Is this another quant quake (factor inversion) period incoming?
(I will post the performance of both Renaissance Technologies external funds RIDA, RIEF full Jan performance next week after they have been published.)
Regards
James
Renaissance, Schonfeld, and Engineers Gate stung in a shaky start for quants in 2026
Quant funds have had a tough start to the year.
Managers such as Renaissance Technologies and Schonfeld have lost money in computer-run strategies.
2026 has so far resembled the worst parts of 2025 at many quant hedge fund managers.
The beginning of the year had the worst stretch of losses since early October, according to a Goldman Sachs report, and several big-name managers did not avoid the pain.
HSBC's Hedge Weekly report states that Renaissance Technologies' two largest funds lost roughly 4% each through January 9. A person familiar with Schonfeld said the manager's quant-only strategy was down 3.9% through January 16.
Engineers Gate was down around 6% midway through the month, a person familiar with the matter said.
Renaissance, Schonfeld, and Engineers Gate declined to comment.
Performance on January 16 — not captured in the Goldman note — was especially bad for many quant funds, industry insiders said.
Last year, systematic funds had several extended periods of losses, including a stint in June and July. Funds gradually recouped summer losses, but ran into trouble again in early October when crowded trades, a momentum sell-off, and inflated junk stocks led to drawdowns.
PivotalPath flagged equity quant crowding as an investor concern in a January report, noting that spikes in crowding measures have preceded previous drawdowns in systematic trading strategies.
Here are the performance for RIEF and RIDA up to Jan 2026.
It is concerning the ML pioneer RenTech posted losses in Jan and underperform most other hedge funds in 2025. Despite the short history for most P123 AIfactor models, it seems that most AI models are performing relatively better than the two external funds run by Ren Tech. (I guess their ML secret sauce is not working).
Pls check out the performance below and share your comments.
I would not call this concerning. RenTech’s real gem, the Medallion Fund, is closed to the public and its actual returns have not been known for years but are estimated to be 30%-70% CAGR. Their public funds are really irrelevant, pale imitations (if that) of the Medallion Fund and don’t reflect RenTech’s real methodology. I’m sure with the level of volatility that has been experienced in markets in 2025 and now even in 2026, they’re doing just fine, as the Medallion Fund is said to focus on statarb inefficiencies on a several trading day horizon (1-3 days). Plenty of opportunities for them.
More broadly, currently what we’re seeing is a rotation into the value factor starting in November 2025. Since the GFC, the growth factor has far outperformed the value factor due to artificially low interest rates (gotta love ZIRP!), but historically speaking, value has outperformed growth due to the federal funds rate being normalized around ~3.5%.
With Warsh’s recent nomination the market consensus is that the federal funds rate is likely to stay around the current levels for longer, favoring the value factor. And indeed we are seeing investors as a whole sell off growth/momo stocks and pile into low volatility/value stocks. Russell 2000 value is doing great since November 2025, so is equal weight S&P vs the very tech heavy Mag7 concentrated SPY.
Whether this rotation into value continues is an open question, but the stellar returns of strategies highly correlated with growth and momentum may be over if it is.
We here at P123 may need to reorient strategies towards value factor, if this rotation continues. May not be known until Warsh gets in as Fed Chair, and we see his actual thinking about the fed funds rate and how successful he is in persuading the FOMC to go along with it (if he favors interest rate cuts.) Plus of course, what the actual data shows.
Here is the performance of Medallion for the last 10 years (consolidated from various source). The latest is around 20% (after fees) for 2025. As you can see, the AR performance in the past 3 years has been dropping fast. In fact, it seriously underperformed the average return of High Flyer (powered by Deepseek) 57% return last year. IMHO, RenTech dominance in ML is starting to fade. Having said that, I agree the external funds are doing much worse.
I’ve not been able to find much public info on the Medallion Fund’s performance myself but what you’re saying makes sense, with detailed market data as well as ML techniques and compute more accessible than ever, their implementation edge is likely eroding.
