《The Man Who Solved The Market》中文版翻译连载49
The MAn Who Solved The Market (52)
Like most investors, Simons, too, became nervous when his fund went through rocky times. In a few rare circumstances, he reACted by paring the firm’s overall positions. On the whole, though, Simons maintained faith in his trADIng model, recalling how difficult it had been for him to invest using his instincts. He made a comMITment to refrain from overriding the model, hoping to ensure that neither Medallion’s returns, nor the emotions of his employees at Renaissance, influenced the fund’s moves.
“Our P&L isn’t an input,” Patterson says, using trading lingo for profits and losses. “We’re mediocre traders, but our system never has rows with its girlfriends — that’s the kind of thing that causes patterns in markets.”
Simons hadn’t embraced a statistics-based approach because of the work of any economists or psychologists, nor had he set out to program algorithms to avoid, or take advantage of, investors’ biases. Over time, though, Simons and his tEAm came to believe that these errors and overreactions were at least partially responsible for their profits, and that their developing system seemed uniquely capable of taking advantage of the common mistakes of fellow traders.
“What you’re really modeling is human behavior,” explains Penavic, the researcher. “Humans are most predictable in times of high stress — they act instinctIVely and panic. Our entire premise was that human actors will react the way humans did in the past … we learned to take advantage.”
Investors finally begin taking note of Medallion’s gains. A year earlier, in 1993, GAM Holding — a London-based investment firm managing money for wealthy clients that was one of the first institutions to invest in hedge funds — had given Renaissance about $25 million. By then, Simons and his team had turned wary of sharing much of anything about how their fund operated, lest rivals catch on. That put GAM executives, accustomed to fully understanding details of how funds operated, in a difficult position. They’d confirm that Renaissance had proper audits, and that their investors’ money was secure, but GAM couldn’t fully understand how Medallion was making so much money. The GAM brass were thrilled with the results of Simons’s fund, but, like other clients, perpetually anxious about their investment.
“I always lived scared, worried something would go wrong,” says David McCarthy, who was in charge of monitoring GAM’s investment in Medallion.
Soon, Simons’s challenges would become apparent.
Simons did an about-face. By the end of 1993, Medallion managed $280 million, and Simons worried profits might suffer if the fund got too big and its trades started pushing prices higher when it bought, or lower when it sold. Simons decided not to let any more clients into the fund.
Simons’s team turned more secretive, telling clients to dial a Manhattan phone number for a recording of recent results and to speak with Renaissance’s lawyers if they needed detailed updates. The additional steps were to keep rivals from learning about the fund’s activities.
“Our very good results have made us well known, and this may be our most serious challenge,” Simons wrote in a letter to clients. “Visibility invites competition, and, with all due respect to the principles of free enterprise — the less the better.”
Simons pressured his investors not to share any details of the operation.
“Our only defense is to keep a low profile,” he told them.
The secretive approach sometimes hurt the firm. In the winter of 1995, a scientist at Brookhaven National Laboratory’s Relativistic Heavy Ion Collider named Michael Botlo received a call from a Renaissance executive asking if he’d be interested in a job.
Fighting a snowstorm, Botlo drove his dented Mazda hatchback to Renaissance’s new offices located in a high-tech incubator close to a hospital and a dive bar near Stony Brook’s campus. Botlo entered the office, brushed off the snow, and was immediately underwhelmed by the small, tacky, beige-and-teal offices. When Botlo sat down to speak with Patterson and other staff members, they wouldn’t share even bare details of their trading approach, focusing instead on the inclement weather, frustrating Botlo.
Enough of the chitchat, he thought.
Botlo was told Renaissance used a decade-old computer-programming language called Perl, rather than languages like C++ that big Wall Street trading firms relied upon, making him even more skeptical. (In reality, Renaissance employed Perl for bookkeeping and other operations, not its trading, but no one wanted to share that information with a visitor.)
“It looked like four guys in a garage. They didn’t seem that skilled at computer science, and a lot of what they were doing seemed by the seat of their pants, a few guys dabbling at computing,” Botlo says. “It wasn’t very appealing.”
Days later, Botlo wrote Patterson a note: “I’ve chosen to learn the business properly by joining Morgan Stanley.”