I’ve written a little bit about RenTech in the past; Here is an article with an interview with Jim Simmons that essentially explains his biz model. And here is one on a ‘tax arbitrage’ trade utilizing basket options to avoid gains and I assume market impact.
Below is an older article I just stumbled upon from 2014 with some additional insight revealed during their basket options court hearing. Of note:
- In one year they executed 26-39MM trades with an average holding period of a few seconds and very few held for more than 6 months.
- They utilize as much as 17x leverage!
- “On an unlevered basis, our models produce modest returns with very low volatility,”
- Not from the article but during the 2008 senate hearings, Simmons described his strategy as essentially mean-reversion. See around minute 10: YouTube or the transcript here on Page 3.
And I’ll leave you with the money quote from Bob Mercer:
“If somebody came with a theory about how the phases of Venus influence markets, we would want a lot of evidence….(But) some signals that make no intuitive sense do indeed work…the signals that we have been trading without interruption for fifteen years make no sense. Otherwise someone else would have found them.”
Edit 3/6: Speaking of phases of Venus…
Edit 9/11/16: A TED talk with Jim Simmons:
Trading related discussion starts at 9:00 mins in. Some interesting tidbits:
- Assembled an excellent team with lots and lots of data. Terabytes of data are taken in daily.
- They charged the highest fees in the industry, investors were upset but didn’t pull money. In fact, wanted to put in more.
- Capacity, capacity, capacity. They knew when to stop.