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Robert Mercer’s Trade of the Century

The Renaissance Technologies executive went all-in on Donald Trump — and won.

  • Michelle Celarier

Lunch at Renaissance Technologies — the secretive, $32 billion quantitative hedge fund headquartered in East Setauket, New York — has long been a communal affair.

In a sparse dining room overlooking a tree-dotted Long Island lawn, the computer scientists and mathematicians who develop Renaissance’s trading algorithms gather to dine on deli takeout and bottled water. The conversations typically tend toward mundane workday chatter: children, vacations, sports. Yet in this remote 50-acre setting, far from Manhattan’s financial district and Connecticut’s hedge fund row, one person — co-CEO Robert Mercer — stands out for expressing a singular passion: politics.

Former colleagues say Mercer’s ultraconservative, free-­market, antigovernment opinions make him unique among the millionaires and occasional billionaire who sit around that table. His views touch upon such varied and controversial topics as support for climate change deniers, a return to the gold standard, and the extreme free-market Austrian economics and individualism popularized by Ayn Rand.

Mercer also has long held strong views on the Clintons.

“He thought Bill Clinton was a criminal, and I’m sure he still does,” says Nick Patterson, who worked at Renaissance until 2001 and in 1993 suggested hiring Mercer from IBM Corp. There Mercer had gained renown for his breakthrough work on computer linguistics, along with Peter Brown, who also would join Renaissance. The two became co-CEOs following the retirement of founder Jim Simons in 2009. (Simons, for his part, recently told CNBC that he and Mercer don’t discuss politics.)

During the 1990s, Patterson recalls, Mercer often railed against then-president Clinton, continually referring to a murky alleged land deal in Arkansas that had followed the former governor to the White House. Like many of the scandals surrounding the Clintons, there was more smoke than fire: Whitewater turned out to be little more than fodder for right-wing talk shows and, apparently, Renaissance lunches.

Mercer’s views did not soften over time. During the Barack Obama era — when hedge funds garnered more scrutiny from Democrats following the global financial crisis — Mercer and his daughter Rebekah, who runs the Mercer Family Foundation, quietly used his substantial fortune and tech savvy to further their policy and political goals. Primary among them: defeating Hillary Clinton in her quest for the presidency.

That he succeeded, against great odds, must be immensely pleasing to the 70-year-old. First backing Senator Ted Cruz and then Donald Trump, Mercer made a bet — both financially and emotionally — on two men the political establishment disdained. His continued support of the eventual victor through the lowest depths of the campaign, and his willingness to stand largely alone among his hedge fund peers in that bet, must make the results of November 8 all the more satisfying — for when Donald Trump was declared the winner of the presidential election late that night, the greatest trade of Robert Mercer’s life paid off.

That Mercer would become Trump’s kingmaker is as surprising as the mogul’s upset win itself. Before this election cycle Mercer was virtually unknown in political circles. Now he has become a force to be reckoned with, on par with Charles and David Koch, who for years have backed Republican candidates and causes with their substantial checkbook.

Though he has done so quietly, Mercer has over time helped finance nearly 100 candidates for national office. There also have been sizable bets on technology to mold public opinion against Clinton and for Republicans — technology that both critics and supporters say was critical to Trump’s success.

Since 2010, Mercer has combined $45 million in campaign donations ($25 million in 2016 alone) with more than $50 million in pretax contributions to ultraconservative nonprofits. He has made an estimated $15 million in other politically oriented investments. Included in that total is a $10 million investment in controversial website Breitbart.com, which under former executive chairman Steve Bannon became what he called a platform for the “alt right” — the far right wing that is home to an openly racist constituency. Additionally, Mercer’s foundation has funded a nonprofit called the Government Accountability Institute, whose president wrote a controversial 2015 book on the Clinton Foundation. Mercer also has put $5 million into Cambridge Analytica, a data-mining and behavioral science company that says it used social media–enabled analysis to target elusive and angry swing-state voters in the 2016 election.

Even liberals like Patterson, now at the Broad Institute of MIT and Harvard, have grudging respect for the man. “Let’s give Bob some credit,” he says. “Suppose the main thing you wanted to do is defeat Hillary. He’s a very smart guy. It’s quite clear Mr. Trump and Bannon and Mercer understood some things about the U.S. that most people didn’t understand.”

