed that plan to be invested in Medallion as well.

Renaissance Institutional Equities Fund (RIEF)

In 2005, Renaissance Institutional Equities Fund (RIEF) was created. RIEF has historically trailed the firm's better-known Medallion fund, a separate fund that only contains the personal money of the firm's executives. In April 2020, Institutional Investor reported that the disparity between Renaissance's Medallion fund and other funds, including RIEF, was approximately 17-19%. Renaissance also offers two Renaissance Institutional Diversified Alpha (RIDA) to outsiders. Simons ran Renaissance until his retirement in late 2009. Renaissance Institutional Equities Fund had difficulty with the higher volatility environment that persisted throughout the end of the summer of 2007. According to an article in ''Bloomberg'' in August 2007, RIEF once again struggled in the high volatility environment of 2020. According to an article in ''Bloomberg'' in November 2020, From December 1, 2020 to February 1, 2021, according to ''Bloomberg'', clients (LPs) had withdrawn $5 billion from the fund. On 25 September 2008, Renaissance wrote a comment letter to the

Securities and Exchange Commission The United States Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street crash of 1929. Its primary purpose is to enforce laws against market m ...

, discouraging them from implementing a rule change that would have permitted the public to access information regarding institutional investors' short positions, as they can currently do with

long Long may refer to: Measurement * Long, characteristic of something of great duration * Long, characteristic of something of great length * Longitude (abbreviation: long.), a geographic coordinate * Longa (music), note value in early music mens ...

positions. The company cited a number of reasons for this, including the fact that "institutional investors may alter their trading activity to avoid public disclosure".

Governmental affairs

2014 tax avoidance investigation

In July 2014, Renaissance Technologies was included in a larger investigation undertaken by

Carl Levin Carl Milton Levin (June 28, 1934 – July 29, 2021) was an American attorney and politician who served as a List of United States senators from Michigan, United States senator from Michigan from 1979 to 2015. A member of the Democratic Party (U ...

and the

Permanent Subcommittee on Investigations The Permanent Subcommittee on Investigations (PSI), stood up in March 1941 as the "Truman Committee," is the oldest subcommittee of the United States Senate Committee on Homeland Security and Governmental Affairs (formerly the Committee on Govern ...

on tax evasion by wealthy individuals. The focus of the

tax avoidance Tax avoidance is the legal usage of the tax regime in a single territory to one's own advantage to reduce the amount of tax that is payable. A tax shelter is one type of tax avoidance, and tax havens are jurisdictions that facilitate reduced taxe ...

investigation was Renaissance's trading strategy — which involved transactions with banks such as

Barclays Barclays PLC (, occasionally ) is a British multinational universal bank, headquartered in London, England. Barclays operates as two divisions, Barclays UK and Barclays International, supported by a service company, Barclays Execution Services ...

Plc and

Deutsche Bank Deutsche Bank AG (, ) is a Germany, German multinational Investment banking, investment bank and financial services company headquartered in Frankfurt, Germany, and dual-listed on the Frankfurt Stock Exchange and the New York Stock Exchange. ...

AG — through which profits converted from rapid trading were converted into lower-taxed, long-term capital gains. The strategy was also questioned by the

Internal Revenue Service The Internal Revenue Service (IRS) is the revenue service for the Federal government of the United States, United States federal government, which is responsible for collecting Taxation in the United States, U.S. federal taxes and administerin ...

(IRS). The higher rates for the five years under investigation would have been 44.4 percent, as compared to 35 percent, whereas the lower rate was 15 percent, as compared to 23.8 percent. In September 2021, Simons, Mercer, and other Renaissance executives agreed to pay up to $7 billion in taxes and penalties to settle the dispute with the IRS. The settlement was among the largest in history.

Campaign contributions

According to

OpenSecrets OpenSecrets is a nonprofit organization based in Washington, D.C., that tracks and publishes data on campaign finance and lobbying, including a revolving door database which documents the individuals who have worked in both the public sector an ...

, Renaissance was the top financial firm contributing to federal campaigns in the 2016 election cycle, donating $33,108,000 by July. By comparison, over that same period sixth ranked

Soros Fund Management Soros Fund Management is a privately held American investment management firm. It is currently structured as a family office, but formerly was a hedge fund. The firm was founded in 1970 by George Soros and, in 2010, was reported to be one of th ...

has contributed $13,238,551. Renaissance's managers were also active in the 2016 cycle, contributing nearly $30 million by June, with Mercer ranking as the #1 individual federal donor, largely to Republicans, and Simons ranked #5, largely to Democrats. They were top donors to the presidential campaigns of Hillary Clinton and Donald Trump. During the 2016 campaign cycle, Simons contributed $26,277,450, ranking as the 5th largest individual contributor. Simons directed all but $25,000 of his funds towards liberal candidates. Robert Mercer contributed $25,059,300, ranking as the 7th largest individual contributor. Robert Mercer directed all funds contributed towards conservative candidates. Between 1990 and 2016, Renaissance employees have contributed $59,081,152 to federal campaigns and since 2001 have spent $3,730,000 on lobbying.

References

{{Hedge funds Financial services companies established in 1982 Hedge fund firms in New York City Companies based in Suffolk County, New York Investment management companies of the United States