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Jim Simons Reaping Reward For Patience On RIEF
Last September, Jim Simons's Renaissance Institutional Equities Fund looked likely to be shut down. This April, RIEF was up 14 percent and continued climb during the volatile first week of May. It is now up 15.56 percent for the year, making it one of the top performing hedge funds so far this year.
Jim Simonss RIEF is on a roll.
Less than a year after it received a stay of execution, Renaissance Institutional Equities Fund, the once-struggling quant fund, is vindicating the Setaucket, New York, hedge fund firms decision not to shut it down as well as Renaissance Institutional Futures Fund (RIFF).
RIEF was up 14 percent through April and continued climb during the volatile first week of May, and is now up 15.56 percent for the year, making it one of the top performing hedge funds so far this year.
Last year it finished up 16.5 percent, its biggest gain since 2006, when the fund returned nearly 21 percent. However, it had lost money during the intervening three years.
The fund, which had $4.6 billion in total assets at the beginning of the year, was created in 2005 to generate gross annual returns of 400 to 600 basis points above the S&P 500 over rolling 3- to 5-year periods.
According to a description of the find on hedgefundnews.com, RIEF is designed to be net long with gross exposure averaging 175 percent long/-75 percent short and to maintain a relatively low annualized volatility of about 10.5 percent with a target beta of 0.4 versus the S&P 500.
On the other hand, RIFF, which bets on the futures and forwards markets in foreign currencies, government instruments, energy, equity indices and traditional commodities, lost 4.3 percent in the first week of May, putting the fund in the red for the year by 1.46 percent.
The fundintroduced in October 2007 is expected to have an annual Sharpe ratio of 1.0, a holding period of about four-to-six months and an annual standard deviation between 12 percent and 14 percent, according to hedgefundnews.com.
It was up 22.7 percent in 2010 after climbing just 3.8 percent the prior year. It lost 12 percent in 2008. It had $2.7 billion at the start of the year.
Last September the firm reaffirmed its commitment to RIEF and RIFF amid rumors it would shutter the then-struggling funds.
Our confidence in these quantitatively-managed, long investment horizon products has been bolstered both by an intensive reexamination of their underlying technology and by their performance during the recent tumultuous economic period, said co-CEOs Peter Brown and Robert Mercer in a letter to investors at the time.
They noted that since its inception RIEF had returned a total of 4.55 percent while experiencing only 60 percent of the volatility of the S&P 500. During that same period the index declined 5.34 percent.
The firm also noted that Renaissance staff added substantial capital to these funds.