Renaissance Technologies (Audio)

I always used to misspell Renaissance as I was typing it out. I'd R-E-N, and then I would sort of, like, not really know what came from there, but I learned a mnemonic to make sure I get it right.

Oh! I thought you were gonna say you've typed it so many times now over the past month.

Well, there's that, too, but you ready for this? You can't spell Renaissance without AI.

Oh, [laughing]

[laughing]

Touché, touché.

Uh... All right, let's do it.

Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Hmm. Is it you? Is it you? Is it you? Sit me down, say it straight, another story on the way. Who got the truth?

Welcome to season fourteen, episode three of Acquired, the podcast about great companies and the stories and playbooks behind them. I'm Ben Gilbert.

I'm David Rosenthal.

And we are your hosts. They say, David, that as an investor, you can't beat the market or time the market, that you're better off indexing and dollar cost averaging rather than trying to be an active stock picker. They say there's no persistence of returns for hedge funds, that this year's big winner can be next year's big loser, and that nobody gets huge outperformance without taking huge risk.

When I was in college, I actually took an economics class with Burton Malkiel, who, of course, you know, was involved in starting Vanguard and is a big proponent of all that, and that is what I learned, Ben.

Well, David, it turns out they were wrong. Today, listeners, we tell the story of the best-performing investment firm in history, Renaissance Technologies, or RenTech. Their thirty-year track record, managing billions of dollars, has better returns than anyone you have ever heard of, including Berkshire Hathaway, Bridgewater, George Soros, Peter Lynch, or anyone else. So why haven't you heard of them? Or if you have, why don't you know much about them? Well, their eye-popping performance is matched only by their extreme secrecy, and they are unusual in almost every way. Their founder, Jim Simons, worked for the US government in the Cold War as a codebreaker before starting Renaissance. None of the founders or early employees had any investing background, and they built the entire thing by hiring PhD physicists, astronomers, and speech recognition researchers. They're located in the middle of nowhere in a tiny town on Long Island. They don't pay attention to revenues, profits, or even who the CEOs are of the companies [chuckles] that they invest in. And at any given time, they probably couldn't even tell you what actual stocks they own. Now, you may be thinking, "Okay, great, I just learned about this insane fund with unbelievable performance," and to be specific, listeners, that's sixty-six percent annual returns before fees, "and, you know, well, I want to invest!" Well, you can't. To add to everything else that I just said, RenTech's flagship Medallion Fund doesn't take any outside investors. The partners of the firm have become so wealthy from the billions that the fund has generated, that the only investors they allow in are themselves.