Oh no! A fund that correlates with the S&P is down about 12% from peaking in May to early April! Meanwhile, the S&P is down, um, 13.8% from peaking in May to early April! So the fund is slightly outperforming its benchmark, even though it's dropped. I don't think anyone invested in the fund hoping to lose 12%, but this is within the range Simons said to expect. One thing you claimed was that we should expect stable, high returns, and the occasional massive crash. And yet the massive crash you predict has not materialized! Instead, we have a slight decline, mirroring a slightly larger decline in the index one fund follows -- as well as a record-breaking year, in which Medallion appears to have earned over 100% before fees, on over $5 billion in assets.

It's suspicious to me that you point to their low-risk institutional fund's losses as proof that their high-risk strategy is dangerous, even as their high-risk fund is posting record gains.

I'm trying to make a point about their overall strategy:

It is easy to have low returns with low volatility - just buy bonds.

It is easy to have hight returns with high volatility - just buy penny stocks or emergent markets.

Their Medallion fund was doing something that defied that rule for 20 years, it had high returns with low volatility. Up until August last year.

That is incorrect. It is very hard to use simple rules like that to get high returns, because when enough people follow the rules, they become invalid. Renaissance is using a huge number of strategies, and they're constantly testing them. It's likely that any given strategy will be obsolete soon enough, but less likely that they'll all be wrong at once.

It might be useful to think of Renaissance as a market-maker, not a money manager -- given that you described two buy-and-hold strategies, and their average holding period is six minutes, it sounds like they might not be in the business you're talking about.

It's possible to get superior returns over time by having such a low cost or such a strong brand that your product is qualitatively different from someone else's: having a brand like Coca-Cola that is, say, 5% more recognizable than Pepsi can give you something that's worth much much more than Pepsi + 5%; being able to make trades 1% faster and 1% cheaper than anyone else (if Rentec can do that) means having a monopoly on taking advantage of one set of market discrepancies. They obviously have to spend a lot of money to maintain that advantage, but the advantage remains.

Ok, so you're saying that in the business of making money buying and selling stocks (short or long term doesn't matter) they have distinct competitive advantage that is not going away.

So what would be their advantage that holds for so long? Ability to properly calculate short-term risk/reward given all available public information?

Update: after reading your blog I found an answer - if stock market is a casino then quant funds are girls serving drinks to the audience.