Renaissance Technologies

**Ben Gilbert** (0:00)
I always used to misspell Renaissance as I was typing it out at 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.

**David Rosenthal** (0:10)
Oh, I thought you're gonna say you've typed it so many times now over the past month.

**Ben Gilbert** (0:15)
Well, there's that too. But you ready for this? You can't spell Renaissance without A-I.

**David Rosenthal** (0:20)
Oh, ho, ho. Okay, touche.

**Ben Gilbert** (0:27)
All right, let's do it. Welcome to Season 14, Episode 3 of Acquired, the podcast about great companies and the stories and playbooks behind them. I'm Ben Gilbert.

**David Rosenthal** (0:53)
I'm David Rosenthal.

**Ben Gilbert** (0:54)
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.

**David Rosenthal** (1:20)
When I was in college, I actually took an economics class with Burton Malkiel, who of course was involved in starting Vanguard and is a big proponent of all that, and that is what I learned, Ben.

**Ben Gilbert** (1:30)
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 RenTec. Their 30-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 Ph.D. physicists, astronomers, and speech recognition researchers. They are 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 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 66% 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, RenTec'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.

**David Rosenthal** (3:08)
Oh, we are going to talk a lot about that towards the end of the episode, because I think it's kind of the key to the whole thing.

**Ben Gilbert** (3:15)
Ooh, cliffhanger, David. I'm excited. So what exactly does Renaissance do? Why does it work? And how did it evolve to be the way it is today? And while the resources are out there are scarce, because for one, employees sign a lifetime non-disclosure agreement, David and I are going to take you through everything we've learned about the firm from our research, dating all the way back before Jim Simons started as a math professor to understand it all. This episode was selected by our Acquired Limited Partners. And to be honest, I didn't think enough people knew what RenTec was to pick it, but when we put it out for a vote, the people have spoken. So if you want to become a Limited Partner and pick one episode each season and join the quarterly Zoom calls with us, you can join at acquired.fm slash lp. If you want to know every time a new episode drops, sign up at acquired.fm slash email. These emails also contain hints at what the next episode will be and follow up facts from previous episodes. For example, we had a listener, Nicholas Cullen, email us this time who found the actual document with the bylaws of Hermes' controlling family shareholder H51, which we linked to in this most recent email. Come talk about this episode with us after listening at acquired.fm slash slack. If you want more from David and I, check out ACQ2. Our most recent episode was with Lata Bjerg-Nudsen, who led the team that created the first GLP-1s at Novo Nordisk. So awesome follow up to the Novo episode if you liked that one. Before we dive in, we want to briefly share our presenting sponsor this season is JP. Morgan, specifically their incredible payments business.