A Hedge Fund House Divided: Renaissance Technologies

by John Bowers


Renaissance Technologies then-President James Simons testifying on Capitol Hill in 2008. (AP Photo/Kevin Wolf)

Renaissance Technologies, the hedge fund firm and one of the largest political contributors in American politics today, is a world made in the image of its leadership.

The firm rejects many of Wall Street's routine practices. Rather than staffing up with whiz kids in finance, for instance, Renaissance looks for analysts with backgrounds in science and mathematics -- much like mathematicians-turned-managers James Simons, 78, now the firm's chairman, and Robert Mercer, 69, its co-CEO.

To say they've raked in money would be an understatement. Between 1994 and 2014, Renaissance's Medallion fund averaged a 71.8% annual return before fees. In 2008, it produced a 98.2% return despite the onset of a global economic recession. In recent years, like other top hedge fund managers, Mercer and Simons have been pouring a bit of their personal fortunes into politics.

On the Center for Responsive Politics' megadonors list, Mercer and Simons hold the first and the fifth spots respectively. Combined, the two men and their wives have so far contributed more than $29.5 million to political organizations during the 2016 cycle: Mercer has spent upwards of $18.5 million while Simons has laid out about $11.5 million.

In both cases, these figures represent significant upticks from contribution totals in previous election cycles. Since 2006, Simons has spent a total of about $30.6 million while Mercer has spent about $34.9 million.

That's not to say their money lands in the same pots. Renaissance is a house divided politically.

James Simons, establishment Democrat

An active philanthropist and promoter of scientific research worth an estimated $15.5 billion, Simons is viewed as quiet and thoughtful, a man driven by a tireless sense of curiosity, judging by a lengthy interview with the New York Times.

Simons has won prestigious prizes for his work at the frontiers of mathematics, pursuing a successful career in academia before founding Renaissance in 1982, His numerical affinity -- he's a former code breaker -- has served Renaissance well: It was among the first "quant" funds, using complex mathematical modeling to identify and exploit market trends. In recent years, Simons has focused on developing and maintaining a number of foundations centered around scientific research and education.

He shuns the limelight. In a 2006 interview with Seed Magazine, Simons quoted George Orwell's "Animal Farm": "'God gave me a tail to keep off the flies. But I'd rather of had no tail and no flies.' So, that's kind of the way I feel about publicity."

Still, Simons has made attention-getting forays into the political sphere, overwhelmingly to the benefit of Democrats. In 2016 he has emerged as a driving force behind Hillary Clinton's Priorities USA Action super PAC, donating $7 million so far. He has contributed a combined $2.6 million to the House and Senate Majority PACs, outside spending groups supporting Democratic congressional candidates, as well as $500,000 to the Democratic Women Vote! super PAC run by EMILY's List. For reasons that are unclear, he also donated $25,000 to Security is Strength, a super PAC backing Republican Sen. Lindsey Graham's (S.C.) presidential run this cycle; Graham was seen as one of the few moderates in the GOP primary field.

The activities of Simon's foundations
suggest far-ranging policy interests, from math and science education to funding for highly advanced research. Simons' son Nathaniel runs a foundation called Sea Change, which quietly gives out tens of millions of dollars a year in support of climate change action.

Robert Mercer, anti-establishment Republican

Renaissance Technologies hired Mercer in 1993 after he'd had a short but notable career in computer science. A brilliant programmer, he had played a significant role in developing early language processing algorithms at IBM. Over the subsequent decades he rose through the fund's ranks, and was appointed co-CEO when Simons retired from the position in 2009. Mercer is an intensely private individual whose side projects and charitable contributions demonstrate markedly far-right inclinations. A recent Bloomberg exposé on Mercer outlining some of his projects -- both within the electoral arena and outside it -- noted that he has funded climate skeptic think tanks, a campaign in favor of the death penalty in Nebraska, and a conference on reinstating the gold standard. Sources close to Mercer told Bloomberg that he rejects the mainstream Republican Party for its ties to "Big Business and Wall Street."

Mercer's contribution patterns are very much in line with this reported rejection of the Republican mainstream. He was the primary source of funding for GOP Sen. Ted Cruz's (Texas) breakout presidential bid, donating a total of $13.5 million to the pro-Cruz Keep the Promise I super PAC. Unlike some who backed Cruz late in the game, when he looked like a last bulwark against Donald Trump's nomination, Mercer gave most of his money early in the primary process, when Cruz -- who also advocates a return to the gold standard -- was fighting against establishment favorites like former Florida Gov. Jeb Bush.

In addition to the money he spent on Cruz's run, Mercer has made a number of donations to conservative candidates and PACs this cycle. He donated $2 million to the John Bolton super PAC, a conservative organization dedicated to "restoring strong American economic and national security," and $668,000 to the Republican National Committee, for instance.

In contrast to Simons' mainstream Democratic leanings, Robert Mercer has positioned himself as a bit of a Republican rebel, a climate skeptic who distrusts government and shuns the traditional nexus between politics and the financial industry. He has invested heavily in the conservative media outlet breitbart.com despite the fact that he is personally loathe to speak with the press. It seems clear, though, that he's motivated by ideology in addition to business interests.

If Simons and Mercer are in accord on any policy matters, they're probably few -- and are likely to be ones that affect Renaissance. The firm itself, after all, has spent millions of dollars lobbying Congress to change how the tax code treats hedge funds and their managers.