To the critics aghast at Trump’s victory, however, Mercer seems more like a villain out of a novel. “If there is a dark, dystopian evil overlord behind everything that Trump has accomplished, it’s Robert Mercer,” says Michael Kink, a top Democratic activist who worked on the congressional campaign of Zephyr Teachout, a progressive congressional candidate in New York who was defeated by a Mercer-backed Republican in November.

The culmination of Mercer’s effort is not just the election of Trump and other Republicans. Mercer’s daughter, Rebekah (known as Bekah) has since been named by Politico as the most powerful woman in the GOP. She is on Trump’s transition team, and two Mercer-financed associates, Bannon and Kellyanne Conway, could end up in the White House after joining the campaign at what is reported to have been the Mercers’ prodding. Bannon already has been named Trump’s chief White House strategist.

Both Mercers will continue to have influence in the Trump administration, according to those on the inside. They are close to both Bannon and Trump’s son-in-law, Jared Kushner — the two people the president-elect relies on most, according to Trump transition team member Anthony Scaramucci of SkyBridge Capital. Underscoring the newfound closeness, Trump made an appearance at the annual “Heroes and Villains” Christmas party held at Mercer’s home on December 3 (accompanied by Conway, who was dressed as Superwoman). Bekah Mercer reportedly has been influential in Trump’s hard-right choices for several White House posts, including Alabama Senator Jeff Sessions for attorney general and retired lieutenant general Michael Flynn for national security adviser. The day after attending the Mercer party, Trump announced he would interview John Bolton — the hawkish former Bush undersecretary of state and Bekah Mercer’s reported pick — for the position of secretary of State.

In a world of secretive hedge fund moguls, Robert Mercer stands out as one of the most reclusive — a trait he shares with the fund he now runs.

Little that is known about Mercer’s background provides insight into his political views. He was born in California and raised in New Mexico, the son of now-deceased Virginia and Thomas Mercer. His father, a scientist whose research at Albuquerque’s Lovelace Foundation for Medical Education and Research was financed by the Atomic Energy Commission in the 1960s, died in 1993 at age 72, two years older than his son is now. (A prize in the father’s name is now granted by the American Association for Aerosol Research, which has received $25,000 from the Mercer Family Foundation.)

While somewhat chatty inside Renaissance, Mercer is notoriously shy in the outside world. At two Hamptons fundraisers this summer, held at the homes of New York Jets owner Woody Johnson and financier Wilbur Ross (Trump’s current choice for Commerce secretary), the hedge fund manager was in the background, making small talk with other Trump donors, says Scaramucci. “He was incredibly cordial and gentlemanly,” the SkyBridge founder adds.

“Bob is fairly reserved,” says Patterson, recalling that at Renaissance Mercer “worked very, very hard. He’s probably not the guy you’d want to go to a party with.”

Mercer almost never talks to the press (and declined to be interviewed for this article). In a rare 2014 public address, made when receiving a lifetime achievement award for his seminal work on computer linguistics, Mercer gave a 40-minute talk peppered with self-deprecatory remarks showing a sly sense of humor that belied the description of him as a “cold blooded poker player” in Sebastian Mallaby’s 2010 hedge fund exposé, More Money Than God.

Saying he was simply a computer programmer, the gray-haired Mercer spoke softly of how his love affair with computers developed, starting at the age of ten. Later, working at the Kirtland Air Force Base weapons lab while a student at the University of New Mexico, he got his first distaste of government. When Mercer learned to run computations in one hundredth of the time, “the powers that be” asked him to run programs 100 times bigger, he recalled. “I took this as a lesson that one of the most important goals of government-financed research is not so much to get answers but to consume the computer budget,” he told the crowd at the Association for Computational Linguistics. “It left me ever since with a jaundiced view of government-financed research.”

After receiving his Ph.D. in computer science in 1972 from the University of Illinois at Urbana-Champaign, Mercer joined the other brains of his generation at IBM. At Renaissance, however, he seems to have found the perfect spot for a free-market fanatic: The firm, which has produced many millionaires on the back of pure brain and computing power, is capitalism at its most basic. Yet in another sense, Mercer was a man at odds with his new co-workers: Founder Simons and co-CEO Brown are both staunch Democrats, the former being one of the top Democratic donors of the most recent election cycle. Mercer, on the other hand, is more aligned with former conservative presidential candidate and Arizona senator Barry Goldwater than with the socially liberal Rockefeller Republicans of the East Coast. Indeed, through his family foundation Mercer has donated $950,000 to the Goldwater Institute. He also has given to the Cato Institute, the Federalist Society, the Heritage Foundation, and the Manhattan Institute for Policy Research, among other conservative groups.

