Renaissance Technologies LLC, the $20 billion investment firm founded by Jim Simons, is starting a new hedge fund, its first in five years, to trade stocks and futures, according to a document sent to potential investors.
Renaissance, based in East Setauket, New York, uses computer models to decide when to buy and sell. It already runs the $7 billion Renaissance Institutional Equities Fund and the $4 billion Renaissance Institutional Futures Fund, along with a third fund that is open only to the firm’s employees.
The new fund, the Renaissance Institutional Diversified Alpha Fund, is scheduled to open in March and will start out trading stocks listed on U.S. exchanges as well as futures and forwards, according to the document. It may add other assets classes later on.
The decision to start a new fund comes a little more than a year after Peter Brown and Robert Mercer, co-chief executive officers and former International Business Machines Corp. language-recognition specialists, took over from Simons, 73, who retired in 2010. The equities and futures funds, which produced mediocre returns in 2008 and 2009, rebounded in the last two years. The equities fund, known as RIEF, jumped 35 percent last year, and the futures fund climbed 3 percent, according to a person briefed on the returns who asked not to be identified because the information is private.
Jonathan Gasthalter, a spokesman for Renaissance, declined to comment.
Unlike the equities fund, which is designed to outperform the Standard & Poor’s 500 Index by 4 percentage points to 6 percentage points, the new fund won’t be measured against a benchmark. Its swings in performance are also expected to be greater than RIEF’s, according to the document.
If the new fund had been operating since 1998, it would have produced an annualized return of 17.55 percent, according to the document. Since August 2005, RIEF has climbed 7.4 percent, compared with 2.4 percent for the S&P 500. The futures fund, known as RIFF, increased 4.4 percent since it started in October 2007.
Renaissance will charge investors a 1 percent management fee and a 10 percent performance fee for the new fund, about half the average rate for a hedge fund.
Renaissance’s best-performing fund is the Medallion fund, with about $9 billion. That fund, open only to employees, has returned more than 35 percent annualized over a 20-year span.