U.S. News

Renaissance Hedge Fund's Value Falls 7%


The Renaissance Institutional Equities Fund, a $26 billion-plus hedge fund managed by mathematician James Simons, is down "in the order of 7%" for the year through Aug. 8, according to a letter the fund sent to investors Thursday.

Renaissance Letter

Renaissance, one of the largest "quantitative" hedge funds, told investors that it has "not had good luck during these last few days." It said it has been "caught in what appears to be a large wave of de-leveraging on the part of quantitative long-short hedge funds."

It also said results for July were "quite disappointing," with returns down between 4% and 4.5%, according to the letter that was obtained by Reuters.

Renaissance is a pioneer in the use of mathematical models that rapidly trade stocks in a strategy that is backed by debt, or leverage.

Simons' success in his other fund, Medallion, has made him among the highest paid managers in the $1.7 trillion industry, taking home an estimated $1.7 billion in 2006.

Other major quantitative funds, AQR Capital Management, D.E. Shaw and Tykhe Capital have also suffered in the recent market downdraft prompted by a widening crisis in the subprime-mortgage lending market, sources briefed on the matter told Reuters.

Simons said both the markets and his systems were behind the declining returns for Renaissance International Equity, but he said he expects the fund to recover.

"While much of the damage was due to weak markets, our system experienced meaningful relative losses during the first two weeks of the month," said Simons in the letter.

But he said the fund is "in the final stages of release" for three "very promising new signals," or components to trading models, that should help the fund "ultimately produce attractive rewards." 

Renaissance declined to comment.