Political differences have done nothing to dampen the success of Renaissance. Since its launch in 1982, the firm has amassed the highest returns of any hedge fund in existence, with its Medallion Fund, which now exclusively manages the wealth of its employees, producing annual returns of about 35 percent. The fund’s hiring formula was, and is, simple: Simons typically recruits scientists and mathematicians, all with Ph.D.s, to develop the programs for algorithmic trading. The outcome, however, is not simple: Renaissance’s Medallion strategy remains entirely opaque to outsiders.

The main glitch in the firm’s reputation has been a 2014 accusation by the U.S. Senate’s permanent subcommittee on investigations that Medallion’s returns weren’t the result of pure brilliance. Instead, the committee asserted, they came from leverage that in some cases approached nearly 20-to-1, sidestepping Federal Reserve margin rules, and a tax strategy allowing the fund to pay long-term capital gains taxes on short-term gains. The Senate investigation found Renaissance had earned more than $30 billion through the strategy and avoided $6.8 billion in taxes. The firm is still under investigation by the Internal Revenue Service, which began to crack down on the strategy in 2010. In a statement at the time of the Senate probe, Renaissance said: “We believe that the tax treatment for the option transactions being reviewed by the [permanent subcommittee investigation] is appropriate under current law. These options provide Renaissance with substantial business benefits regardless of their duration.”

Apart from Medallion, the firm has launched three funds for institutional investors over the years (one was closed following poor returns). These funds take a longer-term view of investing and do not avail themselves of the leverage and tax benefits available to Medallion. Understandably, their returns aren’t nearly as good as Medallion’s, but quantitative funds are once again in fashion, and the $14 billion Renaissance Institutional Equities Fund (RIEF), the largest of the firm’s institutional funds, was up 14.8 percent for 2016 through November. It has annualized returns of about 10 percent since its launch in 2005.

As long as Renaissance’s investors are happy with the fund’s performance, they may care little about the polarized politics of the firm’s leaders. That said, Mercer’s outsize role in the election of President Trump is garnering protest from those who want public pension funds to get out of Renaissance. “People have to take a deep look into their checkbooks and their souls to see whether they want to support people with these kind of views,” says Stephen Lerner, a labor strategist who is a fellow at Georgetown University and also associated with activist group Hedge Clippers. He says Hedge Clippers has been reinvigorated by Trump’s election and plans to take its campaign of divestment to all the pensions and foundations invested in RIEF, telling Institutional Investor: “At some point, in addition to fees and returns, there is the question of assisted suicide. If somebody’s political ideology is to destroy you, it seems that’s a bad investment.” According to alternative-assets data firm Preqin, RIEF’s investors include the Oprah Winfrey Charitable Foundation, the Public School Retirement System of Missouri, and the Employee Retirement System of the City of Providence. None returned calls for comment.

After Mercer’s 2010 ascension alongside Brown to Renaissance’s top job, his already substantial wealth became even greater: He has made Institutional Investor’s Alpha’s list of the top-paid hedge fund managers for the past five years, earning a total of $600 million.

Mercer’s elevation, and accumulation, coincided with increased efforts to rein in Wall Street and increase tax rates on the wealthiest Americans. They also coincided with an event more aligned with Mercer’s personal philosophy: the U.S. Supreme Court ruling in Citizens United v. Federal Election Commission, a decision that effectively allowed unlimited contributions to political campaigns. (Robert Mercer is a contributor to Citizens United, a conservative political nonprofit.)

The hedge fund executive’s political efforts soon included financing opponents of progressive Democrats, such as Oregon Representative Peter DeFazio in 2010. DeFazio wanted to tax all stock transactions, a populist idea that has been tossed around for decades and got renewed but short-lived support following the financial crisis. Such a tax would be anathema to Renaissance given the firm’s short-term trading strategy: It holds thousands of investments, some for only seconds. Arthur Robinson, a quirky individual whose Oregon Institute of Science and Medicine stockpiles human urine and attacks the scientific consensus on climate change, says he has run against DeFazio four times thanks to Mercer’s generous financial backing of both his campaign and his institute. Robinson says he and the hedge funder agree on politics and believe that some of the biggest problems the U.S. faces are “taxes and regulations suppressing free enterprise.” Robinson, however, has lost every election he has run against DeFazio, who maintains his seat in Congress.

