Demonstrating just how massive the ongoing quant (and market) dislocation is, the most recent performance numbers for Jim Simons monster RIEF fund, which is arguably one of the largest quant funds in the world with $100 billion in total capacity (comps being BGI, Getco and Highbridge, the last of which incidentally was responsible for the massive market spike on Thursday afternoon as it force-deleveraged through its owner JP Morgan), indicate that it is underperfoming the S&P by almost 17% Month To Date. One can only imagine what is going on at the internal-only Medallion Fund. The astrophysicists have failed. Hopefully not terminally, although as RIFF is also woefully below its benchmark, these may be dark times for secretive, chainsmoking Jim. As Zero Hedge has warned, when it comes to quant funds, the performance distribution is not a simple zero sum: the market's very topology is held in place by a smoothly functioning quant sector. Its absence results in abnormal and outsized index gyrations, incidentally like the one experienced by the S&P500 in the last 5 minutes of trading on Friday. It would be critical for the MSM to pick up on this topic, as the last time RIEF underperformed so poorly was the summer of 2007, which as everyone knows culminated with the global quant implosion in early August that year. The last thing the current jittery market needs right now is a repeat event of that scale. http://zerohedge.blogspot.com/2009/04/renaissance-underperforms-s-by-17-in.html
The zerohedge guys don't realize that RIEF and Medaillon are completely unrelated. Also: http://humblestudentofthemarkets.blogspot.com/2009/04/quant-funds-august-2007-and-now.html Seems this hysteria about "Quant funds blowing up left and right" might be a bit exaggerated (compared to Aug. 2007).
Trading Algo at Medallion: If (MoneyRaisedThisMonthAtRentecAndREIF > 0) { TransferFunds(RndNumber(below(.25))*TotalAccountSizeAtRentecAndREIF, MedallionAccount); } RndNumber(below(.25)) this month may have equalled .17. And for those who aren't familiar with the TransferFunds function, it has two arguments: TransferFunds(InputAccount,OutputAccount)
Oh, the irony of it all. Investors are lured into Rentec after hearing of such spectacular results...results of the employee-owned fund. Oh, the irony.
Note : 1)The Medallion Fund historically has traded non-stock instruments and is international in scope. American-traded instruments include commodities futures (energies, corn, wheat, soybeans, etc.) and US Treasury bonds. Foreign-traded instruments include currency swaps, commodities futures, and foreign bonds. The Medallion Fund has its own internal trading desk, staffed by approximately 20 traders, and trades from Monday opening bell in Australia through Friday closing bell in the US. 2)The Renaissance Institutional Equities Fund=RIEF, started in mid-2005 is being offered as a "mega-fund" for institutional investors; reportedly it has a capacity of up to $100bn. 3)Renaissance Institutional Futures Fund, or RIFF 4) Nova Fund : The Nova Fund historically has traded NASDAQ stocks only, executing purely electronically, with a desk staffed by 1-2 traders overseeing operations. In the mid-1990s, Nova was one of Instinet's largest volume customers. On one day in 1997 Nova executions accounted for 14% of the share volume of the NASDAQ Read more here : http://www.bloomberg.com/apps/news?pid=20601213&sid=aq33M3X795vQ&refer=home
But that's how Wall Street works. Look after themselves first and if anything left over give it to the customers.......
Could anyone explain why exactly has RIEF and other quant funds been underperforming recently, and what does this have to do with the market's liquidity?
bump. The equity markets look like shadows of their former selves. Everything is much less liquid than in march. Some of the parabolic rises in low quality stocks seem like they are going to collapse