Renaissance Institutional Management LLC is reducing the fees and adding an institutional feeder fund to the Renaissance Institutional Equities Fund, its $4 billion quantitatively managed equity hedge fund.
RIEF has suffered large client redemptions since mid-2007 when assets peaked at $27 billion. Renaissance staff added “substantial capital” this year to its institutional equity fund and its sister fund, the $2.5 billion Renaissance Institutional Futures Fund, according to a Sept. 13 client letter from Renaissance co-CEOs Peter Brown and Robert Mercer obtained by Pensions & Investments.
Messrs. Brown and Mercer wrote that the New York-based company has been reviewing the future of its two quantitatively managed hedge funds since the beginning of the year when they took over as co-CEOs, replacing the firm's founder, James H. Simons, who retired. They believe investors will find the equity fund's risk-adjusted returns and low volatility and the futures fund's absolute returns with low correlation to other asset classes “particularly valuable,” according to the client letter.
RIEF returned 4.55% (cumulative) for the five-years ended Aug. 31, compared with -5.34% (cumulative) for the Standard & Poor's 500 index over the same period, with only 60% of the volatility of the index, according to the client letter.
“While performance relative to the index has varied from year to year (as is likely in a non-tracking fund), RIEF's overall behavior has been more than satisfactory,” wrote the co-CEOs in their letter.
The pair said their review also determined that “a somewhat more competitive fee schedule was in order” for the institutional equity fund as was “a special vehicle for our largest institutional investors.”
According to a source with knowledge of Renaissance's plans who asked not to be identified, effective Jan. 1, fees for the institutional equity fund's most popular share class, Series B, will drop to a 0.35% management fee and 10% net performance fee, from 0.5% and 10%, respectively. The management fee for the A Series share class will drop to 1.5% from 2% and Renaissance will continue to waive the performance fee.
A new Series C share class will not charge a management fee and will impose a charge of 25% of the alpha generated by the fund (net performance minus 0.4%).
Renaissance also is adding a feeder fund to the equity fund for institutional investors called the Strategic Partners Fund. Pension funds, endowments, foundations and large family offices with at least $500 million in total assets will be permitted to invest a minimum of $100 million in the new feeder fund, the source said. New clients may make an initial minimum investment of $50 million and have 12 months to invest the remaining $50 million.
Existing institutional investors in the institutional equity fund's other share classes that meet the criteria may move their investments into the Strategic Partners Fund, with an initial investment of at least $25 million. These clients have three years to top up their total investment in Strategic Partners to the $100 million minimum.
The source said one big change for investors in Strategic Partners is that Renaissance, which has been very secretive about the investments of its three hedge funds, will offer full portfolio transparency to investors at the midpoint of every quarter with a one-month lag.
Strategic Partners Series A charges a management fee of 1.25% and no performance fee; Series B charges 0.2% management fee and 10% of net performance; and Series C does not charge a management fee and its performance fee is 22% of alpha generated (net performance minus 0.4%).
Jonathan Gasthalter, a RenTech spokesman, declined to comment.
Fees remain unchanged for the institutional feeder fund. The famous $15 billion Medallion Fund, managed by the firm's parent company, Renaissance Technologies Corp., based in both East Setauket, N.Y., and New York, remains closed to external investors.