You've confused two separate and very different funds at Renaissance. Their flagship fund, Medallion, is the subject of the book and has continued to perform superbly. You're referencing their funds available for public consumption, which have completely different mandates. Despite your mistake, your point is well-taken. In fact, the continued success of Medallion is probably because Simons recognized early the diminishing returns to scale problem and returned all outside capital from the fund many years ago. If Medallion were close to the size of their funds that are open to outside capital it's highly unlikely that it would have continued its exceptional performance as it has.
"Zuckerman's Curse" is an example of a well-documented phenomenon known as "performance chasing". When investors buy into a product or sector which has risen strongly in the preceding few years, they are at risk of jumping on the wave at its crest, just before it crashes. Performance chasing is very common among retail investors who, because they don't understand the fundamentals of their investment, think that something that has done well will continue to do well. Performance chasing is a form of momentum-based investing, and one of the major challenges in momentum-based investing is to get out before the eventual reversal. There is an old market saying: "the trend is your friend - until the bend at the end."
I feel so foolish after reading such a confusing piece 🤦🏼♂️
You've confused two separate and very different funds at Renaissance. Their flagship fund, Medallion, is the subject of the book and has continued to perform superbly. You're referencing their funds available for public consumption, which have completely different mandates. Despite your mistake, your point is well-taken. In fact, the continued success of Medallion is probably because Simons recognized early the diminishing returns to scale problem and returned all outside capital from the fund many years ago. If Medallion were close to the size of their funds that are open to outside capital it's highly unlikely that it would have continued its exceptional performance as it has.
"Zuckerman's Curse" is an example of a well-documented phenomenon known as "performance chasing". When investors buy into a product or sector which has risen strongly in the preceding few years, they are at risk of jumping on the wave at its crest, just before it crashes. Performance chasing is very common among retail investors who, because they don't understand the fundamentals of their investment, think that something that has done well will continue to do well. Performance chasing is a form of momentum-based investing, and one of the major challenges in momentum-based investing is to get out before the eventual reversal. There is an old market saying: "the trend is your friend - until the bend at the end."