RENAISSANCE Institutional Equities Fund (Rief) has recorded a six per cent full year loss in 2009 following a difficult year for quantitative hedge funds.
It has lost 4.42 per cent since its inception in 2005 and the fund’s assets have plunged to $6bn from $26bn in 2007.
Launched by Renaissance Technologies, Rief’s plans had been grand from the start and its goal of growing up to $100bn in assets was always an ambitious target.
But despite beating the S&P 500 benchmark it set itself, investors have continued to be surprised at the funds low returns.
Last July it told investors it had been, “caught in what appears to be a large wave of de-leveraging on the part of quantitative long-short hedge funds.”
Rief is part of the same group as the hugely successful Medallion, also founded by mathematician James Simons. Medallion, has made Simons among the highest paid managers in the $1.7 trillion industry, taking home an estimated $1.7bn in 2006.
Other major quantitative funds, AQR Capital Management, D.E. Shaw, Goldman Sachs Global Alpha, and Tykhe Capital have also suffered in the recent market downturn, prompted by a widening crisis in the subprime-mortgage lending market.
“All the quant managers are having trouble now, because their models are based on past events, and we haven’t seen markets exactly like these before,” said Brad Alford, a portfolio manager at Alpha Capital Management.
Rief prides itself on being an intellectual powerhouse, but despite a third of its staff holding PhDs it has only recently managed to attract investors back to the fund.
Analysts expect the fund’s performance to recover in 2010.