Wednesday, December 17, 2008

Back to East Setauket

My luxuriously speculative post on Renaissance Technologies, the meat of which is below, got some attention quick. In fact, about an hour after I posted it, it got its first hit from a server in East Setauket, Long Island belonging to a certain... Renaissance Technologies. Which means that RenTech is running a proprietary bot to scan the web or just the blogosphere. It found my blog long before a Google bot from Mountain View trolled by. Most corporations -- for example our old friends TIAA-CREF -- outsource this kind of brand vigilance to other firms, but quant funds like to develop and manage their own technology.

So who's next? Who's another big fund that's opaque, has an incredible mystique and is hard to get into, and gets unbelievably consistent results. How about Renaissance Technologies? What, everyone will say, Jim Simons is a genius and he hires only quant nerds (a syllogism if ever there was one), who are incapable of guile, right? Where Madoff acted smooth by appearing to charge no fees, only collecting commissions on the brokerage side, Simons' fees -- an incredible 5 and 44 -- could just be another way of projecting specialness and uniqueness.
Felix Salmon points out that Fairfield Greenwich is a feeder fund for RenTech as well as Madoff, which certainly doesn’t convey a rigorous stamp of household approval, given the laxity of Fairfield Greenwich’s "due diligence."

As to the other affinities between quant funds and Madoff, consider this. Quant funds, while not necessarily inclined to criminality, are intensely secretive (IP, indeed). I remember talking to a guy from one quant fund who said that the place was so tight lipped that two guys worked on a desk together, developed strategies together, yet one of them got married and didn't tell the other one until he let it slip eight months after the fact because his partner "had no need to know".

The actual probability of RenTech being fake, despite my fanciful conjurings, is negligible. But the probability is less low that there will be fraud turned up at a seemingly pure black box quant shop. Unless there’s already been one that I missed because I was too busy working.


Steed said...

Clark, you have a way of identifying (by some attribute anyway) who checks out ChewYourGrouse? You have to let me know how to do this. thanks.

Anonymous said...


Anonymous said...

Madoff (pronounced MADE-off). Good stuff.