In all probability (which is something they, in all probability, understand much better than you), you are not as smart as the stupidest person who works at Renaissance Technologies, a hedge fund with more STEM Ph.Ds than most equivalent university departments, and where even the receptionists and landscapers are likely to have an advanced degree in something or other. So it is perhaps understandable, if a bit tiresome, that your puny brain cannot understand why a firm that has literally perfected printing money might have lost between 20% and 30% of the money you’ve entrusted it with. So allow Peter Brown to open his tenure at undisputed King of the Nerds put it as simply as his own massive cranium will allow. Try to keep up, dummies.

“Although recent performance has been terrible and worse than prior performance would have suggested was likely for 2020,” the letter says, “in track records as long as ours, some risk-return ratios every bit as bad as the ones we are now seeing are not shocking….”

"Obviously, large positive or negative returns are more likely when volatility is high, as that is basically the definition of volatility,” according to the letter….

Reassured, morons, now that we’ve literally spelled it out for you?

In its letter, Renaissance likened the poor performance to “a run of five heads anywhere in the next 10 thousand flips” of a coin, calling an excessive focus on the returns of any one year “selection bias.” The firm said the probabilities of such awful one-year performances for the three funds was 1% or lower, but “the probability of seeing at least one year as bad as 2020 within our track records,” given their length, is reasonably high.

Even good investments “perform horribly from time to time,” the letter said.

Well, not all of them, and sure, we may have earned ourselves 76% last year in a fund that never, ever fails to record a double-digit gain and certainly never loses money, but that’s not what you signed up, stupid, is it? You signed up for a fund that usually does pretty well, but every decade or so posts a giant loss that means you’d have been better off in an S&P 500 index fund for the duration. And please, please, don’t ask us to explain exactly how this happened, because you’ve simply no chance of understanding, and we’re not going to do it, anyway.

Renaissance rarely sends letters to investors providing extended commentary about its performance and keeps many of its trading viewpoints closely guarded. It is careful not to share many details of its trading with others, even with its own clients, lest its secret escape…. “The losses suggest they consistently loaded up on certain risk factors that kept going against them,” said Andrew Sterge, chief executive of Closed End Trading LLC, based in Wayne, Pa. “Did they intend to load on these factors or was it an accident? The letter doesn’t say.”

Renaissance Says Losses Should Have Been Expected at Some Point [WSJ]

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