U.S. Markets closed

Renaissance Technologies’ Return, AUM, and Holdings

Nina Zdinjak

Legendary Jim Simons, an awarded math genius and a former military code breaker, founded back in 1982 one of the nowadays largest quant hedge funds in the world, Renaissance Technologies. His curiosity for math developed very early as he dreamt about the numbers when he was only 3. Naturally, he graduated from a renowned MIT with a Bachelor degree in Mathematics and three years later he earned a doctorate. First, he worked as a teacher at MIT and then at Harvard, after which he was employed at the American Defense Department. Then, one (un)fortunate day when he openly stated out his pacifist views in regards to the war in Vietnam in public, he was fired, which made him return to intellectual circles.

Due to the years of exceptional returns Renaissance Technologies had under his leadership, Jim Simons became one of the wealthiest hedge fund managers in the world. Now, although being retired, he continuously earns by holding a large stake in the company, and in 2017 he was good for some $1.7 billion. Aside from being known as one of the smartest and most prolific investors in the world, Jim Simons is also well respected for his philanthropic work, as he has given more than $2.7 billion to various charities, and he also founded Math for America.

According to various sources, Renaissance Technologies has around $58 billion in AUM. The firm’s headquarters are in East Setauket, New York, on Long Island. Its main strategy is quant-oriented, which means that it relies only on mathematical and statistical methods for making investments. The team that Jim Simons gathered consists mostly of Ph.D. scientists from various fields such as Mathematics, Pure and Experimental Physicists, Computer Scientist, and Astronomers.

RENAISSANCE TECHNOLOGIES

The crucial year for the fund was 1988 when Jim Simons together with algebraist James Ax launched its flagship the Medallion Fund, one of the most successful funds in the world. What makes this fund special is the application of an enhanced form of Leonard Baum’s mathematical models. James Ax improved it and adapted it to research correlations. Medallion Fund uses high frequency-trading, taking advantage of the inefficiencies in the stock market, such as the execution of large transactions for example. This fund is known for achieving the best continuous returns in history – from 1994 through 2014 it generated an eye-popping return of 71.8% annually averaged; from 1990 until mid 2018, the fund brought back an averaged annualized return of 35%, while last year, when most of the funds struggled, Medallion Fund gained 10% through July.

Its Renaissance Institutional Equities Fund (RIEF) LLC Series B also had envying returns in recent years. In 2013 it delivered 17.64%, in 2014 it brought back 14.53%, followed by 17.37% in 2015, 21.46% in 2016, 15.22% in 2017, and 8.5% in 2018. The fund’s total return amounted to 319.31%, for a compound annual return of 11.5%, while its worst drawdown was 34.58%. Two more of its funds also posted positive returns for the tough 2018 – its Renaissance Institutional Equities generated a return of 7.7%, and its Renaissance Institutional Diversified Alpha Fund LP returned 2.7%. When looking at these amazing performances, one must think that there are no tough years for math geniuses at Renaissance Technologies.

Insider Monkey’s flagship strategy identifies the best performing 100 hedge funds at the end of each quarter and invests in their consensus stock picks. This way it is always invested in the best ideas of the best performing hedge funds and is able to generate much higher returns than the market. Since its inception in May 2014, our flagship strategy generated a cumulative return of 74%, beating the S&P 500 ETF (SPY) by about 24 percentage points (see the details here). Our short strategy outperformed the market by more than 40 percentage points since its inception two years ago.

On the next page, you can read about Renaissance Technologies’ portfolio changes made during the third quarter of 2018. Our analysis indicates that an equal weighted portfolio of RenTec's top 5 stock picks generated a monthly return of 1.15% during the 10 year period between 2008 and 2017, and outperformed the S&P 500 Total Return Index by 37 basis points per month. So, it pays off to pay attention to RenTec's top 5 picks even though this is a quant fund.

On September 30, 2018, Renaissance Technologies’ portfolio was valued around $97.27 billion and it was very diversified, as usual. The largest position was in Verisign, Inc. (NASDAQ:VRSN), a company that offers Internet infrastructure services. This position was worth $1.13 billion, on the account of 7,037,800 shares outstanding. At the end of the Q3 2018, there were 29 smart investors from our database long this stock, which is up by 4 from the previous quarter. Verisign has a market cap of $20.14 billion, and over the past six months, its stock price gained 10.20%, currently trading at $166.61. Among the fund’s top 20 positions at the end of Q3 was also Facebook, Inc. Common Stock (NASDAQ:FB), which was the second among 30 Most Popular Stocks Among Hedge Funds in Q3 of 2018.

The second biggest stake the fund held in Align Technology, Inc. (NASDAQ:ALGN), counting 2,778,381 shares, worth $1.09 billion. Align Technology is a medical device company, mostly known by its innovative product called Invisalign clear aligners. Over the past 12, months, the company’s stock lost 16%, and, at the moment of writing, it is trading at $227.37. Its market cap is around $18.18 billion. The company recently announced that it will deliver its fourth quarter of 2018 financial results on January 29th. For the third quarter 2018, the company disclosed earnings per diluted share of $1.24 versus EPS of $1.1 for the corresponding quarter in 2017. Align Technology also reported total net revenue of $427.09 million for Q3 2018, compared to $385.27 million for the third quarter in 2017. On September 30, 2018, 37 hedge funds reported long positions in this company, up by 1 from one quarter earlier.

The biggest new addition to the Renaissance Technologies’ equity portfolio in the third quarter of 2018 was JPMorgan Chase & Co. (NYSE:JPM). The fund initiated a stake worth $231.88 million, by acquiring 2.05 million shares. The second biggest new position the fund obtained in Alphabet Inc Class A (NASDAQ:GOOGL), which was worth $223.25 million, on the account of 184,948 shares. During the third quarter, the fund also purchased 4.05 million shares of The Coca-Cola Co (NYSE:KO), obtaining in that manner a position with a value of $186.86 million, which was the third largest addition to its portfolio in this quarter.

During the third quarter of 2018, the fund also lost faith in some of the companies that they’ve already invested in previously and decided to sell its entire positions. Among the biggest drops were Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), and Walmart Inc (NYSE:WMT). The fund sold 3.82 million Apple’s shares, 183,555 Amazon’s shares, and 3.32 million Walmart’ shares.

Disclosure: None

This article was originally published at Insider Monkey.