David Rosenthal: belief

Transcript context

…And we are your hosts. They say, David, that as an investor, you can’t beat the market or time the market, that you’re better off indexing and dollar cost averaging rather than trying to be an active stock picker. They say there’s no persistence of returns for hedge funds, that this year’s big winner can be next year’s big loser, and that nobody gets huge outperformance without taking huge risk. When I was in college, I actually took an economics class with Burton Malkiel, who of course was involved in starting Vanguard and who’s a big proponent of all that. And that is what I learned, Ben. Well, David, it turns out they were wrong. Today, listeners, we tell the story of the best performing investment firm in history—Renaissance Technologies or RenTech. Their 30-year track record managing billions of dollars has better returns than anyone you have ever heard of, including Berkshire Hathaway, Bridgewater, George Soros, Peter Lynch, or anyone else. So why haven’t you heard of them? Or if you have, why don’t you know much about them? Well, their eye-popping performance is matched only by their extreme secrecy, and they are unusual in almost every way. Their founder, Jim Simons, worked for the US government in the Cold War as a codebreaker before starting Renaissance. None of the founders or early employees had any investing background, and they built the entire thing by hiring PhD physicists, astronomers, and speech recognition researchers. They’re located in the middle of nowhere in a tiny town on Long Island. They don’t pay attention to revenues, profits, or even who the CEOs are of the companies that they invest in. And at any given time, they probably couldn’t even tell you what actual stocks they own. Now you may be thinking, okay, great, I just learned about this insane fund with unbelievable performance—to be specific listeners, that’s 66% annual returns before fees—and I want to invest. Well, you can’t. To add to everything else that I just said, RenTech’s flagship Medallion fund doesn’t take any outside investors. The partners of the firm have become so wealthy from the billions that the fund has generated that the only investors they allow in are themselves.…

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