Renaissance Technologies’ Big Year Should Scare Many
Everyone’s investments are down. Whether you’re a hedge fund, private equity fund or just an average investor, when you open your account, it’s most likely all red for 2020. However, Renaissance Technologies, the famed algorithm-minded hedge fund, they’re seeing BIG numbers in green.
As of April 14, Renaissance Technologies is reportedly up 24% including fees and 39% before them! This is during the same span where the stock market is down 11%. What’s also surreal is their 9.9% gain in the month of March, which will go down in history as one of the worst in stock market history.
For many this news will make one wonder, how they could get involved. That’s easier said than done since only employees’ money is managed through the fund. The rise of Renaissance should show more pessimism than optimism. Since they trade using algorithms and computers, it’s showing that there’s less of a need for human traders. It seems that Jim Simons have actually solved the market, a feat that Benjamin Graham and David Dodd famously claimed was impossible, especially by any sort of technical analysis. Renaissance has used price points, charts and even machine learning to identify financial reports as well as conference calls to decipher the best prices to purchase stocks. In a world where many companies are learning either how employees can work from home or worse, how companies don’t need employees, many fund managers may start thinking the same.
Computer engineer majors are more valuable than finance majors in the world of Wall Street thanks to Renaissance, which is bad news. Not only does it potentially mean less jobs, it can lead to erratic market behaviors since there’s less humans to make sense of current macroeconomic factors and can lead towards extra confusion for individual investors since stocks may not move the reasons they’ve moved in the past.
It’s also frightening that in a time where people want to tax the extremely wealthy, Renaissance seems to get off easily. By closing their fund to just employees, you have all these workers making more money than ever while the rest of the country suffers. Why go after Amazon, which is making money by providing valuable goods and services to the United States, when Renaissance employees are making tons of money for themselves without providing a direct need for society? Why protest Jeff Bezos, when Jim Simons should be the ones surrounded by picket signs? The least Renaissance can do is open up their fund on the open market or make it some elite form of Vanguard, that the individual investor can actually benefit from. The more successful, Renaissance Technologies becomes, the more frightened we should be as we turn in to some freak “Black Mirror” episode.
