For years, The rebirth of technology has been among the most exalted names in the field of high finance, as close to a certain thing as Wall Street. But the last few months have tarnished its reputation, and investors are now heading for exits.
The renaissance has seen at least $ 5 billion in redemptions since December 1 – an unimaginable rebuke from customers after unprecedented losses from the East Setauket, New York company.
The departure comes after three funds opened to the public fell by two figures last year, their computer models being affected by the rapid collapse of the stock market and the even faster recovery.
Read more: Man-made hedge funds exceeded amounts in pandemic-led year
The renaissance is now in a different position than any other in its nearly 40-year history: trying to convince investors who once asked to go into its funds that it is still worth their money and can be trusted to deliver returns. on market.
The terrible rebirth of 2020
Last year was the worst for its largest fund, RIEF
Source: Documents for investors
A company spokesman declined to comment.
Winner
Founded in 1982 by Jim Simons, a former code breaker for the National Security Agency, Renaissance is the world’s largest hedge fund. Its reputation has been built largely on the success of its Medallion fund, which has averaged about 40% a year since its inception in 1988.
Originally launched as a systematic, trend-following fund that traded in commodity markets, Medallion lost money after the first six months and underwent a renovation that led to its amazing performance.
The company realized after about 15 years that there are limits to the amount the fund can manage without pushing the markets too far, Simons said in a statement. interview in early 2019. Therefore, the Renaissance eliminated the remaining foreign investors in 2005 and has since tried to limit the size of Medallion, which Bloomberg previously calculated to be about $ 10 billion.
The success of the Renaissance made Simons one of the richest people in the world, with a fortune of about 23 billion dollars, according to the publication Bloomberg Billionaires Index. Last month, he announced that he would step down as president of the company, which at the time was managing about $ 60 billion. He will remain a member of the board.
With the Medallion closed, the Renaissance has three funds for outsiders. The largest institutional equity fund of the Renaissance last year had assets of over $ 30 billion.
In December, customers earned $ 1.85 billion net of the three public funds and demanded $ 1.9 billion back in January, according to investor letters seen by Bloomberg. Investors are ready to raise another $ 1.65 billion this month, the letters show.
These figures could be offset if there are entries in February or if investors decide to withdraw any of their redemption requests.
Underperformance
RIEF lost 19% in 2020, the letters show. This fund received most of the redemptions. The Alpha Diversified Institutional Fund decreased by 32% and the Global Equities Institutional Diversified Fund decreased by 31%. The medallion won 76%, according to the Institutional Investment.
Problems with public funds began early last year, as the Covid-19 pandemic shook US stocks. Renaissance told investors in an April letter that its trading systems added to market exposure in early January and then reversed course later in the first quarter based on estimates of its beta model. RIEF ended the three-month period down 14% from a loss of almost 20% for the S&P 500, including dividends.
Company he said in the April letter that he was “vigorously exploring a number of ideas on how to improve both beta models and the control systems that use those models.”
Shares rebounded after declining in the first quarter, with S&P gaining 47%, including dividends, from April to December. Renaissance told customers in a letter in September that its losses so far were due to under-coverage during the March crash and then over-covered against earnings from April to June. This was because its trading patterns were “overcompensated” for the initial problems.
The renaissance once again addressed its sad numbers in a December letter.
“Although recent performance has been terrible and worse than it would have been suggested, previous performance would have been likely by 2020,” the firm said, adding that its model anticipates that, for as long as ours, there are risk reports. profitability as bad as the ones we now see are not shocking. ”
The broader lesson is that “we should expect good investments to work terribly from time to time,” he said.
CRY decreased by 9.5% in January.