Medallion
Just a helpful dad trying to assist my daughter with her school project. It's about a successful hedge fund called Renaissance Technologies. This question is about their Medallion fund,
- what is their gmv?
- what is their holding period?
- what portfolio construction tools/methods do they use?
- what type of strategies do they use, do they have similar characteristics (holding period, underlying data used, etc), or a combination of many strategies with very different characteristics?
They are really secretive
I think in their tax case it was revealed that we use 12.5-20.0x leverage on thousands of low vol trades
Nobody really knows much about Medallion's strategies... if you want the high level overview
They use systematic quant strategies, they don't do any manual trading - everything is based off of mathematical models. Their strategies are mostly statistical arbitrage.
Medallion fund uses short term strategies with 6 month holding period usually.
The Medallion fund has around $34.8B AUM as of its last annual filing. It's closed to outside investors.
RenTec also has funds other than Medallion, like Renaissance Institutional Global Equities which is open to the public but these funds have generally underperformed the market and lag behind Medallion by a lot. Those other funds apply quant strategies but for a longer holding period, and haven't had the best track record.
Damn that's a cool school project.
Here's what I know from talking to someone who works there.
Context: I used to work at a mid-sized fund-of-funds ($5bn in AUM) and my job was manager selection and hedge fund manager due diligence. I spoke to a lot of quant funds, including DE Shaw (we were invested in Oculus and Graphite), AQR, 2 Sigma, and RenTec.
Medallion @ RenTec was not open to outside investors. It invested money for insiders and close friends and families only. Formally, my meeting was about RIEF, which at the time was struggling performance-wise, but was one of few funds RenTec had that was open to outside investors. The meeting gave me the rare-opportunity to inquire about Medallion and hear from an insider.
I asked about Medallion and here's what I know:
- Medallion does not invest outside or institutional capital because (official reason) the fund is so highly levered and trades too frequently to be suitable for the common institutional investor
- The Medallion fund is at peak capacity (or optimal capacity); Medallion hits capacity almost every quarter and the GP forces a dividend to the LPs every quarter to keep the strategy going (in English: it prints money); because there is a forced redemption every quarter, this will also make it unsuitable for institutional investors
- Medallion AUM is not public information / undisclosed.
- The actual Medallion strategy is undisclosed; but we know it is quantitatively driven and equities, commodities, currencies (and related futures) -focused; long and short
- Medallion is tax-advantaged; it employs sophisticated trading strategies to minimize its tax burden; I have no idea how it does this; I believe the government recently closed this loop hole and they owed over $7 billion in back-taxes this year (2021)
- Medallion has a purported (and unverified) track record of +45% per year compounded since inception, net of fees, putting it way ahead of any investment fund's returns in history
- In its very early years Medallion actually lost money but has been very profitable since the mid-90s
- Medallion employs only mathematicians and physicists, who usually have PhDs or comparable advanced degrees
- Medallion / RenTec employees are burdened with stringent non-disclosure and non-compete agreements; they are usually unable to work anywhere else in the industry if they resign
- Finally, there is really little known about Renaissance Technologies and especially the Medallion fund; all the above is what I gathered from a 15min conversation with an insider (who was very uncomfortable that I asked). The founder, Jim Simons, has conducted several interviews which are available on YouTube (my favorite is by Numberphile); he has a very interesting background but he doesn't reveal much.
they were able to lower their tax exposure by making agreements with their PBs to use options to turn their short term gains into LT gains (prob a but more complex but idk)
No offence but this doesn't really seem like he told you anything that isn't on the first page on google
With all due respect, I don't think that's true.
At that time I had over 3 years of experience, made over 25 fund investments and averaged over 100 manager meetings a year... I had never heard of a fund force a quarterly redemption every quarter or a fund basically say they were a HFT.
This is not normal - and at the time had not heard that about Medallion, nor any other fund.
All of this information is revealed in Gregory Zuckerman's book about Jim Simons
...What kind of school project is this
Thanks for commenting on your post to gain traction.
Pick up a copy of this: https://www.amazon.com/Man-Who-Solved-Market-Revolution/dp/073521798X
I never know if questions like this are serious. It's just mind-boggling to me that anyone could both A) know the Medallion fund exists and is more interesting/worthy of a school project than any other hedge fund, but also B) NOT know that RenTech is so famously secretive that expecting a message board to know anything about their strategies is just wildly out-of-the-question. There's lots of people in either of those two sets, but I would have thought the intersection between those two sets is vanishingly tiny.
But assuming this question really is serious, then as someone else suggested, just read "The Man Who Solved the Markets" and that will tell you everything that is publicly known about RenTech. It's non-technical and enjoyable even if you don't have a school project.
I have absolutely no idea how trustworthy this source is but I found an interesting blog post that seems to capture a good summary of their strategy. Read the top post by the guy James Baker.
https://www.quora.com/What-are-the-investment-strategies-of-James-Simon…
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