One longtime Renaissance employee, David Magerman, was suspended in February after he told the Wall Street Journal he was unhappy that Mercer is “using the money I helped him make to implement his worldview,” including that “government be shrunk down to the size of a pinhead.”
Ownership Stakes
To calculate the size of the fortunes Medallion has generated, Bloomberg relied on public documents, including a 2014 Senate report showing that Renaissance’s executive committee, which includes the four men and Chief Financial Officer Mark Silber, owns 70 percent of the firm. While actual stakes aren’t disclosed, Securities and Exchange Commission filings until 2009 provided ownership ranges.
Simons, 79, the only partner whose wealth has previously appeared on a major international wealth ranking, owned between 25 percent and 49.9 percent of Renaissance, according to the 2009 filing, the last time ranges were disclosed. Laufer, 71, owned between 10 percent and 24.9 percent, while Mercer and Brown each had between 5 percent and 9.9 percent.
The net-worth analysis for the Renaissance partners diverges from the standard hedge fund valuation methodology used by the Bloomberg Billionaires Index to account for the lack of transparency about the company’s operations. Instead of using the midpoint of the disclosed ranges, a more conservative approach was applied: The high end was used for Simons, the only Renaissance founder among the four, while the low end was used for the others.
The analysis includes cash distributions the partners receive from Medallion and dividends from Renaissance -- but only since 2006, the year after outside investors were cashed out of the fund. No market appreciation is applied to any of the cash in the analysis, and all known political and charitable giving is deducted for each partner. Capital gains tax rates are subtracted, and the highest state and federal tax rates are assumed.
Cash Distributions
Cash distributions from Medallion are calculated by multiplying the annual return after fees by that year’s assets, currently capped at about $10 billion, according to the person familiar with the firm’s operations. About 40 percent of that amount has been plowed back into the firm since 2009 to account for the fund’s higher operating expenses after the financial crisis, the person said. The rest is allocated to each partner using their stakes in Renaissance as a proxy.
Dividend payments from Renaissance are based on fee income from Medallion and don’t include fees from any of the firm’s other funds. While Medallion charges as much as 5 percent of managed assets and 44 percent of profits, according to a 2017 filing, the net-worth analysis uses the industry standard fee structure of 2 percent and 20 percent. The calculation assumes 20 percent of the fee income is distributed to the owners of the firm.
Renaissance and its algorithms are worth at least $10 billion, according to an estimate by an analyst with a long history of valuing hedge funds. Shares are assigned to Simons and Laufer according to their disclosed stakes but aren’t counted for Mercer and Brown. If they each received 5 percent, the low end of their Renaissance ownership ranges disclosed in 2009, they would both be well over the $1 billion mark.