Few people outside the investment world have heard of Renaissance Technologies. Even fewer have heard of its premier fund, Medallion. This article provides some details, based on dozens of interviews. The firm is drawing increasing interest because money earned from it helped the Trump campaign and a number of political organizations.
For outsiders, the mystery of mysteries is how Medallion has managed to pump out annualized returns of almost 80 percent a year, before fees. “Even after all these years they’ve managed to fend off copycats,” says Philippe Bonnefoy, a former Medallion investor who later co-founded Eleuthera Capital, a Switzerland-based quantitative macro firm. Competitors have identified some likely reasons for the fund’s success, though. Renaissance’s computers are some of the world’s most powerful, for one. Its employees have more—and better—data. They’ve found more signals on which to base their predictions and have better models for allocating capital. They also pay close attention to the cost of trades and to how their own trading moves the markets.
But as computing power becomes ever cheaper and competitors sharpen their skills, will Medallion continue to mint money?