With the investment equivalent of “strangers keep out,” Renaissance Technologies has planned a new beginning in store for its wildly successful Medallion hedge fund. According to Financial News, starting in 2006, the only investors in Medallion – touted by consultant Jacob Schmidt as the most successful hedge fund ever – will be employees, former employees and their families. CFO Mark Silber told FN that the company made the move to contain the fund’s size to keep returns at their lofty levels. Since its inception in 1988, Medallion reportedly has had annualized returns of 34.2%. Renaissance, says FN, has for years been returning money to outside investors to keep the size down (though $5.4 billion AUM hardly sounds like size containment), but now has asked its staff to buy-out outside investors.
One can’t blame outsiders for wanting in to such success, though it came with a hefty price: management fees of 5% and performance fees of 44%, more than double the industry average 2% and 20%.
Speaking of size, Renaissance ambitiously launched a fund in August with a reported $100 billion capacity, and as of early December is said to have already raised $2.6 billion.