In the 2016 election Mercer financed dozens of congressional Republicans, including Kelli Ward, a Republican primary opponent of Arizona Senator John McCain. McCain easily beat the challenge but made it clear that he considered it payback for his role as chairman of the subcommittee that investigated Renaissance’s taxes. “We issued a scathing report about this guy evading taxes, his firm. I’m sure there’s no connection of a $600,000 injection into the Kelli Ward campaign,” McCain told Politico this summer, tongue firmly in cheek.

In the 2016 presidential race, Mercer initially backed Texas Senator Ted Cruz, who shared the mogul’s distaste for big government (and wanted to abolish the IRS). It was a controversial and ideological pick that distanced Mercer from other major hedge fund donors, like Elliott Management Corp.’s Paul Singer, who supported Marco Rubio, a top choice of the Republican establishment.

But Mercer didn’t just give money to candidates and let their campaigns do the rest of the work. Just as Renaissance used financial leverage to amplify its returns, Mercer applied the formula to political capital. His first foray was to put $10 million into a struggling Breitbart News in 2011. The website’s reputation began to soar later that year, when it exposed then–New York congressman Anthony Weiner’s first sexting scandal. In 2016 Bannon told Bloomberg he had hired trackers to follow Weiner’s Twitter account 24 hours a day; they eventually uncovered the politician’s now-infamous underwear photos. It may have been the first time social media played a major role in undoing a candidate — and a harbinger of what was to come.

After founder Andrew Breitbart died suddenly in 2012, Bannon took control of Breitbart.com, soon opening the site to commentary by so-called alt-right extremists, who have expressed anti-Semitic, Islamophobic, sexist, racist, and white supremacist views on the site. The strategy has been controversial, but SkyBridge’s Scaramucci stands by it. “Breitbart has simply become a blogging site for individual liberty and expression,” he argues.

A number of Breitbart staffers didn’t see it that way. Several quit during the 2016 Republican primary campaign, contending that the site had gone beyond Andrew Breitbart’s goal of providing a conservative news alternative to the liberal media. Instead, they believed, it had turned into a propaganda tool. “It became an extension of the political campaign for Donald Trump,” says Kurt Bardella, CEO of Endeavor Strategies, a PR firm that represented Breitbart for two years; he left in protest this spring.

Robert Mercer does not share the more extreme views voiced on Breitbart, according to his former colleague Patterson, who believes the investment was simply strategic. “I’m not trying to defend Breit­bart, but if your main objective is to defeat Hillary Clinton, you do what you have to do,” he says.

Less than two years after investing in Breitbart, Mercer amplified his publishing efforts. In 2013 and 2014 his family foundation gave $2 million to the nonprofit Government Accountability Institute, whose stated mission is “to investigate and expose crony capitalism, misuse of taxpayer monies and other governmental corruption or malfeasance,” according to its website. During those years the institute had close ties to both Mercer and Breitbart: Bekah Mercer sat on its board, Steve Bannon was chairman, and Breitbart senior contributor Peter Schweizer, who has written several conservative books, was president.

In the spring of 2015, Schweizer’s blockbuster Clinton Cash: The Untold Story of How and Why Foreign Governments and Businesses Helped Make Bill and Hillary Rich was published by Rupert Murdoch’s HarperCollins. It quickly became a New York Times best seller and was made into a movie. Schweizer drew on reams of data from the deep web that is not accessible by regular Google searches to build his case of Clinton corruption, using sophisticated European computers he accessed for free, according to Bloomberg. Soon after publication, however, the author and publisher were forced to retract and correct numerous errors, such as quoting fake-news websites. Critics, including the Clinton campaign, pointed out that many of Schweizer’s conclusions were either false or unsubstantiated. According to the Wall Street Journal, the book led the Federal Bureau of Investigation to investigate the foundation, although the FBI did not find enough evidence to recommend criminal charges.

Today neither Bannon nor Mercer is listed as a board member on the nonprofit’s website, and Schweizer has said in several interviews that Trump’s conflicts of interest should also be investigated.

Perhaps the most intriguing aspect of Mercer’s political activity is his $5 million investment in Cambridge Analytica — a deal that board member Bannon reportedly helped broker. Spun off in 2013 by U.K.-based SCL Group expressly to work in American politics, the company combines data mining and behavioral analysis. (Among SCL’s most notable recent achievements was its work on the Brexit Leave campaign in the U.K.)

