Many years ago, Jim Simons took an interest in my theoretical work on discrete topology (still unpublished) in the context of this fund. Among other things, this research provided a powerful mechanism for finding relationships in data that are effectively intractable to discover by more conventional means. Many of the mathematicians associated with Renaissance at the time had diverse and impressive theoretical backgrounds, all focused on different areas of mathematics that could loosely be applied to discovery of signals that, importantly, would be difficult to find via more conventional statistical analysis.
My immediate impression was that this was not a coincidence. Having talked to many other hedge funds over the years, I've come to realize that this is even more anomalous than it seemed at the time. While you will sometimes find a person on the cutting edge of these kinds of mathematics at other funds it tends to be an isolated case. Many hedge funds have boringly simplistic approaches to signal discovery. People overestimate how widely distributed and available this kind of expertise is.
Renaissance are not better at investing per se, they are better at signal discovery than anyone else and invested heavily in maintaining that (meta-)edge over the years, the investing part is relatively mechanical after the signal is discovered.
I can understand that there are a limited number of people who can understand and apply the math necessary, but not that it could remain proprietary for 30 years.
Usually if a company has secret sauce, someone will leave and spin off on their own. Even Google can't retain everyone.
So unless I'm missing something, any explanation has to account for why this hasn't occurred here.
Very tight NDAs (that they actually litigate) coupled with enforceable non-competes ("garden leave" where they pay your salary for, say, a year as part of the deal before you can leave for a competitor) is part of it.
Really high comp is another.
Perhaps a bigger deal is the fact that they actively return money over the roughly $10BN fund value, implying that the strategy doesn't work past that point. A competitor would then be stuck in a zero-sum game battling for a slice of a fixed pie rather than being able to grow the market.
My immediate impression was that this was not a coincidence. Having talked to many other hedge funds over the years, I've come to realize that this is even more anomalous than it seemed at the time. While you will sometimes find a person on the cutting edge of these kinds of mathematics at other funds it tends to be an isolated case. Many hedge funds have boringly simplistic approaches to signal discovery. People overestimate how widely distributed and available this kind of expertise is.
Renaissance are not better at investing per se, they are better at signal discovery than anyone else and invested heavily in maintaining that (meta-)edge over the years, the investing part is relatively mechanical after the signal is discovered.