Renaissance Capital continues strong performance

September 21, 2017

With a gain of 1.7% in August, 11% year-to-date, the Renaissance Institutional Equity Fund is well underway to do what it has done each of the past 7 years: posting high teens net returns. In August gains were driven by the long book with shorts detracting slightly. Shorts in the energy sector and longs in utilities, IT and telecommunications drove performance.

The Renaissance Institutional Equities Fund (RIEF) takes long and short positions in US listed equities on the basis of quantitative techniques. The fund seeks to achieve attractive risk-adjusted returns that exceed U.S. equity market returns with lower volatility. And it’s been doing just that since its launch in 2005. Cumulative net returns for RIEF over this period have been 268% compared to 159% for the S&P 500 Total Return index, while it’s volatility of monthly returns has been 2/3rds of that of the S&P index.

The Fund is invested in over 3,000 shares and invests typically around 170% gross long and 70% gross short. It runs with a fairly consistent beta of 0.4 to the S&P 500 index. Its current top 10 long and short positions as a percentage of NAV are respectively 20% and 14%. REIF has been particularly successful in years with low equity markets returns. For example while the S&P500 was up only 2% in 2011, REIF gained 38% with positive contributions from both longs and shorts. Similarly, in 2015 the S&P 500 index was up 1.38% and REIF gained 20%, again driven by both longs and shorts.

Currently, the fund holds net short exposures in the energy and consumer discretionary sectors. The largest long exposures are in the financials and IT sectors. Assets are at $19bln, still well below a peak of $29bln in 2007.

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