Cambridge Analytica says it uses its massive computer programming capability to build profiles of every voter, mining social media posts, including such things as Facebook quizzes, and other consumer behavior. It then targets individuals with messages designed to bring them to the polls to vote for specific candidates. Working for Trump in the waning days of the presidential campaign, it focused on specific districts in Michigan, Wisconsin, and Pennsylvania, microtargeting voters to cast their ballots for the eventual winner.

Matt Oczkowski, who led the company’s team on the Trump campaign, says Cambridge Analytica was hired to quantify the “Trump effect” and determine how a Trump voter was different from a regular Republican. Through the firm’s research it discovered that Trump supporters self-­identified as disenfranchised; their top issues were immigration, trade, and law and order. As early votes came in, Oczkowski began to see that most Trump voters were white, over 65, and living in rural areas; this led Cambridge Analytica to target such voters in swing states. “The key to our success was finding these elusive Trump voters to make the difference on election day,” he says.

The effort has been criticized by some data scientists. “Where the Obama and Clinton campaigns were identifying undecided voters, Trump was about finding people they knew they could rile up and get them to go to the polls,” according to Samuel Woolley, director of research for the Oxford Internet Institute’s computational propaganda project. Woolley attended a Cambridge Analytica presentation at the Republican National Convention this past summer.

Cambridge Analytica worked on 44 U.S. Republican campaigns in 2014 and 50 in 2016. In the presidential race it initially worked for Cruz, whose win in Iowa was attributed largely to the company’s targeting of voters with controversial “psychographic” techniques that developed a personality for every individual. (Oczkowski says they didn’t have time to create personality types for the Trump campaign.)

When Cruz lost his bid for the nomination, the Mercers quickly moved to the Trump camp and chided the Texan for failing to do the same. They persuaded Trump to use Cambridge Analytica, which received $350,000 from the Trump campaign in July and August. The Mercers also stepped in and persuaded Trump to add Bannon and Conway, who had been running their political action committee for Cruz, to his campaign in August. The PAC was then renamed Defeat Crooked Hillary PAC.

Even the infamous Access Hollywood videotape did nothing to deter the Mercers from their ultimate goal of securing the White House for Republicans. In a statement that included thinly veiled attacks on the Clinton Foundation and Bill Clinton’s past sexual history, the father-daughter Mercer duo said on October 8, “We are completely indifferent to Mr. Trump’s locker room braggadocio,” noting that the “media and political elite do not appreciate the apocalyptic choice that America faces on November 8th. We have a country to save and there is only one person who can save it. We, and Americans across the country and around the world, stand steadfastly behind Donald J. Trump.”

A campaign ethics watchdog, the Campaign Legal Center, believes the Mercers went too far. It is calling on the Federal Election Commission to investigate their decision to install Conway and Bannon into the campaign because, it alleges, FEC filings show that the two were not paid by the campaign but, either directly or indirectly, by Mercer’s PAC. Political action committees are not allowed to coordinate directly with political candidates, including financing their campaigns. The Mercer PAC has denied the allegations.

There is little doubt that Robert Mercer is a passionate conservative determined to upend the political order and bring his brand of conservatism to power. But so are many people. What sets Mercer apart from the many small- and large-scale donors dotting the American political landscape, both friends and critics say, is his sophisticated understanding of computer science and how such expertise can be applied to democratic elections.

Renaissance Technologies’ powerful computers mine data for patterns to inform its investments, looking for what it calls ghost patterns — very much like the way Cambridge Analytica found shy Trump voters to help win the election, the data scientists say. “The same technology that Mercer knows well about reading massive data sets and serving up content is easily applied to running a news site or getting messages across Facebook to a target audience,” says Philip Howard, a data sociologist working alongside Woolley at the Oxford Internet Institute.

Mercer’s former colleague Patterson agrees that the hedge fund manager easily understands the value of sophisticated computer programming, including its potential impact on politics. As a computer scientist, Mercer always had very clear objectives and was “unusually systematic” about achieving them, Patterson says. Nonetheless, “I would never have dreamt when I was talking to him in the 1990s that Bob was going to have a major influence on the national stage.” Mercer was usually a civil, if fervent, debater for his political positions at those lunches, Patterson remembers. On occasion, however, he would get “quite angry” when others disagreed with his views.

In backing Trump, Robert Mercer chose to get even. Despite overwhelming peer opposition to his position, he married his beliefs to his almost singularly unique skill set — and won. “If you had a mountain of polling data and are doing the analytics, Bob Mercer would be an extremely good guy on your team,” Patterson says. Perhaps his bet, viewed as extremely risky by so many, wasn’t such a long shot after all. •