Here is an interesting development for the Indian capital markets. One of the world’s largest hedge funds - Renaissance Technologies (see the Wikipedia entry)- has set up shop in India as a foreign institutional investor, Business Standard reports. The New York based fund has received the approval from the capital market regulator SEBI. The entry of Renaissance comes after SEBI invited global hedge funds to directly come to India rather than using participatory notes to invest in Indian capital markets. Following this move, SEBI has registered around 200 foreign institutional investors in the last two months, and out of them at least 20 are large hedge funds.
Renaissance, which manages over $30 billion, is a global hedge fund management firm with a track record of producing “superior returns” for its clients using mathematical and statistical methods in the design and execution of its investment programs, the company’s website says. It employs more than 260 employees, mostly scientists. The fund’s assets are expected to reach $100 billion in the coming years. The firm’s $6-billion Medallion fund is believed to have returned more than 50 per cent in the first three quarters of 2007, BS reports, quoting Bloomberg report.
Renaissance’s strategy has been to use mathematical models to do trading - mostly long calls, and with some short calls. Says a Reuters report of May 22, 2007, quoting its founder Jim Simons: “We hire physicists, mathematicians, astronomers and computer scientists and they typically know nothing about finance…We haven’t hired out of Wall Street at all.”
The Reuters report has a good snapshot of Simons’ trading strategy. The key to their money spinning trading strategy is that they constantly innovated while not sticking to “trend following”. The fund has between 3,000 to 4,000 positions in its portfolio on any given day, mostly long but some short.